Treasury rejects Teamsters pension plan cuts

The U.S. Treasury Department on Friday rejected a reorganization proposal by trustees of the Teamsters Central States Pension Plan that would have slashed monthly benefit checks by as much as 60 percent on July 1 for about 6,700 Iowa retirees and their spouses.

Nationwide, the proposed cuts by Central States trustees would have affected about 270,000 people.

In a letter posted at www.treasury.gov/mpra, Treasury Secretary Jacob Lew said the application 'failed to meet the requirement to demonstrate that the proposed benefit reductions are reasonably estimated to allow the plan to avoid insolvency.”

' Read more on the proposed pension plan

Treasury said the proposal also did not fulfill requirements that reductions be equitably distributed and that the notices provided to the average plan participant be understandable.

Under the Multi-Employer Pension Reform Act (MPRA) of 2014, Central States Pension Plan trustees can resubmit the proposal. Thomas Nyhan, Central States executive director, said in a statement Friday that the trustees will carefully consider its next steps.

Kay Daubenmier of Cedar Rapids, whose husband Ron Daubenmier, 74, worked for 32 years as a driver for Consolidated Freightways, said the decision was a relief, but 'much more work needs to be done.”

'We have to come up with some solutions and work with Congress to change what is really a bad law,” Kay Daubenmier said. 'This is really a huge issue.”

As Michael Barton, who drove a truck for United Parcel Service for three decades, said in an interview with The Gazette in April, 'I'm in the physical condition that I am because of the job that I had.”

There are a handful of legislative proposals under consideration in Congress to address the issue. U.S. Reps. Dave Loebsack, D-Iowa, and Cheri Bustos, D-Ill., praised Treasury's decision.

Loebsack said 'something must be done to shore up” multi-employer plans that are failing, but he called for a compromise solution 'that does not hurt our retirees.”

Kenneth Feinberg, who has duties as special master for the Treasury, said Friday in a news conference that the decision was made on the submission of the application and a careful reading of the law itself.

'We at Treasury do not believe that the plan as submitted will reasonably avoid insolvency,” Feinberg said.

He expressed concerns about the investment assumptions, particularly as related to early-year investment strategies, as being too optimistic and unreasonable.

‘Severely underfunded' plans

The Teamsters Central States Pension Plan trustees filed an application in October 2015 under a little-noticed measure included in the Omnibus Budget Reconciliation Act of 2014, passed by Congress in December 2014 and signed into law by President Barack Obama.

The MPRA allows trustees of severely underfunded pension funds covering employees of multiple employers to cut the benefits of pensioners. 'Severely underfunded” plans are those expected to not have enough money to pay 100 percent of benefits within 15 years, or in some cases, 20 years.

While Treasury's decision stops any cuts to pension checks on July 1, Treasury Secretary Lew said in a letter to Congressional leaders that the main issue prompting the benefit cut application remains unresolved.

'While we expect that this will come as a relief to these participants, our decision does not resolve the issues threatening their pension benefits,” Lew said in the letter. 'The Central States plan, like a number of other multi-employer plans, remains severely underfunded and is projected to become insolvent within the next 10 years.

'Moreover, absent congressional action, by the time the Central States plan becomes insolvent, the Pension Benefit Guaranty Corp. multi-employer insurance fund - which insures part of those benefits - may itself already be insolvent,” Lew said.

Central States trustees contend the pension fund, which primarily covers retired Teamsters union members, is going to become insolvent in 2026 if it continues to pay out benefits at the existing rate. The fund pays out $2 billion more annually than it takes in - or about $3.46 for every dollar it received in employer contributions.

The trustees said the pension fund needs $11 billion in new money to make good on current and future benefits. They attribute the current shortfall to deregulation of the trucking industry, declining union membership, the volatile stock market's effect on pension fund investments and an aging population.

Quad-City Times reporter Ed Tibbetts contributed to this story.