The way many unions plans work is that several different businesses that represent the workers pay into a common fund. If one business goes under the remaining are legally obligated to cover that company’s pension obligations. That has many businesses looking to get out of these plans early. That’s especially true with those paying into the Teamsters pension fund, the Wall Street Journal reports:
Some companies are pushing to withdraw their workers from a giant Teamsters pension plan that faces a deep funding shortfall and questions about its long-term viability.
Investment losses during the financial crisis and hard times for trucking companies that pay into the Teamsters’ Central States Funds have sapped the fund of money it uses to pay promised benefits.
With just 60 cents of assets for every $1 in obligations, the Teamsters pension fund is considered in “critical” status by the Pension Benefit Guaranty Corp., the federal agency that backstops failed pensions.
Central States has about $18 billion in assets, ranking it the nation’s second-largest multiemployer pension plan. Such funds get contributions from numerous companies.
The Teamsters pension fund pools money from about 1,900 companies, and its investments have been overseen by advisers jointly approved by representatives for union and management.
Recent efforts by Republic Services Inc. to pull out about 800 sanitation workers from Central States show the uphill battle facing a pension plan founded by the late Teamsters President Jimmy Hoffa.
Last week, Republic Services finalized deals with three local Teamster unions in Michigan to move out of Central States to a better-funded Teamster-run plan. Food service distributor Sysco Corp. removed its last Teamster unit from Central States in January.
“There is a reasonable possibility that this plan could run out of money in about a dozen years,” Central States Executive Director Thomas Nyhan said in an interview.
More companies leaving the fund “accelerates insolvency,” Mr. Nyhan said.
Read the whole thing here. It’s a major problem for unions because their pension plans are a major part of their appeal to workers.