As Pamela Gaskill walked through San Francisco's blighted
Tenderloin district one day in 2000, she had an epiphany.
Observing impoverished residents of single-room-occupancy
hotels, she realized she had no financial resources for her own
retirement. Gaskill, a slender, weathered woman who has driven
trucks since the late 1970s, thought, This is what
happens if you dont have a pension. People end up in a
tiny little room with nothing.
Unlike other full-time workers enrolled in traditional
pension plans or even 401(k)s, Gaskill, who drives a
65-foot 18-wheeler for Oakland, Californiabased Rock
Transport, received no benefits in her years as an independent
trucker. After she joined Rock Transport in 1989, she tried
unsuccessfully to negotiate benefits. Then Gaskill and her
partner, Dennis Holocher, another Rock driver, decided to push
for union representation a daunting task. The
drivers were scared, she recalls. They thought if
we went union, the company would fold or let us go. In
2002, after a year of organizing, Rock Transport employees
joined the Western Conference of Teamsters. Best of
all, they also became members of the unions pension
Having a retirement benefit changed the way Gaskill viewed
her work. I called my dad so hed be proud of me
because now I had a real job, she says. Gaskill succeeded
Holocher as shop steward after he retired.
Gaskill and Holocher were lucky. They are among the nearly
583,000 participants in the largest multiemployer defined
benefit plan in the U.S., the Western
Conference of Teamsters Pension Trust. The WCTPT is the
best funded of 194 pension funds jointly sponsored by employers
and local or regional units of the International Brotherhood of
Teamsters. Theyve been conservative in their
investments, professional in their management and fortunate in
their economics, says Joshua Gotbaum, director of the
Pension Benefit Guaranty Corp. (PBGC), the federal agency that
insures both single and multiemployer pension funds.
Today the WCTPT is a $35 billion fund that receives
contributions from more than 1,400 employers, ranging from
small companies with fewer than 50 workers to major
corporations like Coca-Cola Co., Safeway supermarkets and
United Parcel Service of America.
Although the American labor movement dates to the late 19th
century, the creation of
pension funds for union members took more than 50 years.
The multiemployer pension plan was designed to allow union
workers truck drivers, vegetable packers, floor
sweepers, construction workers to build retirement nest
eggs despite frequent job changes. Founded in 1955 as a
multiemployer plan for Teamster members in 13 western states,
the Western Conference pension plan, like many others, was
fully funded for decades. Then a series of legislative
initiatives, including trucking deregulation and the
Multiemployer Pension Plan Amendments Act, both passed in
1980, as well as demographic and technological change, put many
trucking companies out of business. As union shops disappeared,
the number of active union members fell. And two financial
crises in a decade blew a hole in the idea that multiemployer
funds could continue to operate as they always had.
Thanks to careful fund oversight and a diversified
membership, the WCTPT was able to fend off some of these blows.
But even the strongest pension fund could not remain untouched
by market breakdowns like the dot-com bust and the
200809 crisis. As a result, WCTPT trustees, shocked
by successive multibillion-dollar losses, decided to break
their long silence and add the funds voice to efforts to
fix a struggling system for 10.4 million union members.
For a long time, says Charles Storke, the WCTPTs lead
attorney and a partner at San Francisco law firm Trucker Huss,
the attitude of Western Conference officials was We
should tend to our own knitting without regard to what else is
going on in the world. Michael Sander, the funds
administrative manager and a partner at Seattle-based Northwest
Administrators, agrees: Weve been dark for so long,
theres nothing youre going to find if you google
us. Circumstances have changed, and we need to carry the
But can the WCTPT save itself and the unions
multiemployer pension model? It wont be easy.
Multiemployer plans face problems deeply rooted in the
decline of American labor unions in a global, postindustrial
world. The unions, after all, still offer traditional defined
benefit plans, which many employers have dropped in favor of
less expensive, less risky defined contribution plans. The
market outlook remains deeply uncertain, demanding
sophisticated investing skills. And the politics of saving
multiemployer pensions, particularly in a bitterly divided
Congress, are problematic at best.
THE WCTPT WAS THE CREATION OF TWO CONTROVERSIAL veteran
union figures: Frank Brewster, head of the Western Conference
of Teamsters from 1953 to 1957, and David Beck, who served as
president of the national Teamsters organization from 1952 to
1957, when he was replaced by a tough guy from Detroit named
Jimmy Hoffa. Brewster, who in the 1940s conceived of the
Western Conference as the first Teamster region, teamed up with
Beck to start a comprehensive pension trust with the idea that
Social Security alone wouldnt provide sufficient income
But Brewster and Beck, who helped modernize the Teamsters
union, which received its national charter in 1899 from the
American Federation of Labor as a national organization, got
caught up in the mid-1950s federal racketeering probes.
Although neither was found to have Mafia connections, both were
charged with unrelated crimes after being hauled before the
Senates Select Committee on Improper Practices in the
Labor or Management Field, dubbed the McClellan Committee after
senator John McClellan. Both received prison sentences.
Brewsters conviction for contempt of Congress for
refusing to testify was overturned on appeal. In 1975 president
Gerald Ford pardoned Beck, convicted of embezzlement and tax
Though the two founders created a legacy of retirement
benefits for union workers, they left a black mark on the WCTPT
in its infancy. Despite the fact that the fund was found free
of scandal by the McClellan Committee and later by David
Witwer, a history professor at Penn State Harrisburg and author
of Corruption and Reform in the Teamsters Union
fund officials retreated from dealing with the outside
As the WCTPT fund grew, its trustees made decisions that
kept the plan well funded. In the 1980s they created a formal
funding process with a flexible benefit-accrual formula that
allowed them to make adjustments as economic conditions
shifted. In the bull market of the late 1990s, the WCTPT set
benefits at a peak of 3.65 percent times dollars contributed.
After the dot-com bust, trustees dropped accruals to 1.2
percent. An optimistic adjustment brought the number back to 2
percent just before the financial crisis. In good times
we can improve benefits, and in bad we tighten our belts,
administrative manager Sander explains.
Bad times meant that on January 1, 2009, trustees again took
the accrual rate down to 1.2 percent, where it remains today.
Its better to keep a steady accrual rate and the
plan funded strongly, Sander says. After the crisis the
WCTPT used the funds size to negotiate lower asset
management fees. The smart managers were clever in how
they restructured their fees, says Sander bluntly.
The dumb managers did not. And some are no longer with
Even at the height of the 1990s bull market, employers never
took a contribution holiday, which was common at that time. The
Western Conferences early decision, led by Beck, to
diversify membership rather than build locals solely with truck
drivers also helped. Today about 45 percent of members do not
drive trucks.One of the reasons the plan has been strong
is we have flexibility to put a variety of employers and
employees in it, says longtime Teamster leader Charles
(Chuck) Mack, a co-head of the WCTPT. Weve never
taken the position We dont want these people in our
plan. Truck drivers, food processors, office
workers and public employees all negotiate their own benefits
and are bound by individual collective bargaining agreements
with their employers. The economic circumstances for a
food-processing plant wouldnt be the same as UPS, which
is more militant and stronger, Mack says.
Perhaps most important, the WCTPT early on took precautions
to keep assets away from the Teamsters and organized crime,
which in the 1950s and 60s looted assets from the
Teamsters Central States Southeast and Southwest Areas
Health and Welfare Fund to finance casinos. The trustees
initially moved nearly all their assets to Newark, New
Jerseybased Prudential Financial to invest in
fixed income, real estate and annuities. There they stayed
until the early 1980s, when the trustees decided to venture
into other asset classes.
After searching for an investment consultant to help with
asset diversification, they selected Alan Biller, founder of
fiduciary consulting firm Alan Biller and Associates in Menlo
Park, California, in 1986. (Biller likes to say he started his
company in his garage in 1982.) At that time, 84 percent of the
portfolio was in dedicated bonds. In the early 1980s you
could buy long bonds with yields of 12.5 to 14.5 percent,
Biller recalls. For years the WCTPT restrained Biller from
straying from traditional stock and bond portfolios. In 1987 he
proposed investing in farmland, but the trustees decided that
was too unusual. We discussed it in 1987 and invested in
2011, he jokes. In the early 90s he got approval to
build an enhanced equity index portfolio. We were making
what we needed, so they didnt need to do much else,
Billers 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 dont 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
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 its been a
disappointment because our managers werent doing
greenfield [projects], just up-and-running
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
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
IT'S 80 DEGREES AND SUNNY IN SAN RAMON, California, a quiet
suburb in the San Francisco areas 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
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 Hoffas son, James. Mack, who also was appointed
director of the Internationals 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 funds 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
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 theres hardly a one. Mack
notes the decrease in unionization and the efforts of employers
to prevent it. Its a miracle this plan is as strong
as it is, he says. Storke explains sector diversification
among fund members. [Western] Teamsters havent been
particular about who they organize, he says. You
didnt 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
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
funds 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 werent 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
The drop in union membership means fewer active workers pay
into funds as rising numbers of retirees draw on them. The
WCTPTs ratio is better than some, but todays
200,000 active members are less than half the 462,000 in
Despite the Teamster funds 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 its 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
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.
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.
The WCTPT trustees are well aware of issues threatening
Central States. The WCTPT is actively recruiting as many new
members as it can, in as diverse an array of jobs as possible,
and it no longer matters whether they work in the 13 western
states. That was a new concept, says Dodge.
We want this to be the plan of choice, adds Sander,
pointing to the 1,000-plus new participants added from December
2013 through the end of March 2014.
Were dismayed by the seeming abandonment of the
traditional defined benefit plan, a model that works, and
were living proof that it works, Sander says.
We have 230,000 retirees getting a check every month. If
I can replace 65 percent of a truck drivers last wage,
its a victory.
For employers who want out, Sanders Northwest
Administrators has set up rapid-response teams to speak with
unions and employers about the benefits of the pension plan.
Weve been pretty successful in getting parties to
continue with the plan and new units into the plan,
co-chairman Mack says.
The WCTPT is now providing benefits in Indiana, Michigan,
New York and Ohio. Unionists like fresh-salad packagers in
Californias Salinas Valley have replaced some of the
workers lost in the decline of the canned-food industry. In
California the hope survives that, like Rock Transport,
employers will be won over by workers worried about their
Follow Frances Denmark on Twitter at @FrancesDenmark.