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:
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.
I. WHAT IS THIS LAW AND HOW DID SUCH A BAD PIECE OF LEGISLATION PASS?
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:
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.
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.
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.
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.
II. THESE DANGEROUS CUT-BACK PROVISIONS MUST BE REPEALED THROUGH LEGISLATION.
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.
III. INFLUENCING THE REGULATORY AGENCIES
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.
2) Treasury should interpret the cutback provisions in the law fairly.
3) Treasury should develop fair voting procedures.
4) Treasury should involve affected retirees in developing model notices.
IV. CAN WE SUE?
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.
V. FORMING A RETIREMENT REFORM MOVEMENT: HOW DO WE PRESERVE PROMISES AND CREATE A SYSTEM THAT WORKS
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:
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.