By Lindsay McLaughlin

ILWU Legislative Director

Sometimes the interests of ILWU members and their employers coincide and it makes a world of sense to work together. We seek to work with employers on a national sugar policy and against trade deals that give ILWU sugar jobs away. We seek to work with our employers on a national health care program that preserves health benefits. On the issue of pension legislation, the ILWU and the longshore employer group, the Pacific Maritime Association, agreed to work together to protect the pension agreement reached in 2002 embodied in the Coastwise contract. The agreement to work together in Congress was reached at the highest level in a discussion between ILWU International President James Spinosa and PMA head James McKenna.

In 2002, longshore negotiators and the PMA agreed to a pension funding schedule that was approved by the Pension Benefit Guaranty Corporation (PBGC). The PBGC is a federal corporation created by the Employee Retirement Income Security Act of 1974 and charged with insuring workers’ pensions. It currently protects the pensions of 44.4 million American workers and retirees in 31,200 private single-employer and multi-employer defined benefit pension plans.

The PBGC receives no funds from general tax revenues. Its operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plans.

In order to receive approval by the PBGC, the ILWU-PMA plan had to show that the covered work in the agreement was stable, demonstrate that its funding schedule constitutes an effective and sound method for funding the benefits provided under the plan, and establish that if one or more of the employers withdraw from the plan, the funding schedule poses no risk to the PBGC. The 2002 contract’s pension plan passed all those tests.

However, legislation being considered by the House and Senate would alter this funding schedule. The legislation would mandate certain funding levels Congress deems safe for multi-employer plans similar to the ILWU-PMA plan. The 2002 agreement, with its increases in benefits, was designed to dip below Congress’ newly defined "safe" level, and most likely will next year. But in the future it would rise above it based on the growth and profitability of the industry and the funding requirements built into the plan. But in the meantime the legislation could require changes in the 2002 contract that might complicate the collective bargaining process.

Both the ILWU and the PMA agreed that, given that the pension plan was approved by the PBGC, we must protect the sanctity of the collective bargaining agreement. Both the union and the employer spoke to representatives of Sen. Edward Kennedy (D-MA) and Sen. Mike Enzi (R-WY) who will manage the legislation on the Senate floor. They agreed that we made a strong case for the preservation of our existing ILWU-PMA funding plan, and agreed they will sponsor an amendment on the Senate floor that protects this plan. We hope that the House of Representatives will adopt the same or a similar provision.

We had expected the Senate to take up this issue several weeks ago, but Sen. Mike DeWine (R-OH) and Sen. Barbara Mikulski (D-MD) put a hold on the bill. At issue is a provision in the legislation that would force companies with low credit ratings to beef up their pension contributions. The sponsors of the legislation say it’s a form of assurance that if companies go bankrupt, at least they will have put some money in their pension funds for current and future retirees. The requirement would kick in if a company’s credit rating went to junk bond status for two consecutive years.

But the United Auto Workers and the AFL-CIO say that’s unfair. They say plenty of companies have fluctuating credit ratings, even those that are considered junk bond status, yet they keep their pensions. Secondly, if a company is struggling financially, as indicated by its low credit score, why penalize it by making it pay out cash that it needs for operations? That might push it into bankruptcy and make it eliminate its pension plan or freeze out new employees from participating in the pension.

Although the labor community is pleased that the Senate bill attempts to take action regarding the crisis in the airline pensions, there is great consternation that the single-employer plan provisions make workers pay the price for pension reform. In a letter to the Senate, the AFL-CIO said that unfair provisions include new restrictions on benefit increases and freezes on benefit accruals as well as cuts in federal pension guarantees.

"Not only are arbitrary automatic limitations on pension accruals and benefit increases unfair to workers, they put rank-and-file workers at risk of employer manipulation of their pension plan’s funding," said Bill Samuel, Legislative Director of the AFL-CIO.

The legislation includes provisions sought by airline unions and carriers for leniency regarding their pension plans. Offering greater leniency "would dig that hole deeper and put more workers’ pensions at risk," said Senate Finance Committee Chairman Charles Grassley (R-Iowa), whose committee shares jurisdiction over the legislation. "At some point, Congress has to say enough is enough."

He suggested he would scuttle the bill—along with its airline aid provisions sought by Delta Air Lines and other carriers—rather than agree to more concessions.

Delta badly wants a provision that would allow cash-strapped airlines to spread pension plan payments over many years. The current Senate version has a 14-year provision, while Delta wants 25.

The outcome of the airline aid issue could bear on whether Delta, flying under Chapter 11 bankruptcy protection, tries to terminate its pension plans to save cash. Such a move would shift responsibility for pension payments, up to certain limits, to the PBGC.

A number of labor unions along with their employers are working in a coalition to reform the pension laws. As flawed as the pension legislation may be, unions involved in the National Coordinating Committee for Multiemployer Plans (NCCMP) including the Teamsters, Iron Workers and other Building Trades unions, have advocated legislation that may in fact allow pension plan trustees to make cuts to ancillary benefits that have been promised. Ancillary benefits are not the primary promised benefits to retirees, but they may include disability and certain other subsidized early pensions. In their view, they would rather see some cuts rather than have the plans fail.

We are living in an America where corporations continue to steal—legally—from the American people and from their employees. Last summer the courts agreed to let United Airlines renege on nearly $10 billion of its pension promises to 134,000 of its workers.

But this isn’t just about United. It’s about corporate America breaking its promises to workers. Many companies that are not shirking their pension obligations by filing for bankruptcy are switching their defined benefit pension plans—which promise a fixed monthly check—over to riskier defined contribution plans like the 401(k) that is dependent on the uncertainties of the stock market—or to no plan at all.

ILWU longshore workers have a solid plan, a great union and work in an industry that is growing and profitable. If we are successful in getting the amendment that will exempt the ILWU-PMA plan from these new regulations, it will continue to serve us well through our collective bargaining process.