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Biller’s total enhanced index portfolio has beaten the S&P 500 net of fees by an annualized 1.3 percent a year over the past 21 years. “We don’t pay hedge fund fees for hedge funds, and we want full transparency,” he says. That policy now includes a global long-short tactical asset allocation fund that has been run by Mellon Capital Management since 2005.

More change came in 2002, when concerns about volatility led trustees to seek greater asset diversification. Biller built a portfolio that included equity and debt, oil and gas partnerships, farmland, timber and other commodities, and infrastructure. Although “the Teamsters were early investors in infrastructure,” he says, “so far it’s been a disappointment because our managers weren’t doing greenfield [projects], just up-and-running businesses.”

Leery of new asset classes, trustees would check off only on small investments. The first two private equity investments, made in 2005, were $50 million each: one direct, the other in a secondary fund. Today the portfolio comprises a 16.2 percent allocation to alternative investments; 29.4 percent to domestic equity; 10.2 percent to international equity; 30.9 percent to fixed income, including a $5 billion Prudential group annuity; 9.8 percent to real estate; and 3.6 percent to cash and equivalents.

IT'S 80 DEGREES AND SUNNY IN SAN RAMON, California, a quiet suburb in the San Francisco area’s East Bay where top WCTPT officials have gathered at fund headquarters to tell their story. The four men file into a conference room tucked into a corner of a two-story, flower-and-fountain-bedecked open-atrium building that takes full advantage of the balmy weather.

The WCTPT, like other multiemployer trusts, uses a fund management model not found at private single-employer or public pension funds. Instead of chief investment officers, multiemployer plans have co-chairmen — one union, the other an employer representative. Because the WCTPT is so large, its co-­chairmen, Mack and Richard (Rick) Dodge, who retired as a corporate labor negotiator in 2007, are full-time employees. Their side-by-side offices reflect their belief in the collaborative ethos of multi­employer funds.

Mack, 72, joined the Teamsters’ Oakland-based Local 70 as a part-time truck driver in 1962 while he was a married student at San Francisco State University. After graduation he took labor relations courses at night and won his first union election as a business agent in 1966 at age 24. In 1971 he was elected secretary-treasurer of Local 70; in 1982 he became president of regional Joint Council 7; and in 1996 he won election as Western Region vice president, on the same ticket as Jimmy Hoffa’s son, James. Mack, who also was appointed director of the International’s port division in 2003, left all four jobs when he took over as pension fund co-chairman in 2009.

Dodge, also 72, was a longtime labor negotiator in California before joining the WCTPT as an employer trustee in 1996 and becoming co-chairman in 2008. The co-chairmen are joined by Sander, the fund’s administrator, and Storke, the attorney who represents the fund at hearings on Capitol Hill and at meetings of the multiemployer coalition, the National Coordinating Committee for Multiemployer Plans (NCCMP).

The four men have a vast geography to oversee, stretching from Anchorage, Alaska, to Honolulu and from Albuquerque, New Mexico, to Salt Lake City and beyond. “When you have 1,400 employers, bargaining is always going on somewhere in the United States,” says Sander, who has administered the fund, with the help of his 300 employees, since 1992.

The topic du jour is survival. “Back in 1974 there were 30 food-processing companies,” says Dodge, who worked for one himself. “Now there’s hardly a one.” Mack notes the decrease in unionization and the efforts of employers to prevent it. “It’s a miracle this plan is as strong as it is,” he says. Storke explains sector diversification among fund members. “[Western] Teamsters haven’t been particular about who they organize,” he says. “You didn’t get the balkanization of plans that you see in the East and particularly in the Midwest.”

The trustees’ aversion to publicity began to change after the 2001 dot-com bust. As many multiemployer funds struggled, both unions and employers turned to Congress. The result: the Pension Protection Act of 2006 (PPA), which amended ERISA, the comprehensive federal pension law passed in 1974, and required plan officials to project future funding liabilities. If plans fell short, they were legally obligated to take remedial actions like cutting benefits and boosting employer contributions.

As the PPA was being written, the WCTPT trustees realized they had few options for adjusting to mushrooming liabilities. They were hamstrung by their inability to ask for money from their bargaining units between negotiating periods. “At the time, it seemed like an astronomical loss [for the WCTPT]: between $5 billion and $6 billion,” Storke says. The trustees’ search for a solution ended in June 2003, when they cut the benefit-accrual rate in half.

The WCTPT rebuilt its portfolio, booking $32.7 billion at the end of 2007. Then the financial crisis arrived, wiping out a devastating 28 percent of pension assets. By the end of March 2009, only $23.3 billion remained.

That shock caused Anthony Lock, who at the time was the fund’s union co-chairman, to begin attending meetings of Washington-based NCCMP, which lobbies on behalf of 1,385 multiemployer pension plans, members and contributing employers. Mack took over after Lock died in March 2009.

The WCTPT became an active participant in NCCMP activities. The fund also hired its own lobbyist, Holly Fechner, a partner at Washington-based Covington & Burling and a former staffer for U.S. senator Edward Kennedy; she helped write the multiemployer provisions of the PPA.

Then the trustees decided they needed to demonstrate not only that a well-run multi­employer pension could cope with economic pressures but that it was time to seek universal solutions for multiemployer plans.

Today the situation is dire. The number of multiemployer plans projected to become insolvent has more than doubled in the previous decade. Nearly 200 plans, or about 15 percent, are at risk of failure, potentially affecting nearly 2 million people. Among them: the Central States — the second-­largest Teamster pension plan — and the United Mine Workers of America 1974 Pension Plan. Both are projected to run out of money in the next ten to 20 years.

Meanwhile, the federal pension safety net created by ERISA — the PBGC — faces its own crisis. At the end of 2012, the PBGC multiemployer insurance program had a $5.2 billion deficit, with assets of $1.8 billion and booked liabilities of $7 billion in 49 insolvent multiemployer plans. An additional 61 plans have terminated and will run out of money in the next few years, and 46 more will terminate within the next decade.

As if that weren’t enough, the PBGC itself is headed toward insolvency if nothing is done to fund it more effectively or alter its structure. Director Gotbaum did get a premium increase recently, but only for single plans, and employers are unhappy about it.

The decline in members and employers has taken its toll on organized labor. Today newer employers routinely seek to bar union membership to contain costs and retain control over labor. Teamster trucking membership nationally has dropped to about half a million in an industry that claims anywhere from 3.2 million drivers (according to the Bureau of Labor Statistics) to 5 million (according to the U.S. Department of Transportation). A special problem of multiemployer pensions is that when an employer drops out of a plan, it must make a withdrawal liability payment. These payments can be enormous: UPS paid $6.1 billion to exit the Central States in 2007, though it still has 30,000 workers in the WCTPT. The rule has kept many employers from signing up workers. In fact, when all employers but one drop out, that “last man standing” has to pay all of its former competitors’ pension liabilities.

The drop in union membership means fewer active workers pay into funds as rising numbers of retirees draw on them. The WCTPT’s ratio is better than some, but today’s 200,000 active members are less than half the 462,000 in 1980.

Despite the Teamster fund’s relative success, continued uncertainty about the status of pensions has caused mounting anxiety within the rank and file. Sanders says WCTPT members used to ask him, “What do I get?” Now they say, “Tell me it’s safe.”

BY FAR THE BIGGEST PROBLEM plaguing the WCTPT is the status of the fund after the financial crisis. The PPA required multiemployer plans to obtain an actuarial certification of funded status, using a color scheme: green zone for safe, yellow zone for endangered, red zone for critical. Yellow- and red-zone plans have to take actions to correct their underfunding.

For several years green-zone certification was just an academic exercise. At the end of 2008, 76 percent of “multis” were in the green zone, but by the end of 2009 that number had crashed to 20 percent. The WCTPT itself fell from a 97.1 percent funding ratio in 2008 to 85.1 percent in 2009 — still above the 80 percent level that marked the yellow zone but headed in the wrong direction.

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