A column in the Washington Examiner by Irwin Steltzer, a senior fellow and director of the Hudson Institute’s Center for Economic Studies, discusses how Big Labor’s push for the hallucinegenically-named Employee Free Choice Act (EFCA) is primarily a strategy to steady struggling union pension plans (“Irwin Stelzer: Unions need growth to save unfunded pensions,” 9/4).
The article is worth a read in order to learn about some troubling problems with union pension plans documented in “Comparing Union-Sponsored and Private Pension Plans” – a new study by the Hudson Institute’s Diana Furchtgott-Roth and economist Andrew Brown.
“Our report reveals why organized labor is so eager to gain new members through proposed legislation like the Employee Free Choice Act – they need to help bankroll these failing pension plans with new dues-paying members,” said Ms. Furchtgott-Roth.
Steltzer shares some gems from the study.
It seems that “collectively bargained pension plans perform poorly when compared to plans sponsored unilaterally by single employers for non-union employees.”
Among plans covering more than 100 workers, only 17 percent of union plans were fully funded, compared with twice that figure for non-union plans. Perhaps more significant is the comparison of union and non-union plans’ ability to meet the test laid out in the Pension Protection Act of 2006.
That Act defines pension funds that have less than 80% of assets they will need to meet their obligations as “endangered.” Only 14% of non-union funds are in the endangered category, while 41% of union funds have been so tagged.
By contrast, plans that cover staff and officers of unions are probably much better funded. Sauce for the union-official goose is just too good to be sauce for the rank-and-file gander.
None of this should come as a surprise. Unions have gone to great lengths to make sure that their finances, and the condition of their pension plans, are not obvious, even to the most dedicated researcher.
And, as the report’s authors point out, “union leaders like to achieve expanded future pension benefits for their members when they renew collective contracts. It makes their re-election more likely. But leaning on employers to ensure that the pension plan is kept well-funded takes much work for little visible effect ….It sounds much more proactive for union leaders to deliver expanded pension benefits … than to protect already-earned benefits.”
TheTruthAboutPLAs has repeatedly discussed how the union pension issue is related to the debate about project labor agreements (PLAs) because construction unions push PLAs to save underfunded union pension plans.
In rare instances where non-union workers and their employers participate in PLA projects, any employer contributions to union-managed pension and benefit funds on behalf of non-union employees are forfeited to the union plans unless employees join a union and become vested. It is a windfall for Big Labor because they don’t have to pay benefits to those contributors and it props up their struggling pension plans.
In addition, non refundable benefit provision in PLAs occasionally lure non-union workers into joining a union, as these workers want to claim the benefits they have earned for their hard work. These workers will now fund these pension plans, but will likely never receive these benefits because of the Ponzi-like economics and structure of these plans.
Ms. Furchtgott-Roth provides an excellent explanation of the problem with union pensions uncovered in her study for TV viewers:
And if you are somehow not convinced that multiemployer pensions plans are in serious trouble, have a look at Moody’s Global Corporate Finance September 10, 2009 report, “Growing Multiemployer Pension Funding Shortfall is an Increasing Credit Concern.” (We can’t post the study, but I have a copy and things are not pretty with pensions). The key takeaway from that report is shocking news for contributors and beneficiaries of multiemployer pension plans (MEPPS) in the construction industry.
“We obtained plan data from Form 5500 pension disclosure documents that plans must file annually with the US Department of Labor. Unfortunately, the data disclosed in Form 5500s is not up-to-date. The most recent Form 5500s include plan years ended in 2007. Complete information for 2008 year end will not be available until October 2009 at the very earliest. Despite the limitations in the data a very stark picture emerges”
Using 2007 numbers as a starting point, Moody’s estimates that 2008 underfundings for construction MEPP’s ballooned to $72.484 billion or a 54 percent funded level. In other words for every dollar that these funds owe, they hold only 54 cents of invested assets.
MEPP affiliated employers and employees need to know how their plan’s trustees will address these shortfalls.
We will be examining this issue in greater detail in the coming weeks.
You can learn more about PLAs and pensions by reading these posts at TheTruthAboutPLAs.com.