There is a genuine crisis in the United States largely unknown to most Americans. The size of the problem is estimated at more than $50 billion. Even in Washington, D.C., that is a number that ought to get the attention of folks. Largely, that simply is not the case.
I work for Mayfield Transfer. We are a local family owned and operated delivery trucking business with terminals in Wisconsin, Illinois, and Minnesota and we belong to a multi-employer pension plan (MEPP). A MEPP simply means that one bargaining unit has workers at more than one employer. Pooling risk by creating an economy of scale was supposed to helpful to both workers and employers. That is not how events have unfolded.
By law, if an employer in a MEPP goes out of business, the remaining employers in the plan are responsible for picking up the slack. As our burden increases, so does the cost of getting out of the plan. There is a withdrawal liability that has to be paid. Often, that withdrawal liability is at least as much, if not more, than the net value of the company.
The number of "troubled" MEPPs numbers around 114, out of a total of around 1,300 MEPPs across the country, with Central States Pension Fund being the largest in jeopardy. That's the plan we belong to. It is more than “trouble” when your liabilities greatly exceed your assets. A plan such as Central States simply will not survive without reforming the system. In addition to our company, over 180 other Wisconsin companies have employees participating in Central States.
The original structure of this pension plan was like a pyramid. There was a wide base on the bottom representing new workers, who paid the pensions of retired, older workers, with a ratio of 1 to 5. With deregulation of the trucking industry and carriers going out of business, there weren’t enough workers paying into the pension to support the structure. The pyramid has since flipped upside down so there are only a few at the bottom of the pyramid and many at the top drawing on the pension, resulting in a 5 to 1 ratio and unfunded pension liabilities. Central States is not even 50 percent funded to meet its obligations.
What happens when a plan fails? Those in the plan then are supposed to be covered by the Pension Benefit Guaranty Corporation (PBGC). When that happens today, benefits to retirees are reduced by between 50 and 70 percent. It gets even worse. PBGC is promising $100 billion in benefits to about 1 million retired workers, but there is only about $40 billion in assets.
Employers contributing to MEPPs, on behalf of the workers, have done nothing wrong. The retirees who worked a lifetime to collect benefits and are depending on them in the future have done nothing wrong.
We are not the only ones who will be negatively impacted if this problem is not addressed. The states and communities where these people live and the businesses they support will also suffer. The stress on social services will increase at exactly the same time as tax dollars are going down.
Congress recently formed a joint select committee to study the problem and come forward with a report no later than Nov. 30. So far, it has largely been an exercise in political posturing. Democrats are hanging their hat on the Butch Lewis Act. This is nothing more than a federal bailout that would send the American taxpayers a massive bill. The unfunded liability for employers who are part of failing MEPPs is estimated to be as high as $50 billion. Republicans, predictably, react by saying there will be no federal bailout.
Somewhere between doing nothing and forcing American taxpayers to agree to a massive federal bailout, a solution must be found — a solution that is fair and reasonable to employers, employees, and retirees, as well as the American taxpayer. It is up to all of us to demand Congress do more than kick the can down the road.
How can you get involved? The coalition, Protect Our Workers Earned Retirement (POWER!) includes employers, employees, and retirees. More information can be found at www.powrnow.net.
RJ Emerick of Milwaukee is president of Mayfield Transfer, a local delivery trucking business with terminals in Wisconsin, Illinois, and Minnesota. Mayfield Transfer has employees that participate in the Central States multi-employer pension fund.
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