More than half a century ago, the Teamsters Union led the way by negotiating defined benefit pension plans for its members. Other unions followed. Over time, tens of millions of workers in the public and private sectors were covered by defined benefit plans that provided a guaranteed income in retirement.

The defined benefit plan became a hallmark of what it meant to be a member of the middle class. Those plans have been under attack for several decades as some employers and other anti- worker groups have sought to eliminate defined benefit plans and introduce defined contribution plans, such as 401(k)s, where the worker assumes all the risk. As a result, the percentage of workers covered by defined benefit pension plans in the private sector has fallen dramatically from 38 percent in 1980 to 16 percent in 2011.

In the early stages of this attack, workers covered by defined benefit plans in both the private and public sectors were largely protected from having their already vested retirement benefits reduced retroactively. But even this may no longer be the case.

The Problem

Defined benefit retirement plans in both the public and private sectors are under severe stress. The financial crisis of 2008-2009 put pressure on the ability of these plans to meet their long-term obligations. But while the financial crisis exposed the difficulties confronting these plans, it was discrete public policy changes, made by Congress and statehouses across the country, that generated the long-term structural problems confronting many defined benefit retirement plans.

In the case of Teamster multi-employer plans, the biggest blows, in addition to the volatility of the economy, have come about as a result of the deregulation of the trucking industry and the various assaults on the unionized sector of the economy through government policies. These blows have led to a decline in the number of active participants for whom contributions are paid to pension plans—while the number of retirees continues to grow. As the number of active workers decline and the number of retirees grow, the plans are required to rely more and more on investment returns that cannot possibly meet the growing obligations to current and future retirees.

What Does This Mean?

So, what does this mean to us as Teamsters? Plenty. And though many Teamster plans are in good financial shape, others are facing significant challenges. Without implementation of necessary safeguards for the current retirement system, many defined benefit pension plans, including some Teamster multi-employer plans, are facing the once unthinkable prospect of insolvency.

When a private pension plan governed by ERISA runs out of assets and becomes insolvent, at least a portion of pension benefits are supposed to be backstopped by the Pension Benefit Guarantee Corporation (PBGC), a federal agency created by Congress. The problem is that Congress has failed to adequately fund PBGC. That agency could itself be facing insolvency in as little as 10 years if Congress refuses to provide funds so it can meet its legal commitment to pay benefits to retirees whose pension plans have failed.

It is unacceptable even to suggest that workers who have earned accrued benefits under pension funds that are also facing insolvency should have their benefits reduced. The Teamsters Union fought for these retirement benefits, and its members deferred wages to pay for these benefits. The union will not sit idly by in the face of efforts to undermine them. In the case of public sector plans, many governors and state legislatures have failed to provide funds that were previously committed to public employee retirement systems.

As we all know, those contributions were promised to workers who gave up wage increases and other benefits in exchange for decent benefits when they retire. The diversion by these politicians of funds that should have been properly used to fulfill commitments to public employee retirement systems was a betrayal that has left many public retirement systems on the verge of insolvency and has created a growing backlash against public employees and their benefits.

Teamsters cannot lose sight of the fact that our brothers and sisters in public employment previously paid for their retirement benefits and are entitled to receive what they were promised.

The Fight is On

Teamsters Union at all levels must and will fight to force Congress and state governments to secure the promised retirement security of all workers who have earned it over years of hard work,” said Jim Hoffa, Teamsters General President.

In the case of multi-employer plans, the Teamsters Union is now engaged in a lobbying effort to preserve the financial viability of multi-employer plans. The union is working with its labor, retiree and community allies to build a coalition to preserve the retirement security of all workers covered by defined benefit plans, including our members in Teamster pension plans.

“This will be an uphill fight, but it is a fight that we must wage with vigor and focus,” Hoffa said.

While there are many proposals floating around Capitol Hill, the Teamsters are focused on solutions that will generate adequate funding for the pension plans and for the PBGC, which is the insurer of last resort for pension plan participants.

On October 28, General President Hoffa sent a letter to Congress opposing the implementation of cuts to vested retirement benefits as a way to solve the funding problems of multi-employer plans. In particular, the letter said the Teamsters cannot support proposals that would allow cuts to benefits “before waging an all-out national campaign to save these plans and protect these retirees.”

Barbara Easterling, president of the Alliance of Retired Americans, applauded General President Hoffa “for recognizing that retirees who have put in a lifetime of hard work depend on their pensions for retirement security. We should all work hard to secure a quality standard of living in retirement.”

In the case of public sector pensions, the Teamsters are leading an effort to blunt the push by anti-union and anti-worker elements to in some cases slash the pensions of public employees and in other cases eliminate defined benefit pension plans altogether.

Hoffa has appointed International Vice President John Murphy to head a Teamster committee to lead the fight for retirement security for all Teamsters.

“From the members to the local unions to the International Union, Teamsters must be mobilized with our natural allies across the political spectrum to put retirement security and the protection of defined benefit plans front and center in the national dialogue on economic inequality,” Murphy said. “If we can bail out the banks, insurance companies and other big corporations to save the economy, we must certainly protect the retirement savings of millions of American workers whose consumer power is critical to keeping our economy moving forward.”

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