407,000 Workers Stunned As Pension Fund Proposes 60% Cuts, Treasury Says "Not Enough"

Tyler Durden's picture

Submitted by Michael Shedlock via MishTalk.com,

407,000 private sector workers are about to lose most of their pensions.

I first wrote about this on April 21, in One of Nation’s Largest Pension Funds (Truckers) Will Reduce Benefits or Go Broke by 2025.

The Central States Pension Fund, which handles the retirement benefits for current and former Teamster union truck drivers across various states applied for reductions under that law.

Currently the plan pays out $3.46 in pension benefits for every $1 it receives from employers. That’s a drain of $2 billion annually.

The plan filed for 60% cuts in pensions. The Treasury Department has the final say. The verdict came in today: “cuts not deep enough”.

Please consider Pensions May be Cut to ‘Virtually Nothing’ for 407,000 People.

The Central States Pension Fund has no new plan to avoid insolvency, fund director Thomas Nyhan said this week. Without government funding, the fund will run out of money in 10 years, he said.

 

At that time, pension benefits for about 407,000 people could be reduced to “virtually nothing,” he told workers and retirees in a letter sent Friday.

 

In a last-ditch effort, the Central States Pension Plan sought government approval to partially reduce the pensions of 115,000 retirees and the future benefits for 155,000 current workers. The proposed cuts were steep, as much as 60% for some, but it wasn’t enough. Earlier this month, the Treasury Department rejected the plan because it found that it would not actually head off insolvency.

 

The fund could submit a new plan, but decided this week that there’s no other way to successfully save the fund and comply with the law. The cuts needed would be too severe.

 

Normally, when a multi-employer fund like Central States runs out of money, a government insurance fund called the Pension Benefit Guaranty Corporation (PBGC) kicks in so that retirees still receive some kind of benefit.

 

But that’s not a great solution in this case. For one thing, the amount is smaller than what pensioners would have received under the Central States reduction plan, and is based on the number of years a retiree worked. A retiree would receive a maximum $35.75 a month for each year worked, according to the fund’s website. (That amounts to $1,072.50 a month for retiree who worked 30 years.)

 

But there’s yet another problem. The PBGC itself is underfunded and isn’t expected to be able to cover all the retirees in the Central States Pension Fund.

Dear Beneficiary

Central States Pension2

Click here for the entire “Dear Beneficiary” letter.

This is a sad saga for which there is no happy ending.

 

Public Union Whiners

An Illinois state worker was whining earlier today about my post Chicago Pension Liabilities Jump 168%, Understated by $11.5 Billion.

When private pension plans go broke, they go broke. Public pension expect a bailout.

I replied to the person whining … “Corrupt politicians got in bed with corrupt union leaders making promises both knew could not be met.”

Public workers have no idea how well off they are vs. the private sector, yet they demand, more, and more and more, from a state that is broke.

Taxpayers owe the Chicago pension fund absolutely nothing. Bankruptcy is the solution.

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RAT005's picture

I used to live in Chicago.  Can't believe how blind people are to the bankruptcy there. 

nuubee's picture

Error 407k --- Pension funds not found.

remain calm's picture

Just wait till 60 million social security recipients get 25% foreskin shavin, just a little cosmesis and they won't even realize it. It goes something like this real inflation 5% and Social Security cost of living increase 1% per year. In 5 years you lost the tip of your dick and you don't even realize it.

Cognitive Dissonance's picture

I just love NIRP and ZIRP. And so do pensions. /sarc

Retronomicon's picture

They are monsters, undead ones feeding off the living.  The whole zombie/vampire thing is a huge allegory for what's really going on.  Central bankers are the lich lords running the whole thing.

https://en.wikipedia.org/wiki/Lich

A Pimp's love is different's picture

"I want a hamburger, NO, a cheeseburger... I want a hot dog"

Stuck on Zero's picture

If the pension fund had just invested in gold ...

The Saint's picture
The Saint (not verified) Stuck on Zero May 21, 2016 1:19 PM

If this is a "private" pension fund, the fiduciaries should be liable to the fund for fraud and should be able to be sued by the fund or the members.  They may not get much but they can sure as hell make sure the fiduciaries aren't living the life of Riley.

Tom Servo's picture

Guess the Tyler that got shitcanned didn't like MISH? lol

 

Theosebes Goodfellow's picture

You think this is bad? Just wait until they have to revalue the US Dollar to gold to balance the federal debt! Then you'll see effin' haircuts!

Stack on now or soup line later. Take your pick!

NoDebt's picture

"A retiree would receive a maximum $35.75 a month for each year worked, according to the fund’s website. (That amounts to $1,072.50 a month for retiree who worked 30 years."

Still better than my pension (don't have one, never did, never will).

 

GoldenDonuts's picture

I can hear helicopters.  Can you hear helicopters?  I can't see them.  But they are close by.

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) GoldenDonuts May 21, 2016 3:52 PM

Thank you unions.  You made incredible promises years ago in order to enrich your leadership.  Same situation with governments.

Kissy Ass's picture

Robotic truck drivers don't need a stinking pension. Fire these fucking humans already!

NuckingFuts's picture

/sarc/ What's a pension?....

My old man (75) talks about his and assumes everyone has them. This is part of the problem. The Boomers don't understand today's reality and think everyone can do what they did and it will all be fine. And they all vote.

Keyser's picture

8+ years of easy money policies and ZIRP has caused all pensions funds to be in question, private and public... All part of the reason I took early retirement last year, locked in my pension and it was converted to an annuity... Hopefully this will give me some protection from the write-downs in benefits that are surely coming... That is until the USD gets devalued... 

philipat's picture

With ZIRP/NIRP, the future for Pension Plans is either:

  1. Employer/Employee fully fund the plan.
  2. Payouts will be at much lower levels
  3. No Pensions

I suspect it will be #3? If not, in either of the other cases whether Private or Public, either the Employer bails out the plan taking responsibility for under-funding the Plan by making unrealistic assumptions of investment returns or it goes BK. In the case of Public Plans at the State/Municiple level, the Employer is LOCAL Government so no way should Federal Taxpayers bail them out.

CheapBastard's picture

"Change you can beleave in!"

 

~ Soweto

 

Unions have been blindly voting Democrat for years. Maybe they'll learn a lesson this time albeit a very painful one that much of the rest of the [private sector] has already felt.

Perhaps unions will remember Hillery bragging that the Transpacific Trade Pact, is "the gold standard of trade deals."

Vampyroteuthis infernalis's picture

The corporations understand that if you stop paying into the pensions, they will bo bankrupt plain and simple. The war against working class continues as the upper crust wins.

McCormick No. 9's picture

All pensions are a ponzi, even (especially) social security. This is a psychological problem, ie a problem of expectations. The only thing one can expect, and count on, is death. Every other promise, if it comes true, is gravy. Dust off your Epictetus, and shut the fuck up with your pitiful whining.

Handful of Dust's picture

"If you don't hold it, you don't own it."

 

corrollary:

 

"If you don't hold it, you will never see it."

... and so on ...

 

Ballin D's picture

Pensions were dead before NIRP / ZIRP.  They rely on people to pay in money today for commitments made 30 yrs ago (alternatively, allow people to make promises today that they wont have to pay for 30 years).  Worse yet, the people making those decisions are the worst of the worst - govt or union workers.

philipat's picture

That's actually not correct. They rely on money being paid in today on a discounted cash flow basis with investment returns to pay out commitments 30 years in the FUTURE. The models are fine except that all operated on the basis of investment returns of 7-8% PA, which doesn't work any longer. I continue to suggest that the problem is NIRP/ZIRP which is destroying the Pension/Insurance industry, again in favor of the 1%.

The other reason being, of course, that US Corporations don't give a shit, and don't have to give a shit in a crony capitalism/fascist system about workers security. And TPP, TTIP will only make things worse.

It's all part of the same basic problem.

847328_3527's picture

NIRP/ZIRP also destroyed millions of Seniors and savers.

Bendromeda Strain's picture

All part of the reason I took early retirement last year, locked in my pension and it was converted to an annuity.

Then, cash out the 401k, take the tax hit and stack.

jcaz's picture

LOL-  too late, he annuitized.  They keep all the money, he gets a check every month- until they can't afford to send him one anymore.

You're locked in nothing, dude- that's the point of this article.

ThirteenthFloor's picture

Reality watch Illinois representative, Mike Bost lose it over this....

https://www.youtube.com/watch?v=tR8yl-bDWyI

RyeWhiskey's picture

Kissy Ass because he couldn't find his head this morning,

StychoKiller's picture

Hey!  Bots ain't gonna work for free!  I'll start my own Trucking Pension, with blackjack, and Hookers!

RafterManFMJ's picture

A common illustration I use:

How about you come build me a 3 car brick garage? I'll pay you 5K today, but I'll pay you 300K in 30 years...

Any takers? No? Why not? Discuss - lol!!

Bob's picture

That's some crazy shit there!

http://www.free-online-calculator-use.com/future-value-of-money-calculat...

But Wall Street and hangers-on will have long since skimmed all value from the initial investment itself, for that matter. 

Gloomy days ahead for many taught to believe in "investing" like circus dogs are trained to do a somersault for a little treat they still have to stand up and beg for . . . while thousands of $10 ticket holders applaud! 

Poor doggie will find even the bone is just a nutrition-free prop. 

Follow the top 5% for the money--the truly rich and all their various imitators, hangers-on and enablers. 

The rug will be pulled up just as painfully on all their kids. Well, except the top 0.1%.

They'll probably blame the people who took advantage of them, too! 

Imagine that.

jerry_theking_lawler's picture

If we have a contract and you have financial backing...I'll take it. B/c I can get someone to 'financial engineer' this shit right up. Someone will take this lump payment in the future and turn it into a financial instrument and give me the lump payment now (with their cut for processing/handling). This will then get sold in the market and sliced and diced. In 30yrs. when it is worthless, it will be written off.....but by then, it will be on the .feds books so it won't matter.

 

So, sign me up. I will build you a substandard garage for that deal and take my winnings straight to the real Casino where I will promptly lose them in a blaze of glory....but it will be grand I say, grand.

 

Our system is so F'd up.....this is just a joke, I know....but this happens every day in real life (just on a much larger scale).

RyeWhiskey's picture

You're too naive if you think its unions fault. Or better yet - you misdirect intentionally.

Ballin D's picture

its the union's fault in the same way its a toddler's fault when he gets sick for eating too much ice cream.  Yes, the union fucked up and the leaders methodically put themselves in the spot theyre in but maybe the company shouldve slapped them and said "NO, stupid!"

roddy6667's picture

So the workers are children who can't make simple decisions for themselves?

McCormick No. 9's picture

Those who volutarily enslave themselves by selling their life for money are stupider than children. Think about it: economically, once you begin to work for wages, like everyone else, your prime directive is to maximize your profitability. That means that you want to work the least amount for the most money. It's just that fucking simple. The gold ring is to not work at all for enough money to meet all of your basic expenses plus drugs, alcohol, and sex. That is the ultimate goal of an employee. They see life as a commodity, something to be thrown away, either as a drudge, or as a fleshpot.

So, yes, the basic philosophy of the employee is similar to that of a child, but it is exactly that of a slave. Those who understand that life is something to be treasured as an experience of ultimate value chafe as employees. They thirst for something more, and soon are on their own, doing whatever it is that free men and women do that makes them happy.

It's not that employees "cannot" make decsions for themselves, it's that the decisions they make are preconditioned to be entirely self-serving, short-term decisions based on immediate desires, untempered by any higher thinking. In this, employees are EXACTLY like children. It is only in leaving behind the slave mentaility that men can escape childlike thinking, and plan stoically and strategically for the future, taking risks and enduring privation now for gains in the future.

golden kafir's picture

Good analysis mccormick, i agree about the ponzi comment as well. Pensions behave like a pyramid scheme always needing new suckers but the only ones to get paid are the first ones to get them. Government pensions where i live are heavily invested in the logging industry, shipping raw logs to china or wherever and they are are cutting at a breakneck pace that is still clearly unsustainable but no one will care because their pensions depend on raw resource extraction.

Vendetta's picture

9 trillion has already been dropped on the MIC and 15 trillion on corrupt bankers in the last 15 years.... guess you didn't see that.

OregonGrown's picture

When 49% of all CURRENT union employee's in america are government workers....... WE ALL HAVE PROBLEMS.  Being a union sheetmetal worker for 12 years of my life, I SAY, let them fail with NO taxpayer funded bailouts!  

 

johngaltfla's picture

Fiduciaries? At JPMCMSGSBAC etc?

What are you smoking? Crack?

Illegal's picture

I think the mob will being visiting Lloyd and making GS an offer they can't refuse.

Antifaschistische's picture

good point, but they don't.  now let's see why.  could it be the Hedge Fund brown paper sacks full of cash passed under the table to the Pension Administrators at the Unions or anywhere else?

also...I just don't know why this is such a giant problem.   If we are collecting ONE dollar for every THREE we pay out.sounds to me like they need to triple what they are collecting.....problem solved.

EINSILVERGUY's picture

You'll get nothing  and Like it.  

Judge Smails

 

StackShinyStuff's picture

"You fucked up! You trusted us!" - Otter