About 5,200 active and retired Teamsters in Western New York face sharp cuts to their pensions starting next year.
The cuts loom as their pension fund struggles to stay viable in the long run.
The New York State Teamsters Conference Pension and Retirement Fund, which has about 34,000 participants statewide, has submitted a plan to U.S. Treasury Department, seeking permission to impose the cuts.
“No one wants to reduce pension benefits, but we had to take that step to keep the fund from running out of money,” the Syracuse-based fund’s board of trustees wrote in a letter to participants.
At stake are pension benefits for those who are retired, as well as future benefits for those still working.
About 15 percent of the participants are workers and retirees from Local 449 in Buffalo and Local 264 in Cheektowaga. Statewide, nine Teamsters locals participate in the fund.
Fund officials said the cuts are needed because of “historical market losses” in 2000 and 2008 and an “exodus of contributing employers” from the fund. A number of trucking companies that used to employ workers and contribute the fund have closed, filed for bankruptcy, or consolidated.
The New York State Teamsters Conference plan calls for cutting active participants’ monthly benefits by 20 percent, and reducing retirees’ benefits by 31 percent.
There would be some exceptions. Participants 80 or older would see no reduction in their benefits, and those ages 75 to 79 would have their benefits cut by lesser amounts, depending on their age. Participants who are receiving a disability benefit from the fund also would not see a reduction.
If approved, the cuts would take effect July 1, 2017.
The pension preservation plan filed with the Treasury Department estimates the fund would become insolvent by 2027 unless changes are made. The number of active workers participating in the fund continues to shrink, while the number of retirees keeps rising. The plan estimated that for every $2.33 it pays out in pension benefits, it collects only $1 from employers.
Whether the fund’s preservation plan will be approved isn’t yet known. To pass muster, the Treasury Department would have to determine if the benefit cuts are deep enough to keep a plan solvent, but also not larger than needed to avoid insolvency. Plus, the reductions have to be distributed “equally and fairly” among participants.
The Treasury Department has up to 225 days to consider the New York State Teamsters Conference’s application from the date it was filed in late August, so a decision could take a while. A different fund, called the Teamsters Central States Pension Fund, sought approval to make cuts of its own, but the Treasury Department rejected that plan in May, saying the reductions put forward would not be enough to avert insolvency.
If the Treasury Department approves the New York State Teamsters Conference’s plan, participants would still get to vote on the cuts. But even if the cuts are voted down, the Treasury Department could still impose them under certain circumstances.
Meanwhile, the plan’s trustees – a combination of labor and employer representatives – are appealing to federal lawmakers for a “legislative fix” for pension plans in financial trouble.
Fund leaders said if such a legislative solution comes to pass, they would withdraw their application to impose benefits cuts.
“But if we wait to take action, we will be forced to make even larger cuts later, and run the risk the fund will end up paying no pensions at all,” the trustees wrote to participants. “This is a difficult decision that we do not take lightly, and we recognize the hardship these proposed benefit reductions will create.”
George Harrigan, president of Teamsters Local 449, said local participants are greatly concerned about the impact the cuts would have.
“It might not sound like much, but when you tell somebody you have $2,000 in income and now you’re going to lose $600 of that income, you’re not going to make that up,” he said. “Especially for people that are much older. They can’t go back into the workforce. They’re not healthy enough to go in the workforce.”
Harrigan said he is requesting the Treasury Department to hold a hearing in Buffalo on the proposed cuts. When the agency was considering cuts to the Central States fund, a local group traveled to Ohio to speak out on the issue.