Speech by Karen Friedman to the Pension Rights Committee of Minnesota (April 11, 2015)

Speech by Karen Friedman to the Pension Rights Committee of Minnesota (April 11, 2015)


On April 11, 2015, Karen Friedman spoke to the Pension Rights Committee of Minnesota, a group of retired Teamsters who are concerned about possible retiree benefit cuts in certain underfunded multiemployer plans.

Good morning, my friends from the Pension Rights Committee of Minnesota. Thanks for inviting me to speak today. 

I am the executive vice president and policy director of the Pension Rights Center, the country’s oldest national consumer organization working to protect and promote the retirement rights of workers, retirees, and their families. We’ve been around for almost 40 years, and, as you know, the need to fight is greater than ever.

It’s a beautiful morning, and it’s great to be in Minnesota, known as the “the Land of 10,000 Lakes.” However, with the passage of the new Multiemployer Pension Reform Act of 2014, the 10,000 lakes are quickly transforming into 10,000 pools of tears, as retirees and their spouses and widows realize that Congress has betrayed them by allowing trustees to cut their hard- earned pensions for the first time.  

But I’m here today to say that we can turn tears into anger, anger into action, and action into change, as we work together to repeal this new law and, if necessary, to influence the government’s regulatory agencies that will oversee it.  

As we saw earlier this week, grassroots action can make a difference: 

  • Two days ago, there was a protest of about 100 retirees in front of Central States Pension Fund, spearheaded by the Wisconsin Committee for Pension Rights. You spoke to members of the Fund, voiced your concerns, and let the Fund know you are not happy about these pension cuts. Those who were there can tell you more about it. But officials of the Fund know you’re watching.
  • Also, we are happy to report that 1,525 retirees, spouses, and concerned citizens filed comments that we hand-delivered to the Treasury Department to protest the unfairness of the new law. I’ll talk more about that later.
  • The op-ed written by Harold and Donna Carlson in the Star Tribune was terrific. Are you here today? Great job!

The bottom line is: Keep up the good work. We have to keep up these protests and band together for change. And we can make a difference. 

So, I’m going to talk about five topics today:

I. What the new Multiemployer Pension Reform Act will do and why it was passed
II. New legislation that is being drafted to repeal the worst provisions of the new law
III. How we are working to influence the regulatory agencies that oversee the new law
IV. Whether these actions can be challenged in the courts
V. The need for ongoing grassroots efforts – not just byTeamsters – but by lots of organizations throughout the country, banding together not just to undo this dastardly law but to also join together for a new movement for retirement security. 


For the past two years, an organization called the National Coordinating Committee for Multiemployer Plans (better known as NCCMP) lobbied Congress intensively to ostensibly “solve” the problems of seriously underfunded multiemployer plans, particularly the Central States Pension Fund. 

NCCMP, an association of union and employer trustees, and employers, advocated that a key way to saving these underfunded multiemployer plans was to allow trustees to be able to unilaterally decide to cut retirees benefits. This idea was included in a report they published called “Solutions not Bailouts.”  

In Washington we and allied organizations opposed the cutback proposal included in this report. However, NCCMP has a lot of money and a lot of powerful lobbyists working for them. 

In the waning days of 2014, despite massive push-back from the Pension Rights Center, AARP, the Machinists, and the Boilermakers, NCCMP lobbyists were able to convince key members of Congress to include a 161-page piece of legislation in the must-pass Cromnibus (the spending bill) to allow trustees of certain underfunded pension plans to slash the benefits of retirees – by 60 percent or more. 

The law was passed ostensibly to “save” deeply troubled underfunded multiemployer plans, but really what the law does is allow trustees to balance the books on the backs of retirees – the most vulnerable

This new law guts the most fundamental provisions of ERISA, the federal private pension law. 

For 40 years, ERISA has had the strongest protections for retirees. And the law says clearly that the pensions of retirees cannot be cut back unless their plan runs out of money.  

However, the new Multiemployer Pension Reform Act – written behind-closed doors by Congressman John Kline (from right here in the Twin Cities) and now former Congressman George Miller– reverses ERISA’s protections and allows trustees of certain underfunded multiemployer plans to slash retiree benefits while the plans are still solvent. 

This is unconscionable. 

There were no public hearings on the legislation, and the retirees targeted by these cutbacks were never given a forum to have their voices heard. This legislation passed only because it was attached to the Omnibus spending bill. Many members of Congress have since told us that they voted for the bill only because a vote against it would have meant that the entire federal government would have shut down. 

Who would be hurt by this new law? Retired truck drivers, construction, pipe-fitters and food service workers, and their widows or widowers, who count on their earned pensions to make it through retirement. According to the Pension Benefit Guaranty Association (PBGC, the federal private pension insurance agency), as many as 1.5 million older Americans could be affected by these cut-backs now. Many more could be hurt in the future. 

Just like you today, retirees across the country have written us to ask how Congress could have passed such a cruel law. 

They are confused about how the law will work, how they will be affected, or whether they will be affected, and they don’t understand how the pensions they gave up wages for could be cut, or how these unbreakable promises could, in fact, be broken.

While everyone here wants multiemployer plan to continue, there is no immediate crisis that should have compelled Congress to pass a bill that was never vetted. According to the PBGC, there are about 100-200 plans that may become insolvent in 10-20 years. That means there was plenty of time to have a dialogue on this issue and consider other options. Retire cut-backs should have been the last thing on the table – not the first option to consider.

Here’s what the cutback provisions of the new law would do in a nutshell. I’ll take questions at the end of my speech, if you have other questions about these provisions.

First, as I said before, this new law was written quickly – and we didn’t have a chance to look at until 2 days before it was passed. It is worse than we thought it could be. 

It essentially gives almost unbridled power to trustees to cut benefits and gives nothing but illusory protections to retirees. 

So, having said that, here goes:

  • The legislation permits deep pension cuts to retirees in certain financially-troubled multiemployer plans that fit the law’s definition of being in “critical and declining status.” 

These are plans that are projected to not have enough money to pay 100 percent of benefits within 15 years, or in 20 years, if the plan has a 2:1 ratio of retirees to actives or is 80 percent funded.

  • The decision to cut benefits is made by plan trustees, who are typically more aligned with active workers and employers than with retirees.
  • Retirees who are age 80 or over, or who are receiving a disability pension, are not subject to benefit cuts. Retirees ages 75-79 are subject to smaller cuts than retirees under age 75. 
  • How big or small the cuts are for those under age 75 is determined by the trustees. 
  • The cuts are subject to certain legal limits, the most important of which is that benefits cannot be cut below 110 percent of the amounts that the federal pension insurance agency guarantees – which are figured out by a formula.

As most of you know, the maximum guarantee for a retiree with 30 years of service in a the highest pay class in a multiemployer plan is only $12,870, and the guarantee for the many retirees, who have fewer years of service and lower monthly benefits, will be still lower. 

  • There are instances where the cuts could be more than 60 percent of a participant’s benefits. We have a calculator on our website so you can determine how much your benefits will be cut.
  • Plan trustees decide how to allocate the cuts. For example, they can cut retirees’ benefits more than those of active workers, and they can decide whether and how much to reduce survivors’ benefits.
  • Plan trustees are required to reduce the benefits of orphans first – that is, participants whose employers went out of business (or withdrew from the plan for other reasons without paying all of their obligations) before they reduce the benefits of any other plan participants. Why should orphans be cut the first (and most)? They had nothing to do with their employers leaving the fund.
  • UPS retirees in the Central States Teamsters plan are given special protection: their benefits are last in line to be cut. This provision is reportedly the result of a last-minute deal that will save UPS an estimated $2 billion that it would otherwise have been contractually be required to pay to its retirees.
  • There is no provision for automatic restoration of lost benefits if a plan’s funding status improves.  
  • A trustees’ decision to cut benefits can only be reversed by the Department of Treasury, and then only if the Treasury concludes that the decision is based on a determination that is “clearly erroneous.” We think this means that it will be impossible to challenge.
  • Before cutting benefits, the trustees must provide information to all plan members about the cuts, but they control what the information says.  So it is going to be biased toward their point of view.
  • Plans with 10,000 or more participants must appoint a retired plan participant to represent the interests of pensioners. We just learned that the Central States Fund picked a retiree rep named 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 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, or whether, if asked, she will distribute information that you want to go to other retirees to give your perspective. 
  • There is a voting process in the law. Plan trustees must allow all participants to vote on cuts before they are implemented. However, this right is largely illusory. 

First, a majority of all workers and retirees in a plan – not just a majority of the ones who vote – is required to block cuts. Thus, a vote AGAINST cuts FAILS even if 100 percent of those voting oppose the cuts, if only 49 percent of participants actually vote.

Moreover, ballots can be distributed by e-mail, which means that retirees who don’t use the Internet might not vote. 

  • Even if all participants vote against cuts, the Treasury Department, in consultation with the Department of Labor and the Pension Benefit Guaranty Corporation, can override the vote and uphold the trustees’ decision to make cuts, if it concludes that the plan’s insolvency would increase the PBGC’s projected liabilities by $1 billion or more. 
  • Retirees, widows, and widowers whose benefits are reduced cannot bring a lawsuit under the federal private pension law to challenge the legality of the reductions.

What the Central States Pension Fund is doing:

In a new video that Central States put on its website, officials say that Congress is making them do this. What they don’t say that the Fund probably helped write the legislation and I’ll be happy to tell you all that’s wrong about what they say in the video in the question and answer. 


We are working on the Hill with partnering organizations to get legislation introduced that will repeal the legislation.

We have a coalition on Capitol Hill working on repeal legislation. Right now, Senator Bernie Sanders from Vermont is working on a legislative proposal that will repeal the cutback provisions of the new law, and to develop innovative ways to both bring money into the PBGC so it can assist plans, and also bring in money to the plans.


While our primary goal is have the cut-back provisions repealed – and have a piece of legislation that you can organize workers, retirees, and friends around – it is also very important that we try to influence the regulatory agencies that have authority to interpret and enforce the law.

As I said earlier, the primary agency that is authorized to interpret and enforce this law is the Department of Treasury. Treasury issued a Request for Information on a range of issues pertaining to the benefit cuts. The Pension Rights Center helped facilitate the process by which retirees and workers could tell Treasury what they thought. Last Monday, we hand-delivered more than 1500 comments to the IRS from retirees, spouses and interested citizens from across the country. Good job!

Among the recommendations that you and PRC made to Treasury:

1)   There should be standards for the cuts.

  • Before plans can cut benefits, they first should have to make other cuts, like reducing the salaries of plan officials and the fees paid to investment management firms, lawyers, and other consultants.
  • Plans should be required to provide government agencies all the documents to prove they meet the criteria for being in trouble and posting all of this information on Treasury’s website. 
  • Plans should be required to use realistic assumptions about future investment returns, life expectancy, employer contributions, and other factors to calculate the likelihood that our plan will run out of money in the future. Don’t let them monkey with the assumptions.

2)  Treasury should interpret the cutback provisions in the law fairly.

  • Once someone is on a disability pension, benefits should never be cut – even if the disability pension converts to a normal pension at retirement age.
  • The “effective date” for benefit suspensions should be the date that the cuts are actually implemented, so that those who have reached the age of 80 on that date will be fully protected (and anyone who has reached the age of 75 on that date will be partly protected).
  • Factors that plan trustees must take into account before cutting benefits, including the health of retirees and hardships that could affect individual retirees, should be prioritized. 
  • Widows and widowers should be exempt from all cuts. Survivor benefits are generally already reduced pensions and shouldn’t be subject to further reduction by this new law.
  • If a plan becomes solvent after reducing retirees’ benefits, the trustees must first fully restore retirees’ benefits before increasing active workers’ benefits. 

3)  Treasury should develop fair voting procedures.

  • You asked Treasury to let retirees pick the Retiree Representative – not trustees — and clarify that this person have undivided loyalty to all retirees, with no actual or potential conflicts of interest (already, Central States is a test case!).
  • Ballots should be sent by first-class mail, not by e-mail, to retirees and beneficiaries.
  • If plans deliver ballots electronically to active workers and deferred vested participants, then proof should be required that the ballots have been received.
  • For a vote to be valid, there should be proof that a majority of all active workers, retirees, deferred vested participants, and beneficiaries have received and cast ballots.  

4)  Treasury should involve affected retirees in developing model notices.

  • Hold focus groups among retirees and beneficiaries in our plan and others to develop plain-English notices that inform employees and retirees of the extent of the benefit cuts and how the trustees determined that they needed to make the cuts. 


Another strategy that some of you have asked about is, “Can we sue?” Our legal experts are talking to top litigators across the country who are determining whether there are theories to challenge the law, and there are lawyers who are looking into this. 

To take a case, lawyers would need to know that they have a 50-50 chance of winning, and I think there are still explorations. One thing is clear, you need top ERISA lawyers and Supreme Court lawyers, so don’t do anything without talking to us first. 


This is not just about protecting retirees in multiemployer plans – although that is our first and most critical challenge. This is a bigger issue about America. What kind of country are we and what kind of country do we want to become?   

Do we as a country value promises made to people, especially our elderly and our most vulnerable, or have we become a country that obliterates promises, and has no regard for workers and retirees? 

We at the Pension Rights Center believe that the multiemployer issue is fundamental to answering these questions. And, we still think that America is the richest country in the world – and we can and must keep promises.

Over the past few years we have seen attacks on pensions and Social Security nationwide. Ideologues, opposed to collective investment and collective arrangements, have tried to undermine Social Security, when it should be strengthened, not cut.

And while traditional defined benefit system pour billions of dollars into the economy, state and cities continue to slash workers’ and retirees’ pensions.

The multiemployer fight is not just about you — it’s about everybody. 

If Central States and other plans are able to successfully cut your pensions, then this emboldens the policymakers who want to undo promises to everyone, leading to more cuts in state and local plans; bolstering the movement to cut Social Security and Medicare; and even leading to cuts in single-employer plans.

In fact, it’s not just me who is thinking this way. I read a report by the hedge fund BlackRock in which they say point-blank that the new Multiemployer Pension Reform Act of 2014 may lead to what they euphemistically call other “reform” in corporate pension plans. 

They suggest that the new law may offer a “useful model” for other pension plans facing imminent distress. In other words, what happens to multis will happen to everyone, and the only ones to benefit are the corporations, the trustees, and the hedge funds.

Is that the America we want?

So, we need to organize everyone. Not just Teamsters but other union retirees who could be affected: food workers, bricklayers, pipefitters, actors – anyone who is in these funds and one day could be affected. 

And active workers have told me they oppose this too. After all, if the Fund can break promises to their retired brothers and sisters, how can anyone trust what the plan says?

Then we need to go broader. We need to get the women’s groups, the organizations serving people of color, other retiree groups, and get a broad coalition of anyone who is committed to a strong social contract and a just world.

We need to talk about this as a larger movement for retirement justice.

Our principles need to be:

  • Protect the promises made to people in multiemployer plans and all pension plans.
  • Protect and strengthen Social Security – you should all read Nancy Altman’s book, Social Security Works!: Why Social Security Isn’t Going Broke and How Expanding It Will Help Us All.
  • Create new system of universal, secure, and adequate pension plans on top of Social Security so everyone is covered, not just union employees and retirees, but everyone.

This shouldn’t and can’t be a battle about us and them, union retirees versus nonunion retirees, retirees versus active workers, older people versus younger people. No, this is a battle for the soul of our country, and we all benefit.  

Let’s fight for your rights and make a movement for reform.

Thank you for inviting me. I am honored to be speaking to you all this morning.

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