Teamsters in New York State have traditionally had one of the strongest unions and, along with it, one of the most successful pension funds. The Teamsters Local 707 fund has officially, as of last month, run out of funds. This marks it as the first pension fund of its type to bottom out in this way. While this of course has disastrous effects for the retirement plans of the 4,000 retired Teamsters who had previously counted on a pension from that fund, it also has analysts of the wider pension fund program expressing grave concerns about the futures of other union funds across the country. After all, if one of the strongest funds couldn't survive, why should any other plans be able to manage?
Teamsters Local 707 Dries Up
In an interview with the New York Daily News, Teamsters Local 707 member Tim Chmil explained that he and his fellow union members "had collectively bargained contracts that promised us a pension." The members paid into the pension "with every paycheck," in exchange for a guarantee that a pension would be available upon retirement. Unfortunately for Chmil and other union members, this as played out differently from expectations.
Already there is talk of other pension funds that are nearing exhaustion. Teamsters Local 641 and 560, both based in New Jersey, are seeing funding run out, according to union officials. Across the state, the larger New York State Teamsters Pension Fund is also facing dire financial circumstances. And beyond New York, the Central States Pension Fund, which covers more than 400,000 retirees, is on the brink of failure. This would have disastrous consequences for retirement plans in the South and Midwest. According to the Daily news report, there are, in fact, even more plans across the country that are threatening to bottom out.
For union members, talk has been floating around about the possibility of pension funds running out of money for several years. In some cases, it dates back to the 2008 financial crisis. Still, in the intervening time payment checks still came as scheduled, and so many retirees dismissed the rumors as just that.
Desperate Measures Tried and Failed
As the 707 fund ran out of money, officials made a desperate gambit to save the remaining assets by trimming pension payouts. That began to take effect early in 2016 for some retirees. Unfortunately, though, the pension fund was not saved by this action. After running out of funds, the Local 707 fund turned instead to Pension Benefit Guaranty Corp., an insurance company that covers pension losses. This has saved retirees in the union from a total loss of income, but it is nowhere near where the payment levels were supposed to be. Now, the biggest questions are why this happened, and which funds may see a similar fate.