UNION PENSIONS IN THE RED
July 28, 2009
We've all read about underfunded corporate pensions, but here's an unreported story: Union pensions are even more in the red, and it is one reason union chiefs are so eager to rig organizing rules to gain more dues-paying members, says the U.S. Chamber of Commerce.
In April, the Service Employees International Union (SEIU) National Industry Pension Fund -- which covers some 101,000 rank-and-file members -- announced that its pension has been put into what the feds call "status," or "red zone." In other words, it lacks the cash to pay promised benefits and may have to cut them, says the Chamber:
- As of 2007, the last year for which it reported results to the government, the fund had 74.4 percent of the assets needed to pay its benefits.
- Thirteen of the bigger plans operated for the Teamsters have, together, a mere 59.3 percent of reserves necessary to cover obligations.
- Or consider that 26 pension funds at the food workers union, the UFCW, are at 58.7 percent.
- Seven locals at the United Brotherhood of Carpenters fare better at 67 percent.
- As a rule of thumb the government considers a fund to be "endangered" at below 80 percent, and in "critical" status at below 65 percent, and requires them to come up with a plan to get off probation within a decade.
Poor management probably deserves a lot of the blame for the union decline, but the exact causes are a mystery. One clear cause is Big Labor's focus on using pension funds as weapons, not investment tools. An even bigger mystery is that the unions do a far better job with funds created for their officers and employees than for mere workers:
- The SEIU Affiliates, Officers and Employees Pension Plan -- which covers the staff and bosses at its locals -- was funded as of 2007 at 102.2 percent.
- The plan for the folks at SEIU international headquarters was funded at 84.8 percent.
Most current union members would be surprised to learn how their leaders are handling their hard-earned retirement money, says the Chamber. The 93 percent of the private workforce that doesn't belong to a union, but that might have little choice if Big Labor's agenda becomes law, would be even more interested.
Source: Brad Peck, "Union Pensions in the Red," ChamberPost, U.S. Chamber of Commerce, July 27, 2009; and Editorial, "Union Pensions in the Red," Wall Street Journal, July 26, 2009.
For Wall Street Journal text:
Browse more articles on Economic Issues