At that point, attorney Storke says, the Teamsters and
staff started thinking about legislative relief.
Projections showed that the WCTPT would return to health given
enough time. The fund created a scenario-projection program to
test various funding, investment return and return-smoothing
combinations. The findings pointed to the need to extend fund
loss amortization beyond the 15 years stipulated by the PPA,
with additional smoothing.
In September 2009, WCTPT officials packed up their scenario
slide show and took it to Washington. With help from lobbyist
Fechner, they tried to educate congressional staffers about the
WCTPT and multiemployer plans. If other Teamster plans
fail, its going to affect us, says Storke, who
spent lots of time in Washington in 2009 and early 2010, often
accompanied by Mack, Dodge or Sander. In the Teamster
community, if one employer cant fund pension obligations,
that can affect other plans for employees who work for the same
The lobbying resulted in the Pension Relief Act of 2010,
which spread fund losses further into the future. But
longer-term solutions were needed. In response, NCCMP began a
series of meetings that produced a three-pronged plan, called
Solutions not Bailouts, created to preserve plans,
remediate problems and design new kinds of funds.
The WCTPTs trustees have been hoping that improving
financial markets will keep them comfortably in the green zone.
If someone had told me 40 years ago that the first thing
I would do when I got up in the morning is look at the markets,
I would have accused them of being a capitalist swine,
The $35 billion portfolio is overseen by a 14-member
investment committee cochaired by Robert Wrightson, a 40-year
veteran of corporate finance at Consolidated Freightways, now
known as Con-way. His Teamster co-chairman, Rome Aloise, who
was appointed as a trustee in 1998 by Mack, his brother-in-law,
is a contract negotiator for the national Teamsters. He
replaced Mack as a vice president and as Joint Council 7
president when Mack took the pension job, and hes also
secretary-treasurer of Teamster Local 853 in San Leandro,
California. Under ERISA and the formation of the
Taft-Hartley Act the enabling legislation for
multiemployer plans youre legally required
to take off your employer-employee hat when working together on
the pension trust, Aloise says, adding of employers:
In their mind, its their money. But in our mind,
its our members money.
Although he represents employers, Wrightson is quick to
defend pensions. Im a big believer in defined
benefit plans, he says. It gives the employee much
more security as he looks toward retirement. His fellow
employer trustee, Joseph Hodge, has been on the committee for
21 years because, he says, I see the value of having
consistency in this pension plan. Hodge, who retired in
2005 as Coca-Colas regional director of human resources
for California, Nevada and Arizona, used to negotiate 22
separate contracts with Teamster units. The WCTPT, he says, is
a very well-run business model in which the union
trustees and employer trustees take their fiduciary
responsibility very seriously.
As the funds investments grew in complexity, the
trustees at the end of 2012 gave consultant Biller discretion
to hire and fire managers. Its a move thats
becoming common, says Seth Almaliah, a multiemployer investment
consultant with Segal Rogerscasey in New York. We
mostly listened and rubber-stamped his decisions, says
Mack, adding, We had a lot of discussion on what
oversight has to be. Biller and the investment committee
steered the fund to an annualized 8.4 percent return over the
20 years ended in December 2013. That helps when the
funds professionals defend the 7 percent return
assumption used to determine the present value of future
liabilities, a calculation familiar to multiemployer and public
pension funds that are not required by law to use a bond
This has led to a debate between single-employer actuaries
and those in the multiemployer and public pension arena. Jeremy
Gold, an independent consulting actuary based in New York, is
an outspoken defender of using the single-employer discount
rate a measure based on the corporate bond rate mandated
by the Governmental Accounting Standards Board to
determine future liabilities. WCTPT fund administrator Sander
disagrees, pointing to the perpetual nature of the fund, its
long-term returns above 7 percent and its employers
staggered labor-agreement renewals. Gold counters:
Todays Teamsters are getting the benefit of a
guarantee they didnt pay for. Theres a real risk
transfer. He contends that young union members will be
saddled with future liabilities that arent paid for.
Moodys Investors Service and other rating agencies
side with Gold. Whereas the WCTPT reported a 90 percent funded
ratio at the end of 2012, Moodys, using the bond
calculation, reported a 66.7 percent ratio.
The funds ten-year return of 6.2 percent compares a
bit less favorably with the Wilshire Trust Universe Comparison
Service (TUCS) average of 6.65 percent for all Taft-Hartley
plans. Its healthy 15.6 percent performance for 2013 beat
returns for all master trusts in TUCS but was overshadowed by
the 17.82 percent return by its Taft-Hartley brethren, many of
which are failing despite impressive performance.
Still, the WCTPT has been able to meet its pension
obligations with room to spare. In 2013 the fund paid out $2.4
billion in pension benefits to retirees, took in $1.4 billion
in contributions a 3.5 percent increase over 2012
and earned $3.4 billion in investment income.
TODAY A DEBATE RAGES over the future of multiemployer plans.
The House Committee on Education and Workforce is writing a new
bill, following a raft of hearings. Proposals have been floated
to make wholesale changes to the way retirement benefits are
structured. Some plans may remain intact; others, desperate to
remain solvent, may have to slash benefits.
This is not something that is being treated as
politics as usual, says the PBGCs Gotbaum, who has
twice testified on multiemployer plans. Plans are doing
what they can to preserve themselves: raising contributions and
cutting current and future benefits.
The politics are tangled. The committee chairman, Minnesota
Republican John Kline, is nearly finished writing a bill that
would repeal the long-sacrosanct anticutback rule in ERISA and
allow trustees to reduce benefits to keep plans solvent.
That might seem draconian, but the situation is critical.
Take Central States, the second-largest Teamster fund. It has
$18.2 billion in assets, receives $700 million in annual
employer contributions and pays out $2.8 billion a year to
retirees. Executive director and general counsel Thomas Nyhan
testified before Congress in October that a benefit cut is the
only way to salvage something for all the plans members.
Pointing to adjustable benefits in the Netherlands, Denmark and
elsewhere, he asserted that the U.S. is the only country with a
pension anticutback rule that forbids earned benefits from
Nyhans testimony echoed NCCMP director Randy
DeFrehns campaign to adjust benefits rather than wait
until the last dollar is spent. DeFrehn argues that its
better for a fund heading toward insolvency to cut
pensions by 10 percent than to wait until it fails.
If plans could act early and reduce benefits marginally
to remain solvent, why does it make sense to become
insolvent? he asks. As former North Dakota congressman
Earl Pomeroy famously said, A haircut is better than a
Klines bill would allow green-zone plans to extend
their loss amortization period while letting those in the
yellow zone make benefit adjustments before its too late.
DeFrehn stresses the need to eliminate disincentives to
employer participation. Weve almost preserved
[multiemployer plans] out of existence because current rules
are so tight employers dont want to sponsor them
anymore, he says.
Opponents of the bill believe the government should bail out
pensions just as it saved the banks in 2008 through the
Troubled Asset Relief Program. Some national labor
organizations, including the International Brotherhood of
Teamsters and the International Association of Machinists and
Aerospace Workers, resist a future in which pension cuts are
possible. Its a government problem,
everybodys problem, says IAMAW president R. Thomas
Buffenbarger. We can force this government to take
action. But even Buffenbarger has had to compromise: In
January he signed off on Boeing Co.s replacement of its
defined benefit pension with a defined contribution plan.
The PBGCs Gotbaum has his own idea he wants
more money in his agencys coffers. We analyzed what
it would take if there was benefit adjustment authority,
he says, speaking of the part of the Multiemployer Pension Plan
Amendments Act that allows benefit adjustments to plans near
insolvency. The PBGC estimates that this could help some
600,000 retirees whose plans would otherwise fail. But, Gotbaum
says, that would still leave more than a million without help.
His solution: Pay the PBGC 2 percent of the money going to
multiemployer plans so it can bail out 2 million retirees.