The Teamsters spent millions of dollars to lobby Washington for pension reform that will allow them to reduce pension benefits for current workers and retirees beginning in 2016. A letter from the Teamsters to affected current workers and retirees explained that the Central States Pension Fund (the “Fund”) has become severely underfunded and is heading toward financial failure. The letter attributed the problem to the increase in Baby Boomers retiring and the decline in the union workforce – a deadly combination to union pension funds everywhere.
Simply put, the Fund has fewer contributions coming in than benefits being paid out, and this model is not sustainable. As stated in the letter, “…for every $3.46 that the Fund pays out in pension benefits, only $1 is collected from contributing employers, which results in a $2 billion annual shortfall.” The only way to decrease that shortfall is to have more dues paying members, but Teamster membership is shrinking, along with its pension.
The reform will not affect all employees equally. Retirees over the age of 80 and those with disabilities will continue to receive full benefits while current workers and retirees under 75 will be the hardest hit. Those between the ages of 75 and 80 will have their benefits reduced on a sliding scale. The Fund has not yet said how much the cuts will total, but retired union members are anxious to see what will be left of their pension benefits once 2016 arrives.