Teamsters' retirees receive notice of huge pension cuts

Oct. 15--When Dan Ossege used to wear his Teamsters Local 20 jacket and hat, he did so because he was "Proud to be a Teamster."

But now, the 58-year-old union retiree said he's no longer Teamster proud.

He is one of about 3,000 northwest Ohio Teamsters and 407,000 Teamster workers and retirees nationwide who face cuts in the pension benefits. About 220,000 now receive benefits, and the rest are eligible to receive pensions later.

Last week, Mr. Ossege received a letter stating the pension he receives from the union's decades-old Central States Pension Fund will be cut by nearly 50 percent.

As for his union jacket and hat, the Maumee resident said, "Now I'm thinking about wearing them and hoping people will feel sorry for me. It's sad to say, but that's the way I feel."

Mr. Ossege said he earlier calculated how much he thought his pension would be cut based on rumblings about the fund's finances, knew the letter was coming, and still was shocked when he read it.

"I think I'm done being mad. Now, I'm just disappointed," he said.

The decision to cut benefits for Teamster retirees and active Teamster workers covered under Central States, one of the union's largest pension plans, occurred late last month after the pension fund filed for reorganization under a new federal law allowing benefits going to current retirees to be decreased.

The governing board of the $18 billion fund feared that if current benefit payouts continued as is, the fund eventually would become insolvent. The fund covers more than 400,000 participants who live in 37 states, mostly in the Midwest and South.

The fund has been paying out $3.46 in pension benefits to retirees for every dollar it receives in employer contributions.

Central States is a multiemployer plan and is run jointly by the union and a number of companies which contribute to it. Because of its sheer size, there are fears that, if it fails, it could wipe out the Pension Benefit Guaranty Corp., a federal insurance program that now pays benefits to thousands of retirees.

The problem with the Teamsters fund, said Local 20 president Bill Lichtenwald, who is a member of the Central States board, is that numerous factors -- starting with trucking industry deregulation in 1980 and continuing on through NAFTA in the 1990s -- have shrunk the union's ranks and robbed the pension fund of its lifeblood: new members who could contribute.

"For every one person paying into the fund, there's now four people collecting from it," Mr. Lichtenwald said. "Investment-wise, we've had a 13.4 percent return on the overall money for the last eight years, but it's just not enough."

Mr. Lichtenwald participated in the decision to reorganize the pension fund and propose the cuts.

Under the plan, retirees who are 80 or older will not have their pensions cut, and those over 75 will receive smaller cuts than younger retirees. Disability pensions will not be affected.

Those under 75 will feel the brunt of the cuts and will be divided into tiers. Those retired from a still active company would be cut between 20 and 30 percent, but those who retired from an "orphan" firm (one now out of business) will be cut the most, between 40 and 50 percent. Mr. Osegee retired from Wonder Bread, a firm now out of business.

About 134,000 Central States Teamster members in the pension plan will not be affected.

The proposed cuts would take effect July 1, but still must be approved by Central States union members who are working or retired, and ultimately by the U.S. Treasury Department, which could overrule a Teamsters' vote. A fund analyst, Kenneth Feinberg, has been appointed by the Treasury Department to study the proposed cuts and determine whether they are fair or if changes are needed.

Ken Paff, national organizer for Detroit-based Teamsters for a Democratic Union, a reform movement within the union, said industry changes obviously hurt the fund, but union leadership contributed to the problem.

"One of the problems is [Teamsters President James] Hoffa cut a deal with UPS. He let UPS take 45,000 people out of the fund. They switched over to the company fund, so they don't contribute anything," Mr. Paff said. "You had a lot of young ones taken out of the fund. If UPS hadn't left, they would have $800 million more per year in the fund."

Jean-Pierre Aubry, assistant director of research at Boston College's Center for Retirement Studies, said multiemployer pension funds once were seen as the most stable because so many different companies were contributors.

"But if you have a dwindling industry and no new employers coming in, you essentially have a death spiral," he said.

Previously, benefits being paid to current retirees could not be touched legally, but a law enacted in 2014 allowed cuts to existing benefits.

"The way the cuts are made basically is they cut everybody's benefit by 5 percent and see if that makes the fund solvent," Mr. Aubry said. At some point, cuts to benefits of certain groups become illegal because it would take them below a floor set by the Pension Benefit Guaranty Corp.

Mr. Ossege, who has begun a letter-writing campaign and also plans to organize retiree protests, said he and his wife planned ahead. The cuts will hurt, but he believes they can be offset.

"We'll have to cut back on a few things, sure. But I'm one of the lucky ones. There's some guys -- this is just going to kill them," he said.

Contact Jon Chavez at: [email protected] or 419-724-6128.

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