An unsettling read in a very recent post on MSN’s Marketwatch by Elliot Blair Smith might be worth your while. It’s a reminder of how readily even a massive pension fund can be undermined, pensioners victimized, and how political influence by the very wealthy and powerful can be purchased at the highest levels.
Thus far, the Illinois Pension Protection Clause of Article XIII, section 5, has withstood the various unconstitutional assaults by the General Assembly, political influence peddlers like the Illinois Policy Institute, and hedge-fund managers like our Governor. And, it is unlikely such mischiefs will ever cease.
On the other side of the fence – the private sector – without anything except the promises made by management, a retiree faces a very uncertain and unfair future.
In the case of the Teamsters, once a union whose pension management was considered crawling with undesirables and wise-guy corruption, federally sanctioned replacement by the likes of Goldman Sachs and Northern Trust Global Advisors was tantamount to hiring Bernie Madoff to handle the savings of future promises to workers.
“The debacle unfolding at the $16.1 billion Central States fund in Rosemont, Illinois, is a cautionary tale for all Americans dependent on their retirement savings. Unable to reverse a decades-long outflow of benefits payments over pension contributions, the professional money managers placed big bets on stocks and non-traditional investments between 2005 and 2008, with catastrophic consequences.
Facing a devastating shortfall in fund investments, the administrators of the pension funds lobbies Congress to give them the authority to cut retirement benefits – “by up to 50% after Treasury Department approval.
“That’s close to Central States’ astonishing 42% drop in assets—and a loss of about $11.1 billion in seed capital—in just 15 months during 2008 and early 2009. And while the investment losses are not the source of the retirement plan’s unsustainability today, they accelerated the pension’s problems, and almost certainly made the benefits cuts deeper. The professionals made more money disappear in a shorter period of time than the mobsters ever dreamed of.
Trying to extricate themselves from promises made to many unions under the aegis of a single administrator, CEO’s like Joseph Hansen of the United Food and Commercial Workers Union (who earned more than $350,000 annually as he departed his office), heavily lobbied Congress to allow the cutting of pension benefits to union workers for chronically underfunded pensions.
“’The simple fact is that in order to save some of the most vulnerable pension plans trustees must be given the ability to slightly reduce benefits. This is the only realistic way to avoid insolvency and preserve as much of the promised pension benefits as possible,’” the union boss wrote in a letter urging lawmakers to allow underfunded union pension plans to cut promised benefits.”
Signed by Obama in December of 2014, the Multi-Employer Pension Reform Bill “empowered any multi-employer pension fund – commonly managed by unions – to cut benefits for workers and current retirees if the plan is 20 percent or more unfunded.”
Senator Bernie Sanders immediately called for a repeal of the bill, drafting legislation with the Representative Marcy Kaptur of Ohio to stop the law’s impact upon perhaps over one million private sector workers. The Keep Our Pension Promise Act is still languishing in committee.
Back to the article on the Washington Times:
“In another words, Congress and the president let workers who spent decades toiling away to vest in retirement programs take the hit for union managers who failed to keep pensions fully funded.
“In all, more than 10 million U.S. workers rely on multiemployer pension plans. About 1 million of those could get notices next year informing them that the pension benefits they were promised when they signed on to their jobs may be cut. Only those older than 75 get any relief.”
“The concession to union lobbying was a major reversal for Congress, which in the past steadfastly protected the pensions of workers who already had retired.
“The real point of contention is in the cutting of benefits in payment status, meaning benefits currently being paid to retirees. That’s a dramatic departure from long-standing legislation and practice that essentially says that benefits currently being paid cannot be reduced,” said Jean-Pierre Aubry, assistant director of state and local research at Boston College’s Center for Retirement Research.
“Mr. Aubry said the new law will enable multiemployer plans to make deeper cuts to pensions than the 2006 Pension Protection Act allowed. “The new legislation allows for more dramatic cuts to the accrued benefits for current workers and, notably, allows for cuts to the benefits currently being paid to retirees,” he said.
“The Multiemployer Pension Reform Act replaces many provisions of the previous law, creating an escape hatch for many underfunded pensions. The Labor Department’s list of critically underfunded multiemployer pensions shows that the vast majority belong to local unions.”
We may thank the Illinois Supreme Court for their legal and moral adherence to the carefully crafted phrase by Helen Kinney and Henry Green at the 1970 Constitutional Convention, but we must remain – all of us – vigilant in our constant monitoring of what attacks may come next, even from those we would politically trust.