The New York Teamsters Road Carriers Local 707 Pension Fund has won the unfortunate award for “First Pension to Officially Run Out of Money.” According to the New York Daily News, and a host of angry former truck drivers who’ve had their pension benefits slashed, the Pension Benefit Guaranty Corp. (PBGC) has officially been forced to step in and take over payments to retirees of the Local 707, albeit at a much lower rate.
Teamsters Local 707’s pension fund is the first to officially bottom out financially — which happened this month.
“I had a union job for 30 years,” Chmil said. “We had collectively bargained contracts that promised us a pension. I paid into it with every paycheck. Everyone told us, ‘Don’t worry, you have a union job, your pension is guaranteed.’ Well, so much for that.”
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“It’s a nightmare, it has just devastated all of our lives. I’ve gone from having $48,000 a year to less than half that,” said Chmil, one of five Local 707 retirees who agreed to share their stories with the Daily News last week.
“I don’t want other people to have to go through this. We need everyone to wake up and do something; that’s why we’re talking,” said Ray Narvaez.
Of course, the Teamsters 707 and other Teamster pension boards attempted to submit plans that would have cut benefits in order to prolong payments to retirees but those plans were universally rejected by the Obama administration…better that the pensions just run out of cash completely. Per Pensions & Investments:
The Obama administration is in denial about the necessity of cutting pension benefits under the Multiemployer Pension Reform Act of 2014 to try to put distressed multiemployer plans on sounder financial footings and make them more sustainable. It must face reality and order the Treasury Department to stop blocking action.
So far the department, required under the act to approve proposed reductions, has rejected proposals by the Teamsters Central States, Southeast & Southwest Areas Pension Plan and the Road Carriers Local 707 Pension Fund.
Ten plans total have applied for cuts, including the New York State Teamsters Conference Pension and Retirement Fund, Syracuse, whose Aug. 31 application is too new to be listed on the Treasury’s website.
The Road Carriers 707 application stated that the plan projects it will become insolvent in February — only about five months away — absent suspension of benefits.
As desperate as the plan’s financial situation appears to be, the Treasury denied the application.
And while the Local 707 pension was the first to dry up, it certainly won’t be the last…
Also on the brink of drying up are the pensions for two Teamster locals — 641 and 560 — in New Jersey, union officials said. Plus 35,000 Teamster members upstate who are part of the money-hemorrhaging New York State Teamsters Pension Fund.
Bigger than all of New York’s Teamster locals combined is the Central States Pension Fund — another looming financial disaster that could leave 407,000 retirees without pensions across the Midwest and South.
Meanwhile, under the maximum benefits provided by the PBGC, many former Teamsters, like Ray Narvaez, said their monthly retirement checks have been slashed by two-thirds.
Then Narvaez, like 4,000 other retired Teamster truckers, got a letter from Local 707 in February of last year.
It said monthly pensions had to be slashed by more than a third. It was an emergency move to try to keep the dying fund solvent. That dropped Narvaez from nearly $3,500 to about $2,000.
“They said they were running out of money, that there could be no more in the pension fund, so we had to take the cut,” said Narvaez, whose wife was recently diagnosed with cancer.
The stopgap measure didn’t work — and after years of dangling over the precipice, Local 707’s pension fund fell off the financial cliff this month. With no money left, it turned to Pension Benefit Guaranty Corp., a government insurance company that covers pension.
Pension Benefit Guaranty Corp. picked up Local 707’s retiree payouts — but the maximum benefit it gives a year is roughly $12,000, for workers who racked up at least 30 years. For those with less time on the job, the payouts are smaller.
Narvaez now gets $1,170 a month — before taxes.
Of course, as the Central States Pension General Counsel notes, the real “pension tsunami” will come when the massive “municipal and state plans go down next.”
The same crisis now hitting Local 707 has been stewing among numerous Teamster locals around the country for the past decade, he said, and that includes in upstate New York.
The trucking industry — almost uniformly organized by Teamsters — has suffered enormous financial losses in its pension and welfare funds due to a crippling combination of deregulation and stock market crashes, Nyhan said.
“This is a quiet crisis, but it’s very real. There are currently 200 other plans on track for insolvency — that’s going to affect anywhere from 1.5 to 2 million people,” said Nyhan. “The prognosis is bleak minus some new legislative help.”
And it’s not just private-sector industries that are suffering, he added.
“Municipal and state plans are the next to go down — that’s a pension tsunami that’s coming,” he said. “In many states, those defined benefit plans are seriously underfunded — and at the end of the day, math trumps the statutes.”
We’re looking at you Illinois…
Reprinted with permission from Zero Hedge.
