Rick Romell

The Milwaukee Journal Sentinel

The U.S. Treasury Department rejected a plan Friday that would have slashed pensions promised to more than 200,000 Teamsters.

The decision deals a victory to retired truck drivers, dock workers and others who furiously battled against the cuts, which in many cases would have sliced promised pensions by more than half.

On Milwaukee's west side, a group of Teamsters whooped loudly at the news.

"I can't stop crying, but that's OK," said retiree Kenneth Stribling, who had faced a 50% reduction in his pension. "Tears of joy."

"Pretty ecstatic right now," said Bob Amsden, a retiree who had been staring at a 55% cut, and who emerged as a national leader in the grassroots effort to thwart the proposed cuts. "We took down big money, and we won the first battle. We know the war's going to go on."

That is clear. Left unresolved, and still looming, is the financially precarious position of the Central States Pension Fund, which is unsustainable in its current form and is headed for insolvency.

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If the Central States' plan had moved smoothly, the cuts would have hit as early as July. Some pension checks were set to drop to about $1,200 a month from more than $2,700 now.

All the same, the rejection of Central States' request to make cuts — reductions that would be unprecedented in a plan that still has money — buys time for the retirees and their allies. That offers them at least some hope of rallying support in Congress for a political fix to Central States' dire problems.

And Friday's victory was sweeter for having come against long odds, retirees said.

"We never thought we could do this," Amsden said.

Nearly 400,000 people either draw pensions from Central States or are eligible for them upon retirement. Of those, about 270,000 faced benefit cuts under the Central States proposal.

However, the latter number includes about 47,000 United Parcel Service workers and retirees whose cuts would come from UPS.

Thousands of retirees, perhaps tens of thousands, would have seen their pensions cut in half, and it appears that the average reduction would have topped 30%. Some were looking at a 70% cut.

The Central States pension-cutting proposal fell short of the requirements of federal law on three counts, special master Kenneth Feinberg said Friday during a call to reporters.

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Feinberg is a prominent Washington lawyer who has overseen complex issues such as the Troubled Asset Relief Program, payments to families of the victims of the Sept. 11 terrorist attacks and distribution of payments to victims of the BP oil spill.

Assigned to weigh the Central States proposal, he found that it would not protect the troubled pension plan from insolvency, that it did not spread the cuts fairly among plan participants, and that it couldn't be understood without difficulty by the average recipient as required.

"It is technical. It is overly complex. It is not readily understandable," Feinberg said.

Another issue: the proposal's assumption of a 7.5% return on the pension fund's investments, which Feinberg called "too optimistic and unreasonable," particularly in the near term.

Teamsters retirees across the country — including those who worked for big outfits such as UPS as well as trucking firms that went out of business — expressed great frustration at the process and the drastic cuts. More than 2,500 comments were made to Treasury as part of the application review.

"If we didn't fight, they would've wrung us out and hung us out to dry," said Tom Krekeler of the Cincinnati area, who was hospitalized this week for surgery to remove prostate cancer. "We just won a battle."

The financial troubles at Central States run deep. For every $3.46 it pays in benefits, it collects just $1 from contributing employers, plan officials said.

As of January 2015, the plan's $35 billion in liabilities was more than double the value of its assets, and the gap had grown by $3.5 billion since 2011.

Those woes helped drive a fundamental change in federal rules governing pensions.

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Until then, as long as a plan had money, it had to pay the pension promised. But in December 2014, with the holidays approaching and a possible government shutdown looming, Congress passed a massive spending bill that, among other things, rewrote the rulebook on pensions covering millions of Americans.

"They are ready to sweep us under the carpet like scrap," said Richard Jennings, 60, a Teamsters retiree who lives in Grand Rapids, Mich.

The changes, which critics say were enacted in haste and with many in Congress not fully understanding them, apply to "multi-employer" pension plans. Those, unlike the more common single-employer plans, cover more than one company's workers under contracts with unions.

Prevalent in trucking and some other industries, such plans provide pensions for about 10 million people across the USA. But Central States, based in suburban Chicago, is one of the biggest multi-employer plans.

The thinking behind the Multiemployer Pension Reform Act of 2014 was that if plans such as Central States can't cut payments, they'll go broke, creating an even worse situation.

About 1.5 million people are in severely underfunded multi-employer plans. The federal Pension Benefit Guaranty Corp. insures those benefits, but only up to $12,870 a year.

Meanwhile, single-employer plans are insured up to $60,136 a year.

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And the Pension Benefit Guaranty Corp. multi-employer program itself has a huge funding deficit. Before the 2014 legislation was passed, the agency said the program faced a 90% chance of going broke by 2025.

Many angry Teamsters have been blaming the investment practices of Central States, and its executives and trustees.

Among the sore points: Thomas Nyhan, executive director of the pension fund and its companion health and welfare plan, got $32,000 more in compensation in 2014 — on the eve of the proposal to cut retirees' pensions.

In an email, Nyhan said much of the increase was reimbursement for out-of-pocket expenses that was considered compensation for reporting purposes. He noted that two-thirds of his pay comes from the health plan, which is legally distinct from the pension fund and has different participants.

Nyhan's employment agreement provides for a 3% cost-of-living increase, he said. And he raised concerns about Feinberg's decision.

"Because the Pension Benefit Guaranty Corp. ... is also projected to run out of money, today’s decision means that, absent legislative action or an approved rescue plan, Central States participants could see their pension benefits reduced to virtually nothing," he said.

In any event, the most important reason for the pension fund's precarious situation is the federal government's deregulation of trucking, scholars who study the industry have said.

Until 1979, the government tightly controlled interstate trucking, restricting entry into the field and specifying where firms could operate. Deregulation opened the industry to thousands of new, non-union carriers who drove down shipping rates and pushed many of the legacy trucking firms out of business.

As their numbers dwindled, so did those of the workers and companies contributing to Central States.

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In 1980, with deregulation just beginning, Central States had four working Teamsters for every retiree. Today, the plan pays benefits to five retirees for every worker.

Rita Lewis of West Chester Township, Ohio, is prepared to continue to fight further cuts, which some say are inevitable.

"We still have to keep up the pressure," she said. "This is wake-up call to the pessimists and the people who think they can get away with stealing our money. We're going to keep fighting."

Contributing: Susan Tompor, Detroit Free Press; and Fatima Hussein, The Cincinnati Enquirer. Follow Rick Romell on Twitter: @RickRomell