Pensions for 407,000 Private Sector Workers to be Cut to ‘Virtually Nothing’

The problem is that the mishandling of pension funds will mean the unions will look for a taxpayer bailout. Read more on the debacle:

The Central States Pension Fund, which handles the retirement benefits for current and former Teamster union truck drivers across various states applied for reductions under that law.

Currently the plan pays out $3.46 in pension benefits for every $1 it receives from employers. That’s a drain of $2 billion annually.

The plan filed for 60% cuts in pensions. The Treasury Department has the final say. The verdict came in today: “cuts not deep enough”.

The Central States Pension Fund has no new plan to avoid insolvency, fund director Thomas Nyhan said this week. Without government funding, the fund will run out of money in 10 years, he said.

At that time, pension benefits for about 407,000 people could be reduced to “virtually nothing,” he told workers and retirees in a letter sent Friday.

In a last-ditch effort, the Central States Pension Plan sought government approval to partially reduce the pensions of 115,000 retirees and the future benefits for 155,000 current workers. The proposed cuts were steep, as much as 60% for some, but it wasn’t enough. Earlier this month, the Treasury Department rejected the plan because it found that it would not actually head off insolvency.

The fund could submit a new plan, but decided this week that there’s no other way to successfully save the fund and comply with the law. The cuts needed would be too severe.

Normally, when a multi-employer fund like Central States runs out of money, a government insurance fund called the Pension Benefit Guaranty Corporation (PBGC) kicks in so that retirees still receive some kind of benefit.

But that’s not a great solution in this case. For one thing, the amount is smaller than what pensioners would have received under the Central States reduction plan, and is based on the number of years a retiree worked. A retiree would receive a maximum $35.75 a month for each year worked, according to the fund’s website. (That amounts to $1,072.50 a month for retiree who worked 30 years.)

But there’s yet another problem. The PBGC itself is underfunded and isn’t expected to be able to cover all the retirees in the Central States Pension Fund.

Central States Pension Fund is a private pension, established with private companies. They promised workers more than could be reasonably sustained, and it will even get worse as new ways for hauling freight come on line such as driverless trucks, which would eliminate union dues coming in from new drivers. It is unfortunate because retired and retiring drivers paid into the system and certainly should get what was promised. But the unions are crooks who certainly are not in business for the benefit of the workers they represent.

The lawful and reasonable answer is for the pension fund to declare bankruptcy and to pay out what they can from remaining funds. Do not expect that. The union leaders will approach the crooks they have been working with in the Democratic leadership and will beg for some type of bailout from the government, and the taxpayers will be asked to supplement the retirement of the truckers, even as they struggle to meet their own obligations from the meager amount provided by social security, which is also going bankrupt. Sadly, the ponzi scheme continues, and the clueless electorate keeps putting crooked Democrats into office who aid and abet this type of scheme in order to get votes and dollars from the corrupt union leadership. That is not likely to change soon.

Source: zerohedge.com