Teamsters Make the Cut

Teamsters Make the Cut

Copyright 2003, Traffic World, Inc.

In the hottest internal issue within the 1.4 million-member Teamsters union, the other shoe finally dropped.

The Central States Pension and Health and Welfare Fund trustees are making deep cuts that union dissidents say will hurt retirees by curtailing benefits under the Teamsters'' popular "30-and-out" provision.

Thanks to these cuts, early retirement will become more difficult, according to the Teamsters for a Democratic Union. The fund is trying to keep people working to avoid paying them pensions, TDU claims. The cuts were announced Nov 19 at a meeting of union officials in Chicago that some participants said was raucous.

The realistic effect of the new rules is that they will severely penalize early retirees who used to enjoy a "30-and-out" provision that provided a $3,000 monthly pension, Teamsters familiar with the plan say.

Central States blamed what it called the "dramatic" rise in health care costs, the three-year fall in the stock market and the bad economy that has caused the loss of thousands of Teamster jobs for the cuts. Fund Executive Director Tom Nyhan explained the serious situation and said although nobody likes the cuts, they were necessary.

"By taking action now, we are preventing a catastrophe that could leave members vulnerable to a future with dramatically reduced pensions and dramatic cuts in health benefits," said a Teamsters'' statement signed by its five trustee members - Fred Gegare, Jerry Younger, George J. Westley, Charles A. Whobrey and Philip E. Young.

They said the funds had to take action based on government regulations as well as a court order. It is the fund''s responsibility to provide pension and health security over the long term to hundreds of thousands of Teamster families, they added.

"Those trying to undermine the Teamsters union - employers and politically motivated organizations both inside and outside the union - will say that the changes did not have to take place," the trustees said. "That is a bald-faced and irresponsible lie."

Ken Paff, TDU national director, ripped the trustees'' logic and noted the stock market is up nearly 20 percent this year, cutting into their arguments.

"They''re either morons or they''re lying to the members," said Paff. "The people doing this have multiple pensions with generous welfare and health benefits that are not being cut. We''re very concerned about this.

"This is the biggest issue in the union," Paff added. "They''re going to pay a political price for this."

Young and other Teamster trustees noted, however, that even with the cuts being implemented at Central States, Teamsters are still in better shape than the vast majority of working people.

"While this may be small consolation, the crisis at Central States must be put in the context of the national economic crisis and misguided economic policies in Washington," Young noted.

While the move is unpopular within the union rank and file and its tens of thousands of retirees, UPS hailed the move. As the Teamsters'' largest employer, UPS also is angling for structural changes among the myriad of multiemployer pension plans to which it contributes.

Peggy Gardner, a spokeswoman for UPS, called the cuts a positive move but emphasized the company has met all its obligations to the 40,000 UPS workers covered by the Central States plan.

"We''re pleased the trustees have taken action to address the financial health of the plan," Gardner said. "This has been an issue for a number of years. This is absolutely a step in the right direction."

An analysis by independent trucking pension expert Herve Aitken shows that Central States'' unfunded vested benefit liability could be $11 billion this year - a 1,000 percent increase in five years. Demographics don''t help. Where there used to be more active participants funding retirees, that ratio is now 0.87 actives to one retiree. Aitken forecasts that will drop to 0.5 actives to every one retiree by 2010.

The Central States fund is managed by 10 trustees, five from the Teamsters and five from employers. UPS''s role is limited to that of being a financial contributor to the plan, which is negotiated during collective bargaining.

"The main thing we want to stress is the company has met all of its financial obligations to the fund," Gardner said.

Still, the cuts went down hard within TDU, which says the union is being irresponsible to its members. The union successfully negotiated a six-year UPS contract, ratified this year, that initially was hailed by the Teamsters.

"You can ask UPS for more money until you''re blue in the face, but I wouldn''t hold my breath waiting for a $2 billion Christmas present under the tree from UPS," Paff said. "We''re very concerned about this."

The pension cuts affect future pension accrual. The 2 percent accrual rate is cut in half. Those retiring after Jan. 1, 2004, no longer will get $100 per year added to their pension, but a lesser amount based on a complicated accrual formula. Self-contributions for layoffs, sickness and leaves of absence that begin after Jan. 1 will be prohibited completely.

It is against federal law under the Employee Retirement Income Security Act to reduce any earned benefit, so all pension benefits earned to date, including 25-and-out benefits, 30-and-out, etc., will be unchanged. Cuts are in future accruals.

Benefits for members who retire after Jan. 1, 2004, will be calculated based on a complicated formula that counts years worked before Jan. 1 and years worked after differently. People who already have 30 years worked will see less impact while members who still have years to go will be hit harder. In the fund''s own example, someone who retires 10 years from now at age 59 with 30-and-out will get $2,752 rather than $3,000 a month.

The steepest cuts are in medical coverage for retired Teamsters. Those under 57 who retire after Nov. 18, 2003, will have to pay $510 per month ($1,020 per couple) for Health and Welfare.

Those who retire after Jan. 1 will not be eligible for any retiree coverage until they reach age 57. Those retiring after age 57 will pay an amount based on age at retirement ($255 at age 57, $230 at 58, $205 at 59, $180 at 60, $155 at 61, and $130 for 62 and over, each doubled for couples). These amounts will increase $50 per year ($100 per year for a couple).

For those already retired, H&W will increase $50 per year ($100 for couples), starting now. Paff called this an "enormous burden" on retirees that will make early retirement difficult or impossible for many Teamsters.