More than 200,000 retired Teamsters are now facing serious problems with their pensions. Central States Fund, a Teamsters pension plan founded by former union head Jimmy Hoffa, is only 60 percent funded and is now in “critical” status, as the WSJ reports. Despite efforts to make up the difference with big bets in the stock market, the fund is now so deep in the hole that it appears unlikely to earn enough returns to pull itself out:
“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. […]The pension plan pays about $2.8 billion in benefits a year but takes in only about $700 million in employer contributions. “You have to make up the rest with investment returns,” said Mr. Nyhan, which he thinks is unlikely over the long term.
These problems will sound familiar to anyone who has been following the travails of public pension plans in states like Illinois and California. Making matters worse, a number of companies are pulling their employees out of this plan and into other, better-financed Teamsters-run plans. This is good for the workers who manage to jump off this sinking ship, but it will make it even more difficult for the fund to remain solvent in the future. If that happens, retired union workers could take a Cyprus-like haircut as their benefits are slashed to the bone.Workers in defined-benefit funds around the country (including many state-run plans) should take note. If the Central States Fund pensioners had been in defined-contribution plans, they would now be much better off.