The US Treasury Department on September 10 held a hearing on the implementation of the Multiemployer Pension Reform Act, a law passed last year that allows financially troubled multi-employer pension plans to reduce promised benefits.
Outside of the hearing, Sen. Bernie Sanders and Rep. Marcy Kaptur held a media conference urging support for their Keep Our Pension Promises Act (KOPPA) bill, which establishes a fund administered by the Pension Benefit Guaranty Corporation (PBGC) that would be used to maintain promised pension benefits when multi-employer pension funds experience financial trouble.
“We have to send a loud and clear message—when a promise is made to working people, that promise must be kept,” said Sen. Sanders. “We can’t slash pensions in this country. If we stand together, if all Americans stand together, we can win this fight.”
“Your pension benefits are your earned benefits and you have a right to them,” said Rep. Kaptur to retirees attending the media conference. “I am proud to stand with you.”
There are 1400 multiemployer defined benefit pension plans in the US that serve 10 million workers and retirees. These pension plans provide retirement benefits for workers in certain industries in which workers routinely work for a number of different employers, such as construction, transportation, and hospitality businesses.
More than 90 percent of these funds are in good to fair financial shape, but a handful are in critical condition and could run out of money some time in the next 20 to 30 years.
To deal with this problem, the National Coordinating Council for Multiemployer Plans, the trade association for these multiemployer plans, convinced Congress to pass the Multiemployer Pension Reform Act (MPRA).
The MPRA solution for dealing with pension fund financial troubles is to make retirees and workers bear the cost for making the pension plans whole again by reducing benefits.
Sanders’ and Kaptur’s KOPPA on the other hand allows financially troubled plans to avoid benefit cuts by creating a pool of money that could be used to avoid benefit cuts when multiemployer plans face financial difficulty. The pool would be funded by eliminating two loopholes used by the wealthy to avoid paying taxes.
One of these loopholes is called like-kind exchange, which allows wealthy investors to defer indefinitely their capital gains taxes on certain investments.
The other is called the minority valuation discount, which allows people receiving gifts or inheritances of $5 million or more to receive discounts that substantially lower their tax liabilities.
Government analysts estimate that the elimination of these two loopholes would save $18 billion over ten years.
If KOPPA passes, these savings would be used to create a Legacy Fund administered by PBGC. The money in the Legacy Fund would be used to pay a portion of the pension benefits owed by a multiemployer pension plan facing financial difficulties until the plan returns to financial health.
One of the multiemployer plans facing critical financial difficulties is the Teamsters Central State Pension Fund, which currently provides pensions to 208,000 retired Teamsters, whose average yearly benefit is estimated to be $8580 a year or $715 a month.
These retirees and tens of thousands active workers are facing possible pension reductions in 2016.
If KOPPA passes, these benefit cuts will be avoided.
Jim Hoffa, general president of the Teamsters and a number of retired Teamsters joined Sen. Sanders and Rep. Kaptur at their media conference and urged passage of KOPPA.
“We’re here to protect pensions,” said Hoffa at the media conference. “We have retirees here from all across America and this is just the beginning of our fight. Hardworking Americans have earned the right to retire with dignity.”
Teamsters for a Democratic Union (TDU), a caucus of rank and file members and some local union leaders, also supports KOPPA, but TDU accused Hoffa of flip flopping on the issue of supporting passage of MPRA and benefit cuts.
Hoffa sits on the board of directors of the Central States Pension Fund, which supported passage of MPRA, so that it could cut pension benefits to keep the fund alive and return it to financial health.
According to TDU, Hoffa secretly supported the passage of MPRA.
The Central States Fund on its website states that its financial troubles are the result of an aging workforce and a declining number of active workers and companies contributing to the fund.
Investment losses incurred during the financial crisis of 2008 also hurt the fund.
But TDU isn’t convinced that these are the only problems that have caused the decline of the fund, and it is calling for an independent audit before any pension cuts take place.
“(An audit) is a reasonable demand by members and retirees who deferred wage increase so they could have pension benefits they could survive on in retirement,” reads a TDU statement.