By James Spinosa
ILWU International President
Recently the news has been filled with stories about union-negotiated pensions going bust. People have labored for a company for their whole working career believing their loyalty and commitment would be rewarded with a comfortable retirement and spousal support. And then the company pulls some legal scam in bankruptcy court and all those dreams are shattered. It’s incomprehensible and reprehensible.
In this atmosphere I wasn’t surprised that several ILWU members recently approached me asking about the security of our pensions. I was glad they were concerned and I figured they weren’t the only ones wanting an update. I want to give you assurances, but I also want to issue warnings, tell you what your union is doing to protect your pension and alert you to what you can do.
The ILWU negotiates many contracts throughout the industries we represent with various pension plans and different degrees of risk. The main kind of pension facing problems in corporate bankruptcies and contract negotiations these days are "defined benefit pensions." In this kind of pension—like the ILWU longshore pension plan and the Northern California Master Freight contract that covers some ILWU Local 6 and 17 warehouse workers—the union and the employer negotiate a specific amount of money a retiree gets each month, usually based on the number of years the worker has been employed by the company. The employer is required by law to set aside a certain amount of money each year, based on what the eventual benefit will be, and put it into an investment fund so it will be there when needed. The employer is also legally required to contribute a certain amount of money each year to the Pension Benefit Guaranty Corporation (PBGC), the government agency charged with insuring workers’ pensions, as an insurance policy payment in case problems arise in the future with the company’s financing.
There are two kinds of defined benefit pensions—multi-employer plans, where, like in our longshore plan and the Northern California Master Freight contract, different companies band together and create one plan for all their workers, and single employer plans, where one company assumes all the payments and risks.
I want to assure all ILWU members covered by the longshore plan that their pension is very solid. This is true for several reasons. First, as a multi-employer plan, should any of the almost 80 companies in the Pacific Maritime Association employer group go bankrupt, the remaining ones are bound by the contract to cover the financial obligations. And as long as world trade continues, our industry and employers will likely remain profitable. The ILWU Coast Committee also acts as equal trustees with the PMA, always keeping a close watch on the fund and its investments.
Also, in 2002 the longshore negotiators agreed to a funding schedule that was approved by the PBGC—which, as the plan’s insurer, has an interest in making sure is solvent.
Other non-longshore ILWU members who have single employer pension plans could face more risks. If their employer should go broke, either through changes in their industry or even simple bad management, they could face employer attempts to bail out of their pension payment obligations. And if they then need to turn to the PBGC for help and insuring their monthly retirement checks, they may find trouble. The PBGC’s single employer insurance fund is itself in debt, having recently been stuck picking up the bill on numerous large pension debts left behind by bankrupt steel and airline companies, among others. In many cases the PBGC insurance limits have resulted in workers receiving only a portion of what they have been promised.
Currently, Republicans have legislation in Congress which, in typical Orwellian fashion they call the "Pension Protection Act of 2005," but actually could put pensions further at risk. Provisions in the multi-employer section of the legislation could affect the carefully negotiated and PBGC-approved longshore funding requirement and affect future bargaining.
The section affecting single employer plans has many defects. It has a provision that would prohibit paying any future plant closing benefits, including those already negotiated, no matter how well funded the pension plan is. It would also prohibit benefit improvements, even simple updates just to keep up with wage growth, if the plan's funding falls below 80 percent. If the funding falls below 60 percent all benefit accruals cease and cannot be restarted until the funding level is back up to 80 percent. These provisions put workers at risk of having their employer manipulate the plan and intentionally trigger a benefit accrual freeze or a ban on benefit increases by simply failing to fund it adequately. These and many other provisions in the bill make workers’ retirement less secure.
All 27 Republican members of the House of Representatives Edu-cation and Workforce Committee voted for the bill, while all 22 Democrats voted "present" (abstention) in protest of the lack of information on how it would affect employer contributions to pension plans and how it would deal with the PBGC’s shortfall. Now the Republican plan is to send it to the House Ways and Means Committee to fold it into one bill with Bush’s Social Security privatization proposal and try to sell it as comprehensive retirement reform. They figure they may be able to "peel off" some Democrats reluctant to vote down the pension protection and get them to pass some form of Social Security privatization. It’s a cynical and despicable move, but probably the only chance the Republicans have to pass a program nearly 70 percent of the American people oppose—even after months of it being the top sales pitch of Bush’s domestic agenda.
As these legal maneuvers show, nothing is inviolable—not the best written contract language or the most righteous laws. We must always remain alert and vigilant. Right now we need all our members to write their Congressional representatives opposing both the Pension Protection Act and the Republican attempt to link Social Security privatization to it.
In closing, let me reiterate that the ILWU Longshore pension is secure and stable. The fact that we have so many large, multi-national companies contributing to the fund as employers and covering each other, and that your officers as Trustees of the fund review it in depth monthly, makes it probably the most secure pension in the country.
