Centers for Disease Control and Prevention director Rochelle Walensky last week pleaded with Congress for more money for COVID. How about asking the Teamsters to share some of their $36 billion pension bailout that President Biden announced last Thursday?
Democrats sold their $1.9 trillion spending bill in 2021 as COVID “relief,” but it included some $86 billion to shore up more than 200 ailing union multi-employer pension plans. The $36 billion for the Teamsters’ Central States Pension Fund is the largest tranche awarded so far, but Mr. Biden assured his labor friends last Thursday that more is on the way.
Multi-employer pensions were common after World War II in trucking, construction and manufacturing. They let employers with a common union like the Teamsters offer collective plans that are jointly administered and collectively bargained by unions and management. They operate much like state plans for teachers and local government workers.
High labor costs have driven many unionized companies bankrupt, however, forcing surviving employers in the plans to pick up more of the cost of the generous benefits. Yet contributions negotiated by unions haven’t been enough to fund benefits, especially as more workers retire. Teamsters in the Central States plan can retire at age 57.
Central States last year was only 17% funded and projected to collapse in a few years. The federal Pension Benefit Guaranty Corp. (PBGC) insures pensions up to $12,870 a year for participants with 30 years on the job. But it, too, is under-funded. If Central States failed, its liabilities could have taken down the PBGC, which insures multi-employer pensions for 11.2 million workers and retirees.
Congress in 2014 acted to prevent this death spiral by passing bipartisan legislation that let sick plans reduce benefits and make other changes to avoid insolvency. Eighteen plans took advantage of the law, but Democrats then had second thoughts and decided to ding taxpayers instead.
Central States’ overseers proposed modest pension cuts that would have spared nearly half of participants. But progressives howled, and the Obama Administration rejected the reforms. At their first opportunity, Democrats rushed through a bailout. Last year’s union, er, COVID relief bill lets the PBGC make lump sum payments to keep some sick 200 multi-employer plans solvent through 2051 and fully restore benefits in the 18 plans that had cuts.
Notably, the law prohibits the PBGC from conditioning aid on governance reforms or funding rules. But it doesn’t forbid benefit increases. So the failings that got these plans in trouble will continue and may lead to future bailouts. Government unions with under-funded pensions in New Jersey and Illinois will surely demand one too.
Meantime, Democrats are calling Republicans stingy for refusing to spend more on COVID, including treatments for the uninsured. But Democrats appropriated a mere $24 billion for vaccines and treatments in last year’s COVID bill and none in the Inflation Reduction Act, which included $369 billion of climate pork. Maybe COVID patients would have received more help if they paid union dues.
The Wall Street Journal
