IN MAY, ONE OF THE TEAMSTERS UNION’S LARGEST PENSION
funds announced that its “rescue plan” had been rejected by the
Department of Treasury. That might sound like bad news for trucking
industry workers, but it was actually a victory—or at least a reprieve—
of sorts.
The proposal, submitted by the Central States Pension Fund (CSPF),
which covers active and retired members of the Teamsters union, had
requested deep benefit cuts to keep it solvent. Under the plan, for
example, retirees under the age of 75 would have seen their benefits
reduced by approximately 50 percent as of July 1. However, on May 6,
the Special Master of the Treasury Department notified CSPF that it
had denied its petition, stating that Central States had failed to make
a reasonable case under the Multiemployer Pension
Reform Act of 2014 (MPRA) that its proposal would
have taken the fund off the path to insolvency.
The rejection was a stinging setback to Central
States, which has 400,000 participants and which has
warned since it filed its application last September
that it would be insolvent within 10 years unless
painful reductions were made now.
How did a $16.8 billion fund get in this position?
The CSPF has a long and colorful history. Founded
in 1955, it was best known in its early years for its
loans to Las Vegas casinos and in some cases, rather
unsavory characters. Some have said that if it had
not been for Jimmy Hoffa and the CSPF, there
would be no Las Vegas strip.
Those times are past, however. The last casino loan was paid off in
1986 by Wayne Newton and the owners of the Aladdin Hotel.
Today, the fund is managed by responsible trustees but has struggled
in the face of subpar investment returns, high costs, and perhaps most
significant, a steep decline in the ranks of organized truck labor. At its
peak before trucking deregulation in 1980, the Teamsters had about
400,000 members in its freight division. Today, it has about 50,000
members. With unionized trucking eviscerated by bankruptcies and
consolidations over the past 35 years, there are fewer employers paying
into the fund to support a growing number of retirees.
What happens next? Because of the timing of the denial, the fund has
opted not to submit a new rescue plan to the Department of Treasury
and is turning to Congress for help. However, according to fund management, a significant number of legislators encouraged rejection of
the rescue plan, so I cannot imagine a satisfactory solution will be coming out of Congress anytime soon. If the fund did become insolvent,
BY CLIFFORD F. LYNCH fastlane
More turmoil for drivers
employees would be covered by the Pension
Benefit Guaranty Corp. (PBGC), but at only
about one-third the level of the CSPF benefits.
Since the fund collapse would no doubt push
the PBGC fund into insolvency, this doesn’t
seem to be a good solution either.
Ironically, the CSPF board is not getting
any support from the union. In September
2015, James P. Hoffa, general president at
the International Brotherhood of Teamsters,
wrote to CSPF’s executive director to urge
the fund not to file its rescue-plan petition.
“I can appreciate the need
to help the Central States
Fund avoid insolvency,” he
wrote. “But it is nothing
short of outrageous that to
do so, the Fund may propose draconian benefit cuts
that will impose significant
hardships on the very people the Fund is supposed to
serve.” Hoffa said he instead
supports the proposed Keep
Our Pension Promises Act,
spearheaded by Sen. Bernie
This is a difficult and serious problem for the
industry, but Hoffa is right about one thing:
The real potential losers are the drivers who
worked years in anticipation of a reasonable
retirement income.
Clifford F. Lynch is principal of C.F. Lynch & Associates, a provider
of logistics management advisory services, and author of Logistics
Outsourcing – A Management Guide and co-author of The Role of
Transportation in the Supply Chain. He can be reached at cliff@
cflynch.com.
