MPRA SLASHES BENEFITS TO TEAMSTERS AND UFW PENSION FUNDS

MPRA SLASHES BENEFITS TO TEAMSTERS AND UFW PENSION FUNDS

If you've been following MPS news, you're aware that MPRA is a law that would permit our plan trustees to apply to the Department of Treasury to slash our pension benefits (read more here). Since it was enacted in 2014, eighteen pension funds have applied to the United States Treasury under MPRA. But through the end of 2016, not a single one of those applications had been approved—five had been denied outright, and five had withdrawn. Notably, the application of the Central States Teamsters, which involved over $20 billion of unfunded pension liability, was denied. 
 
Unfortunately, things have changed in 2017. Three applications for MPRA have recently been approved by the United States Treasury, including those from the NY Teamsters and United Furniture Workers Unions. It is of concern that the Department has not denied an application since the inauguration of President Trump.

b77a546c-daf3-412b-a13b-a1f2651e4f2c.jpg

TEAMSTERS

On August 3rd, the US Treasury approved the application and proposed pension cuts of the New York State Teamsters Conference Pension and Retirement Fund. Participants and beneficiaries of the Fund were then given an opportunity to vote on whether to approve or reject the proposed benefit reduction.  MPRA provides that unless a majority of participants and beneficiaries vote to reject the benefit reduction, the reduction must go into effect. [1] The voting period began on August 16, 2017, and ended on September 6, 2017. Of the 34,636 participants and beneficiaries who received a ballot, 28.26 percent (9,788) voted to reject the reduction.  Because a majority of eligible voters who received a ballot did not vote to reject the benefit reduction, the benefit reduction will take effect on October 1, 2017.
 
So what are the New York State Teamsters proposed cuts? 

  • All active participants will have their benefits reduced by 18%. The trustees defined an active participant as an individual who has not retired and entered pay status as of July 1, 2017, and had at least 500 hours of employer contributions submitted to the plan on their behalf in the 2015 plan year, the 2016 plan year or in the 2017 plan year prior to July 01, 2017.
  • All non-active participants (i.e.—everyone else, including retirees and terminated vested participants) will have their accrued monthly benefits reduced by 29%.[2]

 
To present a poignant example, a retiree who is receiving a benefit of $2,000 per month would have his or her benefits cut by 29%, or $580. It's hard to imagine supporting yourself and your family through retirement at $1,420 per month.
 


UNITED FURNITURE WORKERS

 
The second application the US Treasury approved for reduction of benefits in July was for United Furniture Workers Pension Fund. Their trustees proposed the maximum reduction of benefits (up to 110% of the PBGC guarantee) and it was approved.  While a majority of participants will not experience cuts (either because they are disabled, over age 80, or already scheduled to receive very small benefits) some participants will experience cuts as high as 62% [3], larger than the cuts faced by the Teamsters. It's difficult to contemplate how furniture artisans have dedicated their lives and hard work to their craft, but cannot afford to retire. 

Participants and beneficiaries of the Fund were given an opportunity to vote on whether to approve or reject the proposed benefit reduction.  The voting period began on August 3, 2017, and ended on August 24, 2017. Of the 9,273 participants and beneficiaries who received a ballot, 21 percent (1,928) voted to reject the suspension.  Because a majority of eligible voters who received a ballot did not vote to reject the benefit reduction, the benefit reduction took effect on September 1, 2017.  
 
 

 

[1] If the New York State Teamsters pension fund were systemically important this vote could be overridden by the trustees. A systemically important plan is one that is projected to need more assistance from the Pension Benefit Guarantee Corporation exceeding $1 billion in today's dollars.
[2] Benefits for disabled persons or persons over 80 years will not be reduced under MPRA laws

[3] The percentage reduction ranges from 0% to 62.4%. Of the Fund's 9,896 total participants, 7,081 have no reduction. For the 2,815 that will have a reduction, the reduction is on average 12.7%. This information is based on their application.