WASHINGTON — Cuts proposed by the Teamsters Central States Pension Fund will touch retirees and workers in every corner of Minnesota, a document just released by the Pension Rights Center reveals.
A state-by-state analysis that carries the Central States fund logo details the expenditures driving the giant union retirement fund’s request to slash retirement benefits under a new pension law passed in 2014. Trustees insist it’s the only way to save the fund from insolvency.
The deep cuts will resonate in every Minnesota congressional district with the Sixth and Eighth Districts having the most people at risk, the document shows.
The breakdown underscores the deep financial reach of the multiemployer retirement plan in Minnesota, where payouts generate millions of dollars in federal taxes and help fuel local communities. In Minnesota, the Central States fund pays benefits of about $143 million a year, the report says.
The cuts would shrink the annual payments in Minnesota to about $99 million, the Central States fund said, affecting nearly 15,000 Minnesota workers and pensioners.
In Minnesota, the cuts average about 34 percent but range to 50 percent or more. (Another 7,000 Minnesotans were exempted from cuts because they are over 79 or retired with a Central States disability pension.)
“I think the report will raise awareness among members of Congress who don’t think this is a problem,” said Karen Friedman, executive vice president of the Pension Rights Center, a Washington-based advocacy organization which opposes the cuts. “Every person I’ve talked to is looking at cuts of 40, 50, 60 and 70 percent in their pensions.”
Central States executive director Thomas Nyhan accused the Pension Rights Center of “misrepresenting” the data. Nationwide, the Central States fund is about $16 billion in the red, owing far more in accrued benefits it must pay out than the fund has in assets. In Minnesota, retirees are collecting four times more in benefits than today’s union members contribute to the pension fund, the report shows.
“The data does not address the impact of the proposed Central States benefit reductions,” Nyhan said in a statement to the Star Tribune. “Rather, it quantifies Central States Pension Fund’s total presence in these districts … These documents were prepared by Central States in 2014 in order to illustrate the need to take action to save the fund. The data, including the ‘current pensions at risk,’ demonstrates what the impact would be on each district should the fund become insolvent — a virtual certainty if the rescue plan is not approved and implemented.”
The rescue plan is bitter medicine.
Ham Lake retiree Tim Huettl thinks the collective hit of the proposed pension cuts will leave a mark on Minnesota’s economy.
“It’s going to trickle down really deep as times goes on,” Huettl said.
Huettl, 69, drove trucks for decades for various companies, including USF Holland. He’s facing a 50 percent cut to his monthly $2,627 pretax pension check and considers himself lucky because he and his wife own their own house and she has a 401(k) retirement plan. They live “pretty low key,” he said, and will somehow trim their grocery and entertainment budgets to make things work.
“We’re one of the fortunate ones,” Huettl said.
The U.S. Treasury Department has until early May to rule on the Central States cuts.
Regardless of the decision, many retirees see the requested reductions as a betrayal.
“The economic part of it, I just don’t think most people realize the ripple effect,” said Ronald Buntrock, 71, of Osage, Minn.
A retired truck driver, Buntrock said he’s facing a 50 percent cut to his monthly $2,900 pretax pension check. They still owe money on their house, Buntrock said, and he can’t go back to work because of his health. They live on a tight budget, driving cars that are 15 years old.
“This represents people that are going to be losing homes, cars, their futures, their ability to help their kids and their grandkids from now on,” Buntrock said.
The long-standing federal law that once forbade pension cuts changed in 2014 with a piece of legislation slipped into the federal budget by Minnesota Republican Rep. John Kline and California Democratic Rep. George Miller. The Multiemployer Pension Reform Act never came to a debate or vote on the floor of the House.
Instead, it was tacked onto a massive budget bill that needed to pass to keep the government running.
Now, a battle rages in Congress to address what some see as a broken promise.
“A pension crisis has been growing for decades that poses a direct threat to families in Minnesota and across the country,” Kline said in a statement to the Star Tribune. “Unfortunately, opponents of these bipartisan reforms continue to spread fear and misinformation, while also failing to propose a practical alternative that will protect workers, retirees, and taxpayers.”
Minnesota Democratic Sen. Al Franken has co-sponsored a Senate bill to stop the cuts.
“These cuts would have a devastating effect on the retirement security of tens of thousands of Minnesotans,” he said in a statement to the Star Tribune. “Recently published data underscores that alarming fact.”
Democratic Sen. Amy Klobuchar said she supports “efforts to change this law.”
In the House, Minnesota Democrats Collin Peterson, Rick Nolan and Keith Ellison have signed on to a bill to stop the cuts.
The new law requires the government to approve pension reductions to very large plans if those plans are in dire financial shape. Retirees and current workers get to vote on pension cuts, but the way the votes are counted, those who do not vote are assumed to be a “yes” vote for the cuts. Even if workers and retirees vote down the cuts, the Kline-Miller law requires the Treasury Department to implement the cuts if the agency determines that the plan’s failure will cost the government-run Pension Guaranty Benefit Corporation more than $1 billion. Because the Central States fund almost certainly meets that threshold, if Treasury approves Central States’ proposed reductions in May, they will take affect regardless of how plan participants vote.
Those rules cannot change without additional legislation. But bills offered in the Republican-run House and Senate remain in committee for now. The Senate Finance Committee is scheduled to hold an informational hearing about multiemployer pension plans next week. Whether that leads to legislation restoring benefits is unclear.
“There is a fundamental agreement that you don’t cut pensions to retirees,” said Minnesota Democratic Rep. Collin Peterson, who is supporting a bill to outlaw cuts. “There were promises made and people contributed to the funds. I just don’t think it’s fair and we’ve got to do something about it.”