A battle to hold on to pensions — and the dreams they carried
They thought they were the lucky ones — truck drivers and warehouse workers who counted themselves among the dwindling number of Americans still guaranteed a private pension.
But that promise of a monthly check, once considered ironclad, is now in doubt for more than a million retirees and older workers nationwide, including tens of thousands in Massachusetts and neighboring states. Their underfunded pension plans are creeping toward insolvency, putting benefits they earned over the course of a career at risk of being cut or even eliminated.
For such people as Bob Connors, 64, who spent decades unloading cases of beer at the Anheuser-Busch warehouse in Medford, that’s brought uncertainty at a stage of life he had figured would be less stressful.
“I’m trying to be frugal, less travel and eating out, because I don’t know what’s going to happen,” said Connors, a Medford resident and Teamsters union member who retired two years ago. He’s collecting a pension that’s enabled him to delay taking Social Security. “If it gets cut, I might have to go back to work or sell my house.”
Beyond the pensions of local Teamsters, hundreds of other retirement plans offered by large US companies or groups of smaller ones are struggling. Some have frozen contributions for veteran employees and stopped offering the retirement benefit to new hires.
“We’re looking at the death rattle of pensions in the private sector,” said Alicia Munnell, director of the Center for Retirement Research at Boston College, who cowrote a recent report on the decline of a little-known class of benefits called multiemployer pension plans, which have been particularly hard hit. “These plans are going to run out of money. Employers have decided they’re cumbersome, and they don’t want to assume the risk.”
In place of pensions, which guaranteed a comfortable retirement to past generations, many private employers have been transitioning to 401(k) retirement plans, which effectively shift the financial risk and the burden of making contributions to employees, Munnell said.
Connors and his fellow Teamsters — some retired, others still working — have pinned their hopes on their multiemployer plans. In years past, they were offered by consortiums of small businesses that lacked the scale to provide standalone plans. He belongs to two underfunded plans: the Central States Pension Fund, which covered him at his last warehouse job, and the New England Teamsters Pension Fund, which he became vested in earlier in his career.
Both are now among about 115 multiemployer pension plans in the United States whose condition is deemed “critical and declining” — underfunded by $36.4 billion and on track to become insolvent in the next two decades, according to an analysis by the actuarial firm Cheiron Inc. The plans, covering nearly 1.3 million workers and retirees, provide those who have retired with pensions that can total several thousand dollars a month.
In 2014, Congress passed a controversial law called the Multiemployer Pension Reform Act, which allows troubled pensions to submit rescue plans to the US Treasury Department. The proposals, which must be approved by a department-appointed official called a special master, can call for benefit reductions of as much as 50 to 70 percent. The Treasury has so far allowed at least four underfunded pension plans to lower payouts to participants.
Multiemployer plans are in the most trouble because they’re typically found in such industries as trucking, manufacturing, construction, and beverages — sectors in which many companies have gone under, leaving fewer active workers to support a growing number of retirees. But the same trend is happening in the much-larger ranks of single-employer pensions.
Only about two dozen companies statewide, 13 percent of the 180 that responded to a 2016 benefits survey by the trade group Associated Industries of Massachusetts, said they offer pensions. AIM said the number has been declining steadily in recent years.
A bill to shore up floundering multiemployer plans through federally guaranteed bonds — filed in November by Representative Richard Neal, a Springfield Democrat, and Senator Sherrod Brown, an Ohio Democrat — is being pushed by congressional Democrats and is likely to be part of the wrangling over permanent funding of the federal government.
So far, however, the proposal has gathered only modest GOP support. Whether it will be included in a funding compromise is far from certain.
In the meantime, Frank Sullivan, 58, a truck driver who delivers beer to bars, restaurants, and liquor stores from Weymouth to Framingham to Tyngsborough, is wondering how and when he’ll be able to stop working. Sullivan has been lugging heavy cases since he was 21, making up to a dozen stops a day. He’s had surgery on both knees, an elbow, and to repair a hernia.
“I’d planned to retire at 62,” said Sullivan, who is still paying off a mortgage on his Rockland home and helping his kids with college debt. “But that may not be in the cards now.”
Many companies paying into the failing multiemployer plans have fallen victim to a combination of woes — from deregulation of the trucking industry that allowed nonunion competition to a wave of mergers and bankruptcies. And some of the funds were hurt by the bursting of the dot-com bubble in 2000 and the global financial collapse of 2007 and 2008, which depressed the value of their holdings.
A major problem with the funding of many pension plans is the ratio of active to retired workers. It’s swung from two active workers for every retired worker 20 years ago to one active worker for every five retired workers in some plans today, said Gene Kalwarski, chief executive of Cheiron in McLean, Va., which has multiemployer plans as its clients.
“These funds are getting drained,” Kalwarski said. “More and more people are living into their 80s or beyond, and there are fewer workers left behind to support them.”
Kenneth Feinberg, formerly the Treasury Department’s special master to review underfunded plans, in 2016 rejected a plan by Central States that would have cut Teamsters pensions. Feinberg said he might have approved the cuts if he was convinced they would stabilize the fund, the nation’s largest multiemployer plan. He concluded they wouldn’t. And the federal Pension Benefit Guarantee Corporation, created to insure pension benefits, lacked the funds to cover the shortfall in the Central States plan, let alone other troubled multiemployer plans, he said.
“Central States is too far gone,” Feinberg said. “Something else has got to be done.”
Neal’s bill would create an agency within the Treasury Department authorized to issue federally guaranteed bonds that could finance 29-year, interest-free loans to the scores of multiemployer pension plans.
Supporters consider the negotiations on government funding an opportunity to exert leverage on behalf of the bill. But the concept is anathema to many conservatives.
“It’s a bailout,” said Andy Roth, vice president at the Club for Growth, a group favoring free-market policies and limited government. “Whether it’s a loan or a loan guarantee, you’re putting pressure on the taxpayers to deliver.” Roth said lawmakers should recognize “pensions are an archaic device that should be heading with the dinosaurs into extinction” and not stick taxpayers with the bill.
John Murphy, a Teamsters international vice president who has grappled with the issue of pension underfunding since 2014, said union members across the country negotiated contracts with less take-home pay in exchange for employers redirecting money to pension funds that would help workers in retirement.
“What we’re trying to do is protect American workers and retirees who labored for years and years and put a lot of deferred income into these pensions,” Murphy said.
Tim Lawler, a 57-year-old Teamster and sales representative for Martignetti Cos., said the pension uncertainty has taken a toll on him and others.
“You change your whole lifestyle because of this,” he said. “My wife stayed at home and raised the kids. When you hear the words middle class, we’re the middle class. But I don’t think of retiring now. How could you?”