On April 11, 2015, Joellen Leavelle spoke to the Wisconsin Committee to Protect Pensions, a group of retired Teamsters who are concerned about possible retiree benefit cuts in certain underfunded multiemployer plans.
Hi. I’m Joellen Leavelle, Digital and Outreach Director at the Pension Rights Center. Thanks to you all for inviting me to speak today. And a very special thanks to Bob Amsden, who picked me up bright and early at the airport at 7:30 this morning.
The reason I’m here and the reason Bob picked me up so early this morning is that today’s meeting is an important one – and so is every meeting that retirees like you are having around the country. The rally at the Central States Pension Fund earlier this week was important. The people who attended that rally showed that there are retirees who are going to stand up and fight against any pension cuts. That is important.
And so is the meeting that Karen Friedman, the Center’s executive vice president and policy director, is speaking at today. Karen is in Minnesota, speaking to another group of retirees who are just as worried as you are about what’s happening to their pensions. As I’m sure you’re all too aware, an awful new law called the Multiemployer Pension Reform Act has the potential to devastate the lives of hundreds of thousands of retirees. And many of them don’t even know about it yet.
Today I’m going to discuss this new law and give you an update on what’s going on in Washington, including efforts to repeal the provisions of the law that allow trustees of certain underfunded plans to cut retiree pensions. But first I’m going to tell you a little more about the Pension Rights Center and what we’ve been doing since we were founded shortly after the Employee Retirement Income Security Act, also known as ERISA, the nation’s private pension law, was enacted.
The Center’s mission is to protect and promote the retirement security of workers, retirees, and their families. We do this in two ways – through policy and direct assistance. On the policy side, we try to do everything we can to make sure that laws are fair by representing the interests of workers and retirees. This includes having meetings with members of Congress and their staff, writing fact sheets about new proposals and laws that could affect your retirement security, talking to groups like yours about these important issues, and countless other activities.
Second, we work as part of the U.S. Administration on Aging’s Pension Counseling and Information Program. This program helps ensure that people who need help or have questions about their pensions have a place they can go to get answers. The seven pension counseling projects provide free legal assistance to 30 states, including Wisconsin. If you have a problem with or question about your pension, you can get free legal help from the Upper Midwest Pension Rights Project. I’ve brought with me several copies of a brochure that lists contact information for each counseling project.
And now for a little bit about myself. I’ve been at the Pension Rights Center for 10 years. Sadly, much of what I’ve seen during my time at the Center is a string of broken promises. I’ve seen employer after employer make promises to employees only to later break that promise, wreaking havoc on the lives of countless retirees.
The first broken promise I worked on involved people whose traditional pension plans had been converted to “cash balance” pension plans. While this may not sound like a big change, it was. These cash balance “conversions” left workers who were very close to retirement with much smaller pensions than they had expected. By working with people like you, we were able to persuade Congress to put an end to the worst abuses.
More recently – and before MPRA was passed – much of our focus was on the latest threat to retirement security: de-risking. De-risking, or risk dumping as we call it, occurs when companies like GM and Ford want to get rid of their pension liabilities either by transferring them to insurance companies or to individuals themselves by offering lump sum buy-outs. As with the other threats I mentioned earlier, the Pension Rights Center is right there with retirees, helping them understand how de-risking can affect them and working to make sure that policymakers create laws that provide protections in these transactions.
Unfortunately, the broken promises I’ve mentioned have changed the rules of the game mid-stream, and in many cases, placed the burden of saving for retirement squarely on the backs of workers and retirees who have had very little, if any, time to prepare for the consequences.
But we at the Center have never seen as big a threat to retirement security or as big a broken promise as we have with MPRA. The Multiemployer Pension Reform Act is by far the worst assault on retirement security that any of us have seen.
For years we’ve known that a number of multiemployer plans were in financial trouble. These problems stem from economic consequences of the recession and the financial health of some participating employers. And many solutions had been proposed. It wasn’t until a group called the National Coordinating Committee for Multiemployer Plans put forth several ideas in a report called “Solutions Not Bailouts” that cutting retiree pensions was even seriously considered as an option. Before this report, cutting retiree pensions had never before been considered. Unfortunately, this report laid the groundwork for what ultimately became MPRA.
Many, if not all, of you already know that the law was passed without any input from the people who would be most affected by it – you, the retirees. We at the Pension Rights Center weren’t even made aware that the legislation was a possibility until the very last minute, when there was very little we could do to stop MPRA from becoming law.
But that didn’t stop us from trying. Center staff and our allies held countless meetings and phone calls with Congressional staff and you – you were amazing. You all and others from around the country used our website to send nearly 50,000 letters to your members of Congress, urging them to vote against this terrible law.
We didn’t win that fight, but we’re determined to win the next one. Before I get to that, I want to talk about what the law does. I’ve brought a fact sheet summarizing the key provisions of the law, so I will only discuss the most concerning parts of the law now. If you have questions about other parts of the law, just ask during the Q&A.
Here’s what the law does:
First and foremost, the law violates what had been a core principle of ERISA – that retiree pensions wouldn’t, shouldn’t, and couldn’t be cut unless a plan runs out of money. The reason for this fundamental promise was simple – retirees have little to no opportunity to return to work to earn income. Due to various health concerns, many retirees are simply physically incapable of going back to work. And when Congress enacted ERISA, it recognized that retirees need the most protections, not the least. But this law gives trustees unprecedented power to break the most sacred of ERISA’s promises.
I’ve spoken to countless retirees who cannot believe that this is the reality in which we all now live. The people I speak to made numerous sacrifices throughout their working lives because they were secure in the fact that their pension would be there for them when they retired. And now that promise has been broken. I know that many of you gave up wages, salary increases, vacations, time with your families, and other benefits because you believed you would retire with a secure pension. And now this law threatens to break that promise.
The law allows trustees of certain “critical and declining” pension plans to cut the pensions of both active workers and retirees. These trustees now have immense control over whether and how much your pensions can be cut within certain limits.
For example, your trustees could decide to cut retiree pensions by the maximum amount, which could end up being 60 percent or more, if they determined that this was necessary to prevent your plan from running out of money.
However, they cannot reduce benefits below 110 percent of the amount guaranteed by the federal pension insurance agency, the Pension Benefit Guaranty Corporation. If you want to calculate how much your pension could be cut by the new law, visit our website. We’ve got a calculator that can give people who are 74 and younger estimates about how much their pensions could be cut by the new law if the trustees were to make the biggest possible cuts.
Now, whose pensions can be cut?
Retirees who are receiving disability pensions and those 80 and older are exempt from cuts. Retirees between the ages of 75 and 79 will see less of a cut than retirees younger than 75, who will see the biggest cuts.
It is important to note that the law treats certain groups of retirees differently. For example, retirees in orphan plans – those whose employers have withdrawn from the plan without having paid the full withdrawal liability – are first in line for cuts. Next are retirees whose employers are still participating in the plan. Finally, UPS, which withdrew from the Central States plan right before the Great Recession, negotiated a last-minute deal that allowed its retirees to be the last in line for cuts.
Again, while the law does have limits on how much retiree pensions can be cut, it is the trustees who will ultimately decide the size of the pension cuts all within the confines of the law.
For many reasons, pension plan trustees are typically more aligned with active workers than they are with retirees. To give retirees a say, the law allows retirees to have a representative.
We learned on Wednesday that the Central States Pension Fund has appointed its retiree representative. We don’t know much about her, but her name is Susan Mauren. As she says in a letter to retirees, she has no vote in the pension fund’s decision to make pension cuts. Instead, her role is to “provide an independent perspective to help those who have a vote understand how their decision will affect” retirees.
But what retirees have told us that they think they should have been able to pick the retiree rep themselves – not the trustees. Otherwise how will this person be truly independent? We wonder if she will hold meetings with you, the retirees, or whether, if asked, she will share retiree perspectives about the possible cuts. There’s a lot we need to know about the retiree representative and her role in the process.
The law also requires that any plan that wants to make cuts put the cuts up for a vote. And this is where things get tricky.
All plan participants, not just retirees, but current workers, retirees, and those who earned a benefit but are not yet retired, will vote on whether pension cuts are made. We think this vote is unfair to retirees because, according to the law, it doesn’t matter if a majority of those who cast a ballot vote against retiree pension cuts. Rather, the only way a vote could overturn the trustees’ decision to make cuts is if a majority of all eligible voters or participants in the plan – again, current workers, retirees, and those who have earned a benefit but are not yet retired – vote against them. Let me restate this. The only way for a decision to cut retiree pensions to be overturned is if a majority of the participants in the plan – not a majority of voters – vote against it.
And then, even if the vote is able to prevent the pension cuts from happening, the law gives the Treasury Department authority to overturn the vote if it deems that the plan’s insolvency would increase the PBGC’s projected liabilities by $1 billion or more.
Finally, there is no provision in the law that would require plans to restore retiree pensions to their pre-cut levels, if a plan’s funding status improves after having made cuts. This means that your pension may not be restored to pre-cut levels, even if the cuts that are made restore your pension plan to solid financial footing.
Even though the law does a lot of things, there is a lot that the law leaves unsaid. For instance, many plans convert disability pensions to regular retirement pensions once a retiree reaches a certain age. Is that retiree exempt from cuts? We don’t know. The only thing we can tell you to do is check with your pension plan to find out. Or, ask the retiree representative.
Also left unsaid is what happens with certain re-employment restrictions. Many of the people I’ve spoken with want to know, now that their plan may slash their pensions, whether they will be able to return to work without having their benefits suspended. Again, the law is silent on this. We advise that you check with your pension plan to find out the answer to this question. We have heard, however, that this was addressed at this week’s meeting of the Central States Pension Fund. We expect Central States and other plans to flesh this out in the coming months.
So, are there alternative to cuts? Yes, there are.
Despite what many people who supported MPRA have said, there are alternatives to the cuts that the law permits. Our belief is that retiree pension cuts should have been the last option on the table – not the first.
Of course, as I mentioned earlier, it is important to acknowledge that many multiemployer pension plans are facing serious funding shortfalls. None of us in this room want the Central States plan – or any multiemployer plan – to run out of money. We just think that other options should have been considered before cuts to retiree pensions were even put on the table.
The Pension Rights Center and AARP have proposed a number of common-sense proposals that we and other organizations believe should be considered before multiemployer plans are allowed to cut benefits.
These ideas include letting plans join together to save on administrative costs, finding creative ways of relieving employers of obligations for workers and retirees whose employers are no longer contributing to the plans, and providing much more money to the PBGC to help the agency assist plans and provide higher guarantees. We believe that these approaches and ones specific to certain industries should be explored, rather than reducing the hard-earned and much-needed benefits of retirees. We’re not saying that these alternatives will be painless, but we do believe that these are a whole heck of a lot better than pension cuts of up to 60 percent.
So, what’s the plan of action?
To have any chance of repealing this, we’re going to need partners in Congress – like Representative Moore – to help. And we’ve already begun the process. We’re working closely with members of Congress to repeal the cut provisions of the law. In fact, Senator Bernie Sanders of Vermont is planning to introduce legislation that would do just that. The bill is also likely to include new ways to provide money both to the PBGC and to severely underfunded multiemployer plans. Will passing this legislation be easy? Of course not. But if we work together we can make it happen.
But we’re going to need your help. In the coming months, we will work with you to write, call, and visit your members of Congress. We will work with you to add your voices to our story bank, because we use those stories when we meet with members of Congress. If we want them to take action and support the repeal legislation once it is introduced, it is imperative that members of Congress hear from you – their constituents. We will work with you to contact the media and write letters to the editor. We’ll work with you to sign letters and petitions that will raise awareness and generate support for the repeal effort. And then we’re going to do it again. And again. Because that’s how important this is. We’ve got to do everything we can to prevent retiree pensions from being cut.
At the same time, we’ve got to work to make sure that the law as it exists today protects retirees as much as possible.
That’s why we asked you to send comments to the Treasury Department about how it should implement the new law. And, boy, did you ever! You submitted more than 1,500 comments, telling the Treasury Department about your unique circumstances and giving recommendations on what information plans should provide when they apply for benefit cuts and how these plans should notify workers and retirees about the proposed cuts. This item here is incredibly important.
Many of the retirees I’ve spoken to do not have an e-mail address. Why is this important? Well, the law allows retirees to be notified of the vote by e-mail. We need to make sure that those retirees who don’t have e-mail are not left out. They need to have the opportunity to vote on whether the cuts will happen. And every vote matters.
Your comments to the Treasury Department also included suggestions on the type of person who should be selected to be the Retiree Representative, input on the process to allow participants the ability to vote on the cuts, and more.
And there’s still more to be done.
The Wisconsin Committee to Protect Pensions has created a fantastic Facebook page where they share information about this law. We need more groups to do the same. And with you as a model, they will.
If we’re going to stop this, groups like yours will have to do two things. Make sure people know about the law. As I mentioned earlier, there are countless people who have no idea that this law exists and that it could affect them. We need to make sure that they don’t find out about the law when it’s too late – and after their pension has already been cut.
We also need groups like yours to keep holding meetings to make sure that people know what they can do to stop these cuts from happening. Like I said earlier, we’ve got to do this together if we’re going to stop this.
By the way, this law doesn’t only affect Central States retirees. Steelworkers, construction workers, nurses, food and service workers, and many others are affected by the law. We need to get as many of them involved as we can in the movement to stop retiree pension cuts.
And while this issue affects all of you deeply, others outside of multiemployer plans should also care about this law. Why? Because once multiemployer plans start cutting your benefits, this creates a dangerous precedent that could lead to cuts in Social Security, Medicare, in state and local pension plans and even in corporate pension plans. This law represents a fundamental change in the social contract as we know it. In fact, a recent report released by the Blackrock hedge fund actually says this. The report says that this new law could be used as a model for making benefit cuts at corporations and in state governments. We’ve got to stop this from happening.
And this isn’t only a retiree issue. This affects active workers, too. Many of them have told us that they think this law is terrible. After all, if pension plans can cut pensions they have promised to their retired brothers and sisters, how can they trust the same promises that have been made to them? They can’t.
That’s why we need to organize throughout the country, among retirees and active workers; Teamsters and other unions; retiree and women’s groups, churches, and organizations that represent communities of color. We should get everyone on board to join with us to repeal this law, because if it’s allowed to move forward, this is a strike against all of us.
Together, we can change this law. It’s not going to be easy and it is going to take a lot of work, but together, I know we can get it done.
Thanks. Any questions?