N.Y. Teamster Drivers Balk at Proposed Pension Cuts
This story appears in the Jan. 9 print edition of Transport Topics.
The U.S. Treasury received nearly 700 comments before a Dec. 21 deadline on a proposal from the New York State Teamsters Conference Pension and Retirement Fund to reduce benefits to 34,629 active workers and retirees beginning this summer.
Trustees want to reduce benefits 31% for retirees and 20% for active workers to save the pension from becoming insolvent in 2027. Financial documents in the application state that while the pension received $116 million in contributions and withdrawal payments in 2015, it paid out $286 million in benefits to retirees and only earned $50 million in profits from investment to close the gap. In 2016, the fund expected a similar unfunded liability.
“With our application to the Treasury, we didn’t kick the can down the road. We looked for a way to cure the problem,” said John Bulgaro, president of the Teamsters Local 294 of New York and a member of the pension fund’s board of trustees.
The cuts are set to begin on July 1.
The rescue plan doesn’t include a quick solution, but rather assumes the assets of the pension will drop until 2043, when employer contributions and investment profits finally outpace retiree benefits.
But Jim Kalinowski wrote in his comments to the Treasury that he doesn’t believe the plan will work.
“After attending an informational meeting, the trustees were smug, placed blame for any problems with others and were often confusing in explaining things,” he wrote. “The trustees assumptions about funds future are just that, and yet they were spoken as realities. I saw no proof that those cuts proposed in application would actually solve any funds long-term problems.”
Carl Zebrowski, of Getzville, New York, like others, wrote about the years of work he put into his union job that earned him the right to collect the full pension he paid into the fund.
“During that time, I and my family sacrificed much in order to guarantee a good pension to support myself and spouse in our old age. We missed holidays, special family events and even funerals in order to stay employed,” he wrote.
Zebrowski added, “We, at present, are squeaking by, but a cut will cause us to make some drastic moves. I would hate to think that we will become reliant on government programs, such as food stamps, in order to survive.”
Others pointed out that the Treasury should reject the application because it’s inequitable to cut retiree benefits at a higher percentage than active workers who could earn higher pay in future years.
“Whose benefits do you cut? Do you cut benefits for people who are still working and can recover or do you cut the people who retired believing their benefits were safe?” said Norman Stein, a senior advisor to the Pension Rights Center. “This is the worst outcome for those already receiving benefits because it’s too late for them to go back to work.”
Stein believes that since the trustees cater to active workers whom vote in union elections, they are more likely to apply severe cuts to the nonvoting retirees for political reasons.
The trustees counter in the application that the benefit cuts are equitable, pointing out that 33.6% of retirees won’t receive any cuts while 33.1% will suffer reductions in benefits. In comparison, 72.7% of active workers will experience double-digit cuts.
A New York-based nonprofit, the Teamsters Alliance for Pension Protection, or TAPP, paid for a forensic audit to determine whether the trustees failed to protect the interests of retirees when the fund started losing money.
The lead investigator, Ted Siedle, found $400 million-plus in avoidable underperformance losses and more than $500 million in excessive investment and administrative fees and expenses. For example, Siedle wrote that the pension allocated about 64% of its assets to alternative investments, including hedge funds, private equity, infrastructure, natural resources and real estate mutual funds. He concluded the “high-cost alternatives gamble” cost the fund $51 million annually in excessive fees.
“The report says to me that we didn’t have to be where we are today. We may still have been in critical status, but we may not have been in critical ‘declining’ status without the fiduarciary breaches,” said TAPP President Mark Greene, who has driven 28 years for UPS, which contributes about 76% of the funds to the pension.
UPS Inc. called the financial hardship of the pension fund and possible benefit cuts “regrettable”, in a statement to Transport Topics. YRC Worldwide Inc., the second-biggest contributor, declined to comment.
The Treasury Department has until mid-April to make a final decision.
