U.S. Senate Minority Leader Chuck Schumer this week stood with Long Island-area Teamsters who have suffered pension benefits cuts and are at significant risk of losing even more of what they earned and saved over a lifetime of work. Schumer explained that due to Wall Street speculation during the financial crisis and structural shifts in the economy, New York multiemployer pension plans are in financial trouble and now many families could lose out on retirement savings—through no fault of their own.
The Teamsters Local 707 multiemployer pension plan became insolvent earlier last year and the Pension Benefit Guaranty Corporation (PBGC) has begun to provide financial assistance. The plan’s retirees and beneficiaries have received drastic benefit cuts. Which is why, Schumer, along with his Democratic conference colleagues in the U.S. Senate, are pushing new legislation that would help local Long Island-area Teamsters avoid cuts in the future—and perhaps reverse past cuts—so their families and retirement security are not put at risk. Schumer said this must-pass legislation is necessary to put Long Island workers hard-earned pension plans back on solid footing.
“For years, these plans offered Long Islanders a nest egg in their retirement. But today, everything has changed, with pension plans being slashed and with risk of future, deeper cuts. Teamsters in Long Island paid into this program with the promise that they would be able to retire with financial security. Now countless Long Island’s Teamsters are facing a financial nightmare—cuts to their hard-earned retirement savings they depend on,” said Senator Schumer. “Workers and their families who rely on these plans could lose or see a reduction in benefits earned over a lifetime of work, through no fault of their own. The result is that the pensions of Long Island’s Local 707’s members and other hardworking Long Islanders would be cut down to the bone—putting their families’ financial security and future at risk. That is why I am calling on Congress to immediately pass the ‘Butch Lewis Act’ to ensure the financial safety of thousands of New York’s retirees, current workers, and their families. After a massive tax reform bill that delivered tax giveaways primarily to the mega-rich, we should be able to solve this middle-class pension problem.”
After the 2008 financial crisis, the Great Recession and tectonic shifts in our economy, many plans, including the New York State Teamster Conference Pension and Retirement Fund, which has more than 34,000 participants, absorbed major financial losses and now they are in danger of not meeting their full obligations to retirees. Earlier this year, Trustees and members of the Teamster Fund faced a tough choice as the plan was 46 percent funded with $1.46 billion in assets and $3.14 billion in liabilities. Ultimately, the Teamsters went through a process to keep the plan solvent in the short term that included a 30 percent cut to benefits. The average cut for those who retired with 30 years of service will be about $2,000—taking most retirees to $3,550 from $5,000. Still, the future solvency of the plan is uncertain event with these cuts.
Schumer said the New York State Teamster Conference Pension and Retirement Fund is vital to more than 34,000 members, including 16,000 retirees and some 18,000 active members. On Long Island, 4,508 Teamsters from Local 707 are part of this fund, including 3,757 retirees and 751 active members. If additional large pension plans are allowed to fail, not only will employers no longer be able to pay promised benefits, but taxpayers would be at risk of having to pay billions when the Pension Benefit Guarantee Corporation (PBGC), the government sponsored insurance company for multiemployer pensions, cannot afford to cover losses and becomes insolvent.
Schumer said Long Islanders deserve a Better Deal on pensions and is calling on Congress to immediately pass The Butch Lewis Act. The bill, introduced by Senator Sherrod Brown of Ohio, would work to ensure that no American loses the pension benefits that they deserve. For the members of the New York State Teamster Conference Pension and Retirement Fund, this bill would help the plan avoid cuts in the future and even help reverse past cuts that have been made. Schumer added without this bill protections, future and further cuts are still possible.
Schumer explained the “Butch Lewis Act” would create a new office within the U.S. Treasury Department, which would be called the Pension Rehabilitation Administration (PRA). The PRA would allow pension plans to borrow the money they need to remain solvent and continue providing retirement security for retirees and workers for decades to come. The money for the loans and the cost of running the PRA would come from the sale of Treasury-issued bonds to financial institutions. The PRA would sell Treasury-issued bonds in the open market to large investors such as financial firms. The PRA would then lend the money from the sale of the bonds to the financially troubled pension plans. To ensure that the pension plans can afford to repay the loans, the PRA would lend them money for 30 years at low-interest rates, around 3 percent. The 30-year loans would buy time for the pension plans so they can focus on investing for the long-term health of the plan, while the loans pay benefits owed to current retirees.
In addition to prohibiting the borrowed funds from being used to make risky investments, the bill also requires plans that borrow money to submit reports to the PRA every three years to demonstrate that the plans are on track to getting back on solid footing. Pension plans may borrow as much money as they need, as long as they can demonstrate the ability to repay the loan. The interest will be comparable to that of a 30-year Treasury bond. The rate may be slightly higher in order to cover operating costs for the PRA. During the first 29 years of the 30-year loans, the pension plans will pay only fixed interest rates on the money they’ve borrowed. In the last year, the pension plans will pay interest on the loans and repay all the money they borrowed. Since the money comes from the sale of Treasury-issued bonds to financial institutions. These PRA bonds will be fully backed by the Treasury. Schumer said the PRA will not have trouble raising the money because investors want long-term bonds that carry little risk.