Defined-Benefits Squeeze

Workers in defined-benefit pension plans used to be one-third of the private sector. Now they are a sixth—and those 20 million workers’ security is under serious threat.

Consider the Central States Pension Fund. Once an anchor of retirement security for Teamsters in 29 states from Minnesota to Florida, the fund lost nearly a third of its assets during last year’s market meltdown. This only made an uncomfortable balancing act more precarious.

For years the Teamsters have failed to organize in their core industries, such as freight, leaving a shrinking pool of active workers contributing to the pension fund—and a lot more retirees pulling from it.

The Teamsters exacerbated the problem in 2007 when they allowed UPS to exit the fund, removing 44,000 workers. Now, if another major Teamster employer goes out of business, the Central States fund could be forced to cut retiree benefits for everyone.

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The threat is real. YRC, one of only two employers left in the once-mighty National Master Freight Agreement, recently suspended pension contributions—worth about $40 million a month. Workers approved the concession by 58 percent.

But pension funds aren’t struggling only in industries where union membership is waning and the recession has hit hardest.

This summer the giant health care union 1199 SEIU, United Healthcare Workers-East, opened its contract with an employer group of 108 hospitals and nursing homes two years early. The union made almost a billion dollars in wage concessions to shore up its pension fund, and created a second tier inside the pension plan for new hires.

The 1199 fund had lost almost a third of its value in the Wall Street meltdown last year, leaving it in the “red zone” according to new federal pension rules.