BRIDGEWATER — For more than a century, workers at the Stiles and Hart Brick Co. have been mining clay and firing it in kilns at temperatures of up to 1,950 degrees to make the classic Boston paver bricks used at far-flung construction sites.
The state’s last brickyard has survived wars, economic downturns, and changing architectural styles. But now it’s buckling under the weight of an arcane pension plan that has left the brickyard’s fourth-generation owner responsible for not only his own retired workers, but for those from defunct companies that were once part of the plan.
“We’re in survival mode,” said Lincoln Andrews, 56, whose great-grandfather bought the brick company in the 1940s. “This will eventually put me out of business. The math is inescapable. I’m frantically trying to find a way to save my employees’ jobs.”
Stiles and Hart, whose bricks have been used to restore such Colonial-era landmarks as Boston’s Faneuil Hall, is one of scores of small businesses in the United States struggling to prop up about 120 multi-employer plans classified as “critical and declining.” That means their liabilities dwarf their assets, and they’re projected to go broke within 20 years.
Andrews, who views his 40 workers as an extended family, wants to preserve their livelihoods. But he’s in a standoff with a deeper-pocketed company that’s co-trustee of the pension plan about how to proceed. Andrews has been pushing that Australian brick maker for a cash infusion to lighten the plan’s nearly $18 million debt load — so far, to no avail.
Multi-employer plans, covering 10.6 million workers and retirees nationally, are holdovers from an earlier era when small employers and unions — often in blue-collar settings such as brickyards, machine shops, and warehouses — joined forces to create retirement funds like those of larger employers.
But decades of consolidation and global competition have thinned the rosters of the plans’ employers, while market declines in the 2008 recession drained the value of their funds. To keep the plans afloat, surviving businesses must continue servicing their ballooning debt.
“We’re in a crisis,” said Gene Kalwarski, chief executive of the pension consulting firm Cheiron Inc. in McLean, Va. “It’s become a race to the last man standing, and they’re left holding the bag. Unless there’s a solution, the pensions aren’t going to be there for the workers.”
At the start of 2019, the pension plan covering Stiles and Hart’s workers and employees of other companies that had joined the plan had assets of $5.3 million and an unfunded liability of $17.7 million, according to its actuarial report. There were 530 participants in the plan.
While the plan started more than a half-century ago with multiple employers paying in, most have gone out of business. Its fund, which still supports “orphan” retirees from the failed companies, now has just two active employers sharing the burden: Stiles and Hart and a rival, Glen-Gery of Wyomissing, Pa.
Andrews said his business is profitable, but his earnings are being offset by his payments into the pension fund, with money he borrows from a local bank. On top of his rising liability, his monthly contributions to the fund total nearly $400 per worker, roughly triple the rate he paid only a dozen years ago, when the plan’s debt was smaller. That is unsustainable, he said.
Earlier this year, alarmed by the mounting liability, Andrews offered to turn over Stiles and Hart to Glen-Gery for free if it assumed his debt and saved his workers’ jobs, but the offer was refused. Andrews fears Glen-Gery, which also pays into the fund each month, would prefer to put Stiles and Hart out of business.
The brickyard’s collapse would crush longtime employees counting on their paychecks and pensions to carry them through their working years and fund their retirements.
Manufacturing technician Chris Withers, 59, an Army veteran who has built molds for Stile and Hart’s machinery for 16 years, would be eligible for his pension at 67. Without it, Withers would struggle to support his wife and their six children.
“The way things are going, I don’t know if I’ll be able to retire,” he said.
For the mostly older workforce at Stiles and Hart, the squeeze could begin as soon as November. That’s when trustees of its multi-employer plan meet to consider cutting pension benefits. Andrews, who is one of the trustees, said that can be avoided if Glen-Gery’s well-capitalized corporate parent shores up the plan.
Late last year, Glen-Gery was acquired by Brickworks Ltd., an Australian company. Brickworks paid $110 million, securing a foothold in the US market, where it has continued to snap up other brick makers in a classic industry “rollup.” As part of the buyout, Brickworks agreed to assume the company’s liability for the pension plan.
“They knowingly purchased the liability, and they got the company cheap because of it,” Andrews said. “Now they don’t want to step up” to reduce the debt load.
Mark Ellenor, president of Brickworks Building Products North America, said his company is meeting its obligations under a labor contract to make monthly payments for its workers in the plan — payments also required by law. But it’s under no obligation to pay down debt now.
While agreeing the pension plan is underfunded, Ellenor said that, unlike Andrews, he doesn’t view the situation as an emergency because the plan remains solvent. Ellenor said acquiring Stiles and Hart — as proposed by Andrews — “doesn’t fit with our model.”
If all else fails, the workers might look to the government to make them whole.
Congress created the Pension Benefit Guaranty Corporation in 1974 to assure obligations are honored if plans run into trouble. But the organization’s own finances are strained. The burden at multi-employer plans must be shared by surviving employers as long as they’re in business. If those plans become insolvent, the guaranty agency will pay the retirement benefits — but at a fraction of what workers were previously owed.
Lawmakers have been seeking a way to recapitalize the plans. In July, the House of Representatives passed legislation filed by Representative Richard Neal, Democrat of Massachusetts, to provide government-guaranteed loans the plans could repay over 30 years. But chances are slim that Neal’s bill, which opponents brand a bailout, will be approved by the Republican-controlled Senate.
Stiles and Hart workers haven’t followed every twist and turn of their pension plan’s unraveling. But like hundreds of thousands of others in underfunded plans, they know that money they’d been banking on for their retirements is in jeopardy.
Packaging operator Mikel Kelle, 36, a 17-year employee who’s president of the union local, said his father, two brothers, and a brother-in-law have worked at the brickyard.
“I was pretty much born and raised here,” he said. “I was running around this place with my Dad. But I’m afraid when I retire, there’ll be nothing left for me.”
Andrews said he runs into many of his workers in the grocery store. They or their children grew up with his own kids, and he feels a deep responsibility to them.
“Our objective,” he said, “is to make sure they’re able to support their families.”
This story has been updated to correct the number of US workers and retirees covered by multi-employer pension plans.