Outlook Remains Bleak for Multi-Employer Pension Funds
By: Richard H. Wessels, Esq.
Two years ago, we prepared a series of articles on the underfunded union pension issue. As we explained then, a perfect storm has hit multi-employer pension funds. A combination of a workforce downturn in many unionized sectors (particularly construction), poor investment results and tougher funding requirements (including interest rate assumptions) mandated by federal laws, has created historic levels of underfunding. Two federal laws, the 2006 Pension Protection Act and the 1980 Multi-Employer Pension Protection Act have created this substantial liability in many funds. The most common liability for employers is an increased contribution requirement (surcharges) or unfunded withdrawal liability (for example, a big bill after a union is ousted or a business is shut down). The U.S. Department of Labor has a list of multi-employer plans in critical and endangered status. “Critical” status is the most serious, often referred to as “red zone.”
Some of the union plans in the upper Midwest on the 2012 “red zone” list are:
- Automobile Mechanics Local 701 Union and Industry Pension Fund
- Automotive Machinists Pension Trust
- Bakery and Confectionery Union and Industry International Pension Fund
- Central States Southeast and Southwest Areas Pension Fund
- CWA/ITU Negotiated Pension Plan
- DuPage County Cement Masons Pension Plan (502(B))
- GCIU Employer Retirement Plan
- Greater Wisconsin Multi-Employer Retirement Income Plan
- Indiana State Council of Carpenters Pension Fund
- Laborers National (Industrial) Pension Fund
- Local 705, International Brotherhood of Teamsters Pension Fund
- Local 731 IB of T Textile Maintenance and Laundry Craft Pension Fund
- National Automatic Sprinkler Industry Pension Fund
- Pension Plan for Employees of United Furniture Workers of America
- SEIU National Industry Pension Fund
- Sheet Metal Workers Local Pension Fund
- Sheet Metal Workers National Pension Fund
- Teamsters Industrial Employees Pension Plan
There are several factors which can determine whether a multi-employer pension plan is classified as being “red zone,” but being less than 65% funded is the general rule of thumb. The US DOL not only has a list of “red zone” pension plans, but also has a listing of endangered funds. These are union pension funds which are in bad shape, but not quite as bad as “red zone.” The general rule for the endangered category is a pension fund that is less than 80% funded.
Here is a sample of US DOL’s listing of 2012 endangered funds impacting upper Midwest employers.
- Fox Valley and Vicinity Laborers Pension Fund
- Local 731, IB of T, Excavators and Pavers Pension Fund
- Rockford Pipe Trades Industry Pension Fund
If you have any questions about multi-employer pension plans to which you are contributing, give Dick Wessels a call at 630-377-1554.