Closely Watched Pension Case Could Bring Cuts For Other Plans

Multiemployer plans are retirement programs in unionized industries where wage earners typically work for more than one employer in a year such as in trucking and construction.

Friedman called MPRA (pronounced Mepra) the worst law passed in the Pension Rights Center’s 40 years of existence.

“If these cuts are allowed to go forward, we think it is going to set a terribly dangerous precedent. This would undo undoes the promise of ERISA,” she said.

The May decision by Treasury will be the first test for the 2014 MPRA law.

Comments on the Central States Trustees are due at the end of Tuesday and there are already several thousand submissions.

By coincidence (or not) the Senate Finance Committee holds a hearing on the same day devoted to the MPRA and the challenges of multiemployer plans. One of the witnesses will be a pensioner in line for having her retirement pay (and standard of living) reduced.

Treasury Special Master Ken Feinberg has been given the job to determine whether the cuts and the process the trustees employed meet the letter of the law.

Friedman contends the law has not been followed, that the trustees have not done everything they could. “We take the position they did not do anything to reduce administrative and investment management expenses,” the Pension Rights Center leader said.

She noted as the trustees were preparing in 2014 to cut benefits, they gave Central States Executive Director Tom Nyhan a $32,000 raise to push his compensation into the neighborhood of $700,000. “I would not call that reasonable,” Friedman said.

Defrehn said multiemployer plan participants have an important protection that workers in government and individual employer programs do not.

“What distinguishes the multiemployer world from the public employer and corporate pension worlds is the Taft-Hartley Act requires multiemployer plans to have an equal number of labor and management trustees,” said the leader of the trade group representing companies in multiemployer programs.

Friedman said Congress should find the money to help Central States because it helped create the problem when it deregulated the trucking industry in the 1980s, which brought down rates, revenues and wages for these companies.

Defrehn demurred: “If people think Congress is going to write a check it’s a pipe dream.”

The nightmare that 401(k) plan holders saw daily through the financial crisis in the value of their retirement holdings was just as real for multiemployer pension members, but visible usually from the periodic account statements for the entire plans.

In 2008 before the collapse, 75 percent of multiemployer plans were considered healthy and 25 percent unhealthy. “The system got clobbered,” said Defrehn.