Ohio Construction Company Cleared of $5M Pension Liability Claim

Stevens Engineers & Constructors, Inc. doesn’t owe withdrawal liability to the Iron Workers Local 17 Pension Fund because the work identified by the union did not fall with the jurisdiction of their previous collective bargaining agreement.

The decision is a blow for the distressed Iron Workers pension fund, which is severely underfunded with a deficit of over $170 million. The Cleveland-based pension plan was the first to receive approval from the Treasury Department to cut participant benefits.

An employer that participates in a multi-employer pension plan and withdraws from the plan is liable for its share of any underfunded benefits, a scheme also known as withdrawal liability. A special rule applies to employers in the construction industry. These employers are not subject to liability if they completely withdraw from work in the jurisdiction of the CBA of the type for which contributions were previously required.

The parties’ dispute started when the union assessed pension liability against Stevens, claiming that certain activities in a construction project that commenced after the company withdrew from the plan, involved work within the jurisdiction of their previous CBA.

The three-judge panel said the power rigging work, which the fund disputed, was not work within the jurisdiction of the CBA because the agreement allowed Stevens to assign this work to another union. The fund could not use the power rigging work as a basis for assessing liability because the job’s assignment to certain workers meant it was within their jurisdiction rather than the iron workers.

Matt Austin owns Austin Legal, LLC, a boutique law firm based in Ohio that limits its representation to employers dealing with labor, employment, and OSHA matters. You can reach Matt by calling him at (614) 843-3041 or emailing him at Matt@MattAustinLaborLaw.com.

Ideas for Broken Pension Plans

Federal lawmakers are trying to come up with a way to protect the pensions of more than one million union workers. Several options have been offered, none have been accepted. The latest offer comes from union crony Ohio Senator Sherrod Brown and Massachusetts Representative Richard Neal. Their bills came the same day the Pension Benefit Guaranty Corporation – the federal agency that insurance pension plans – released a report saying the agency is running a $65.1 billion deficit and will be bankrupt by 2025.

Legislation by Brown and Neal is called the Butch Lewis Act. It would create a Pension Rehabilitation Administration, a new federal office within the Treasury Department (making government bigger) that would sell bonds to financial institutions to raise money to fund loans to financially troubled plans.

The UPS Loan Proposal is another option. UPS has a proposal that would provide up to three successive low interest long-term federal government loans to troubled pension plans to cover their cash flow shortage or 5 years each.

A third option is the New Design from NCCMP (National Coordinating Committee on Multi-employer Plans). There, the loan program would lend funds to qualifying “critical and declining” status pension plans at 1% interest for 30 years. The loans would be interest only for the first 15 years, and then require a level payment of principal and interest for the remaining 15 years.

Another option is funding from credit union profits. This proposal comes from the American Families for Pension Security nonprofit group. The group wants to create a federally chartered special-purpose credit union for the more than 10 million members of multi-employer plans and their families. The credit union would use its profits from loans and credit card operations to build a reserve pool to help plans repay and secure the loans.

There are drawbacks to each of the proposed plans. None have been accepted, and there is no telling whether any for of any of the plans will be implemented.

Matt Austin owns Austin Legal, LLC, a boutique law firm based in Ohio that limits its representation to employers dealing with labor, employment, and OSHA matters. You can reach Matt by calling him at (614) 843-3041 or emailing him at Matt@MattAustinLaborLaw.com.

Over 100 Union Pension Funds Set to Fail

Some 114 multiemployer pension funds are on track to fail within the next 20 years. These funds, covering 1.3 million workers, are currently $36.4 billion underfunded.

The funds have total assets of $43.5 billion and liabilities of $79.9 billion. Most of that shortfall is attributed to the Central States Teamsters plan ($17.2 billion), the Bakery and Confectionery Union plan ($3.2 billion) and the United Mine Workers plan ($2.4 billion).

Pensions and Investments is reporting that, in addition to these 114 plans, there are another 53 multiemployer plans form which all contributing employers have already withdrawn. The Pension Benefit Guaranty Corp. (PBGC) will have to step in with financial assistant – until it, too, goes bankrupt. The PBGC program is slated to run out of money in 2025.

Three of the failing multiemployer pension plans have sought and received permission from the U.S. Department of Treasury to cut retiree benefits in an effort to heal their underfunded status: New York State Teamsters Conference Pension and Retirement Fund, the United Furniture Workers Pension Fund, and Iron Workers Local 17 Pension Fund.

Matt Austin owns Austin Legal, LLC, a boutique law firm based in Ohio that limits its representation to employers dealing with labor, employment, and OSHA matters. You can reach Matt by calling him at (614) 843-3041 or emailing him at Matt@MattAustinLaborLaw.com.

The Inner-Workings of the PBGC Taking Over Union Pension Plans

Many of my clients are suffocating under the weight of unfunded pension liabilities. They ask me what happens if they sell the company, what happens if they get rid of the union, what happens if they file bankruptcy, etc. While answering each of those questions depends on a myriad of specific facts and legal analysis, here is a peek behind Reichhold, Inc.’s plans to sell its assets in bankruptcy and abandon its employees’ union pension plan. The Pension Benefit Guaranty Corporation (PBGC) will take over the pension plan and pay the retirement benefits for more than 4,500 current and future retirees of Reichold. The retirement plan is 70% funded leaving a $97 million shortfall of which the PBGC will cover $90 million. Employees who retire at age 65 with a 100% vested pension will be eligible for up to $59,320 per year.