Congress’ backroom pension-cutting deal is even worse than expected


At last the actual language has been released of the backroom, last-minute congressional deal allowing benefits of millions of retired workers to be shredded.

It’s even worse than its critics anticipated.

We’ve tracked this inexcusably hasty, secretive maneuvering during the last week, reporting that it allows extreme, potentially premature cuts in benefits for retirees who are members of multi-employer pension plans. Such plans typically are sponsored jointly by unions and employers in given industries, like trucking. See our posts here and here for more background.

The measure ostensibly aims to stave off insolvency for multi-employer plans facing financial problems, largely by allowing them to cut retiree benefits to save money, well in advance of insolvency. Helping these plans survive is a laudable goal -- as many as 200 of the 1,400 such plans in existence may face financial problems over the next 20 years.


But as Ken Paff, national organizer of Teamsters for a Democratic Union, asserts: “The process stinks.” The deal was worked out in secret and invested with a bogus urgency: There’s absolutely no reason it needs to be passed this week, much less attached to an omnibus budget bill that has to be enacted before Congress leaves for vacation this week. “To attach this to a budget bill is a dirty trick,” Paff says.

The actual language of the 161-page pension measure wasn’t made public until Tuesday night; at midday Wednesday, pension advocates were still working their way through it. But it’s already clear that some descriptions of the provisions provided to reporters Tuesday by its drafters, Reps. John Kline (R-Minn.) and California’s George Miller (D-Martinez), were flagrantly misleading.

They said, for example, that a controversial “carve-out” for United Parcel Service, which employs Teamsters and would be on the hook for their retirees’ benefits if they’re slashed under the plan, was not in the bill.

But it is in the bill, right there on page 82, artfully concealed behind convoluted legal language. The provision generally applies to “orphans” -- retirees whose employers have either gone out of business or exited the pension plan. UPS exited the Teamsters’ huge Central States pension plan in 2007, then agreed with the union to establish a separate new plan for its workers while committing to covering any benefit cuts for workers still in the old plan. Central States is perhaps the shakiest pension fund in the nation, so it’s most likely to take advantage of the Kline/Miller bill.

The new provision effectively places UPS retirees last in line for benefit cuts among all “orphans” getting their benefits from Central States. Pension experts say that arrangement materially reduces the likelihood that the UPS retirees will suffer more than minimal cuts, if any cuts at all. In turn, that reduces the liability of UPS.

The Teamsters on Tuesday said this provision could save UPS $2 billion, calling it an “outrageous government bailout of one of the most profitable companies in America.” The union noted, accurately, that it would likely result in deeper benefit cuts for non-UPS retirees -- who would effectively be paying for UPS’ break with their own retirement stipends.


The company, for its part, disputes that it’s getting a bailout. The measure, it says, “will not change our contractual obligation.” That’s true but disingenuous -- its contractual obligation stands, but its potential cost is sharply reduced. Asked for a further comment, UPS declined to “speculate on the potential financial implications, as there are too many unknown factors about the multi-employer plans and the future conditions under which they will be impacted by this legislation.”

Kline and Miller also maintained that their bill contained numerous protections for retirees, especially those disabled or 75 or older. A ratification vote by workers and retirees would be required before benefit cuts could be implemented. But those protections aren’t nearly as strong as they implied.

For one thing, full protection is available only for those aged 80 or older; those aged 75-80 are only partially protected -- the benefits of a 76-year-old, for instance, could still be slashed by 80% of the maximum allowed by the bill. Since many retirees would face benefit cuts of as much as two-thirds of what they were promised during their working lives, that’s not much of a safeguard.

As for the ratification vote, in many instances it will be a pure sham. For pension funds facing especially large shortfalls, the secretary of the Treasury can simply overrule an adverse vote. Which pension plans? Those considered “systematically important,” defined as being at least $1 billion in the hole. Pension experts say that provision applies to Central States and at least seven others. Since the category may include some of the biggest multi-employer funds in the country, the ratification requirement may as well not exist at all.

Obviously, the implications of this wretched bill won’t be fully understood until it can be carefully analyzed and subjected to public debate. The first takes days, and the second won’t happen at all.

What’s clear already is that it’s a dramatic evisceration of labor law safeguards that have been in place since 1974 under the Employee Retirement Income Security Act, the indispensable ERISA. The fact that this is being done at the instigation of special interests -- employers and some unions -- is obvious from how it’s being slipped onto the legislative calendar virtually in the dead of night.

When secret deals are cut, the victims are never in the room, and they haven’t been during this process. The measure needs to be stripped out of the omnibus bill, now.

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