June 8, 2012: The Central States Pension Fund’s 2011 Financial and Analytical Reports show that the fund was down to $17.7 billion at the end of 2011. The reports – which were received by Teamsters for a Democratic Union this week – also describe in more detail decisions regarding YRC Teamsters, and a new rule on withdrawal liability.
Fund assets dipped from $19.9 billion at the start of 2011, to $17.7 at the end of the year. The fund made zero on investments during the year; in fact there was a loss of .28%, attributed to poor stock market performance.
Employer contributions for the year were $737 million, but benefits paid were $2.83 billion. Thus employer contributions cover only one-fourth of benefits, and the rest must be made up by return on investment. Employer contributions were up in 2011 by $100 million over 2010, primarily due to increases in employer contribution levels. A secondary factor was the return of YRC contributions in June 2011, at a very low contribution level.
The fund is in serious condition and could possibly be insolvent within a decade. The International Union – in alliance with other unions and allies such as the AARP – needs to launch a grassroots movement aimed at strengthening the Pension Benefit Guaranty Corporation (PBGC) to protect all workers’ pensions, such as the bill introduced by Senator Robert Casey (D-Pa) two years ago. Behind the scenes lobbying isn’t working. Teamsters and retirees are ready to join in to defend our pensions.
YRC on “Distressed Employer Schedule”
The report details that in 2011 the Trustees of the fund decided to accept the low contribution rate of about $1.75 per hour from YRC. However, approximately 12,000 participants employed by Holland and YRC were put on a “distressed employer schedule” which basically eliminated all early retirement options, with the remaining benefit being the accrued benefit at age 65, or sharply reduced for earlier retirement.
Thousands of YRC Teamsters were hit hard by this big cut. Some, with more than 25 years, were permitted to retire by mid-2011 with their benefits intact.
YRC is making monthly payments at the $1.75 rate of $3.64 million per month. YRC still owes $89.5 million from previous obligations, and the amount is due in a lump sum payment on March 31, 2015, the date that the concession agreement expires.
The Fund took another hit when Hostess Brands stopped making payments last August on 2,800 Teamsters. Later Hostess filed Chapter 11 bankruptcy in a move to escape its pension obligations.
The fund had 67,815 active participants as of November 2011, and 213,647 retirees.
“Hybrid Withdrawal Liability”
In July 2011 the fund adopted an alternative withdrawal liability method. Any new employer in the fund will only have withdrawal obligations based on the “direct attribution” method, which would be much lower, because they will have no obligations regarding existing retirees from other companies. Existing employers in the fund have the option of paying off their present withdrawal liability, and then becoming “new” employers. Whether any employers will take this option is unknown, but may be doubtful.
The fund is heavily dependent on investment success. In fact, to maintain its present level of assets, it has to make 12% on investments this year. This is well above any reasonable projection.
The fund uses Northern Trust to manage about half of the $17.7 billion in assets. Approximately half of the assets are now under passive investment (index funds), to reduce the cost of money management. The fund has 67% of assets in stocks.
The Central States Health and Welfare Fund, which has 83,385 participants due to the fact that UPS still participates in many areas in the H&W fund, continues to operate in the black, with growing assets.
TDU members won the right to obtain quarterly reports in federal court. These 2011 reports were delayed due to the fact that the previous Special Counsel passed away in January. The new Special Counsel is retired federal judge David Coar.
Full reports for your review
Independent Special Counsel Report