Federal relief includes pension bailout

In addition to the popular $1,400 payments for many citizens, the recently passed $1.9 trillion federal American Relief Plan also allocated $86 billion to help stabilize distressed multi-employer pension funds for the next three decades.

The money would shore up 185 union pension plans that are close to collapse. It’s a group that includes a million retired truck drivers, retail clerks, builders and others who face a loss of earned retirement income.

Cloquet’s Sherman Liimatainen serves as vice president of the National United Committee to Protect Pensions and he co-chaired the American Pension Justice group that lobbied for several years for federal action. He is also a retired secretary treasurer of Teamsters Local 346 in Duluth. He is pleased that the pension funding was included in the stimulus plan.

“Nine thousand union members had their pensions imperiled in northern Minnesota,” Liimatainen said. “In our local area, retired Teamsters had their benefits on the line and this federal action saved us. When you go down to our local [grocery store], those employees are union members and their pensions were saved. In our community that has a big impact.”

Liimatainen said that after 40 years of contributing to a pension fund, he was told to expect a 65-percent cut in monthly benefits. He said there are 1.5 million active and retired union workers affected nationwide, including about 23,000 Minnesota retirees who paid into the Central States Pension Fund.

Employee pension funds are built on employee contributions over a period of time, some stretching into decades. They pay in to cover their pensions at retirement but much of that money has gone to employees who have already retired. A fund remains solvent only if there is a strong workforce paying in, making steady contributions.

In the financial collapse of 2008, much of the reserve pension fund money had been invested in high-yield Wall Street stocks and lost value quickly. Healthy reserve fund balances disappeared, even though contributing workers continued to pay in. At the same time, a loss of union jobs nationally put pressure on the pension funds.

Many of the pension plans started paying out more to retirees than workers were sending in. The trustees of these pensions warned that without federal action the money would run out in 2025.

Some retirees faced pension cuts in the range of 47 percent. U.S. Senator Tina Smith met with labor leaders specializing in the pension issues in 2018, realizing how many workers were affected. She said she remembered hearing from one woman in Duluth who said she saved and did everything right, but losing her pension meant she would likely “be living under a bridge.”

Disbursement of funds will take time with rulemaking and discussions regarding how the program will be implemented. It is estimated that some affected pension plans would not be allowed to submit applications for financial assistance until 2023.