Thank you, Mr. Feinberg, for allowing me to speak here today. I am Karen Friedman, the Executive Vice President and Policy Director of the Pension Rights Center, a national consumer rights organization that works to protect and promote the retirement security of American workers, retirees and their families.
I flew here from Washington today to support the retirees here in Michigan – and retirees across the country – by urging the Treasury Department to reject the Central States Pension Fund’s application to cut pension benefits for retirees.
My comments will be brief because I don’t want to take away time from the retirees who are here to voice their concerns.
Mr. Feinberg, I don’t envy you at all, because you have been given a terrible task. You were appointed by the Treasury Department to oversee the Multiemployer Pension Reform Act (MPRA), a cruel and unjust law.
In fact, in the 40 years since the Center was founded, we have never seen a law worse than MPRA. So, my apologies to you.
The Pension Rights Center is well aware that the Treasury Department cannot overturn this law. Only Congress can do that – and we along with everyone in this room are working hard to make sure that happens.
But there is something you CAN do. You can REJECT the Central State’s Pension Fund’s application with good conscience.
As we outlined in our formal comments to Treasury, the Central States Pension Fund’s application is seriously flawed and simply does not meet the conditions established under MPRA.
The trustees, who operated under severe and disabling conflicts of interest, designed a 10,000 page application that serves their own purposes – not the interests of retirees.
Here’s how the Central States application flunks every condition set by MPRA:
First, the application fails to demonstrate that the Central States Pension Fund took all reasonable steps to avoid insolvency:
The trustees didn’t work to increase employer contributions to an adequate level. Nor did the trustees reduce the plan’s administrative and investment management expenses. Neither did the trustees explore whether there were valid legal actions against Goldman Sachs and others who invested the plan’s money and lost billions.
Second, the plan did not equitably distribute the benefit cuts.
The trustees created a proposal that hurts retirees, those who could least afford cuts, the most. The trustees decimated benefits of long-service retirees because they responded to the trustees’ former benefit structure that incentivized early retirement. The trustees interpreted the definition of orphans more broadly than the statute provides. The trustees state that the average benefit cut is just over 22 percent, but the retirees we’ve talked to – and there are many – have cuts of 50 to 70 percent – or even higher.
Third, even with the steep and unjust proposed cuts, the ability of the Central States Pension Fund to survive for the long term is extremely uncertain – a key factor that the law says must be considered before the Treasury Department can approve any application to cut retiree pension benefits.
I’ll end this way: Mr. Feinberg, please reject the application. The Pension Rights Center is working with workers and retirees, with the International Brotherhood of Teamsters, AARP, Teamsters for a Democratic Union, and with members of Congress from both parties who believe you should reject this application.
There are better solutions.
We are working with retirees, allied organizations and members of Congress to work toward a bi-partisan “Grand Bargain” solution.
Something like what was fashioned in this great city of Detroit. We can take a page out of Detroit’s playbook here. Stakeholders from all sides – Democrats and Republicans – along with the help of foundations and unions were able to figure out a way of savings this city’s retiree pensions.
In the end, instead of cutting retiree pension benefits by the original proposal’s 34 percent for some retirees, which pales in comparison to the cuts many Central States retirees are facing, Detroit found a way to save the plan. In the end, civilian retirees only got pension cuts of 4 percent, sparing police and firefighters from any cuts.
Surely if it can work in Detroit, we can find such a solution for Central States and for all underfunded multiemployer plans.
I’ll end by again stating that the Central States Pension Fund application does not meet the conditions required by MPRA to cut benefits.
Reject their application so we can work toward a better solution to save retirees pensions and underfunded multiemployer plans.