Feds place 150 union pension funds in 'critical' status

2/1/2015

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The funds lack enough assets to meet at least 65 percent of their future obligations. (iStock Photo)

The Labor Department says 150 union multi-employer pension funds are in "critical status," meaning that they lack enough assets to meet at least 65 percent of their future obligations.

Another 85 funds are listed as being "endangered," meaning they lack the assets to meet at least 80 percent of their future obligations.

"These are lists of plans whose own funding [levels] puts the plan at risk," said Norman Stein, senior policy adviser to the Pension Rights Center, a nonprofit consumer watchdog group. That status gives the trustees the option of cutting some benefits as part of a rehabilitation plan to get the program back to health. They are not obligated to makes cuts, though, Stein notes.

The determinations were based on reports to the department from the pension plans' actuaries, which the department has posted online. Several report that the plans have been troubled for several years.

The Indiana State Council of Carpenters Pension Plan, for example, reports: "This is the fourth year the plan has been in critical status. The law permits pension plans to reduce, or even eliminate, benefits called 'adjustable benefits' as part of a rehabilitation plan."

The Central New York Laborers Pension Fund is now in its fifth year of being in critical status and the International Brotherhood of Electrical Workers Pacific Coast Pension Fund passed its six-year anniversary in April.

The notices, mostly brief form letters, give few details as to why the programs are in trouble or the depth of the problem. The actuaries are not required to state in the notices exactly how underfunded the plans are, just that they pass the threshold to be listed as critical.

It is not something the plans are eager to talk about, either. Calls by the Washington Examiner to representatives of the funds were mostly unreturned. The few who did respond said they were not allowed to talk.

"I don't have authority to do that," said Tobie Weiland, administrator for the Central New York Laborer's Pension Fund, explaining she would have to get permission from the trustees. "It would be a wonderful story because there are so many pension plans that are in trouble," she added.

A September study by Boston College's Center for Retirement Research estimated that 27 percent of multi-employer pension plans overall were in critical status and another 14 percent were endangered.

Diana Furchtgott-Roth, former chief economist of the Labor Department and now a senior fellow at the Manhattan Institute for Policy Research, says there are several reasons for the programs' under-funding

"The first is that they have declining membership," Furchtgott-Roth said, noting that according to the Labor Department, unions account for just 11.1 percent of all workers, a three-decade low. "So when you have a larger pool of retirees that you have to pay benefits and a smaller pool of new members, you have problems."

Other causes include the 2008 recession and the failure of union leaders to negotiate for more payments into the plan.

The silver lining for union members looking to retire is that the number of critical plans this year is down from previous years and the overall trend suggests the number will continue to decline should the economy continue to recover. The department listed 232 plans as critical in 2013 and 240 as critical in 2012. The number of critical plans hit a peak of 283 in 2010.

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