The U.S. Treasury Department has approved a proposal for a 29 percent pension cut for members of a Teamsters unit based in upstate New York.
The cuts, which the leadership of Local 294, also known as the upstate Teamsters, will now go to a vote of the union membership.
Union leaders say the cuts are needed to avoid running out of money in the next decade. With union membership declining and more members retiring, the union plan has been paying out more than it’s been taking in during recent years.
“The fund is eligible to reduce benefits,” reads part of the approval letter from the Treasury Department whose members also consulted with the federal Department of Labor.
About 16,500 retirees, mostly across upstate with a few in New Jersey, would be facing the cuts if approved in a membership vote. Another 18,500 who are currently working would see the cuts when they retired. The cuts could start as soon as this fall.
While it’s uncertain if the vote to cut pensions will pass, turnout in such votes is often low and empty ballot returns are counted as “yes” votes according to the rules for such contests.
Additionally, federal officials could enact the cuts even after a “no” vote if they deemed reductions were necessary to keep the fund alive.
The upstate Teamsters, which includes truck drivers and warehouse workers for companies like UPS and other freight carriers, have “multi-employer” pension plans, where the retirement credits follow workers if they change employers such as trucking firms.
An even larger Teamsters retirement plan, the Central States Pension Fund based largely in the Midwest, has also looked at enacting cuts but they haven’t gotten the federal clearance yet.
Additionally, Teamsters Local 707, based in and around New York City, became insolvent earlier this year.
Without making earlier cuts, members saw their benefits slashed by two-thirds since they were backstopped by a federal guarantee program that pays a bare minimum amount.
While current retirees could see a 29 percent cut, those who are currently working would get 18 percent less upon retirement, according to the latest plan.
Retirees ages 80 or older would see no cuts and those between 75 and 79 would get fewer cuts depending on their age.
Not everyone favors the cuts.
Karen Friedman, policy director at the Washington, D.C.-based Pension Rights Center, believes the federal government should do more to backstop troubled pensions.
They favor cutting some large tax loopholes for the wealthy in order fund an account that could be tapped by various pensions worried about their futures.
She noted that the Treasury Department, after several years of saying “no” to pension cut plans, seems to shifting its stance. They recently approved a similar reduction plan for a Cleveland-based ironworkers union.
“There trend is going to be to approve these applications,” she said.