Iron­worker union’s bid to cut pen­sion ben­e­fits is re­jected

Baltimore Sun - - FROM PAGE ONE - By Sarah Gantz sarah.gantz@balt­sun.com twit­ter.com/sarah­gantz

The U.S. De­part­ment of the Trea­sury has de­nied an ap­pli­ca­tion by Iron­work­ers Lo­cal 16, which rep­re­sents 1,100 Bal­ti­more-area re­tirees and work­ers, to cut pen­sion ben­e­fits to re­tirees to ex­tend the life of the fund, which is in dan­ger of run­ning out of money by 2032.

Un­der a 2014 law, union pen­sions deemed to be in the worst fi­nan­cial con­di­tion may ap­ply for per­mis­sion from the fed­eral gov­ern­ment to cut ben­e­fits to re­tirees — long con­sid­ered taboo for unions — if they can prove the cuts will keep the pen­sion funded for at least 30 years.

But in a de­ci­sion Nov. 3, fed­eral reg­u­la­tors said the union had not proved that its pro­posed cuts would be enough to shore up the fund for decades to come. The union can re­sub­mit its ap­pli­ca­tion if it is able to ad­dress the prob­lems raised by fed­eral reg­u­la­tors.

“Trea­sury’s re­jec­tion is a sub­stan­tial blow to the pen­sion plan’s abil­ity to avoid in­sol­vency,” the union’s board of trustees said in a state­ment.

With about 620 re­tirees draw­ing from the pen­sion and only about 300 work­ers pay­ing into it, the union es­ti­mates that the fund will run out of money in 2032 un­less it takes ac­tion.

The pro­posed cuts would have saved $1.8 mil­lion in ben­e­fit pay­ments in 2017, ac­cord­ing to the union.

“With­out that sav­ings, as­sets will con­tinue to hem­or­rhage,” the board said in its state­ment.

The Trea­sury de­nied the ap­pli­ca­tion af­ter con­clud­ing that the union had un­der­es­ti­mated the amount it would have to pay out, based on re­tiree mor­tal­ity, and fu­ture em- ployer con­tri­bu­tions, based on the num­ber of work­ers and how many hours they work.

Specif­i­cally, reg­u­la­tors took is­sue with the union’s use of an out­dated mor­tal­ity ta­ble based on pop­u­la­tion data from the 1960s, while mor­tal­ity rates have de­clined sig­nif­i­cantly. The union said in its ap­pli­ca­tion that it has seen above-av­er­age mor­tal­ity rates, ac­cord­ing to the Trea­sury de­ci­sion.

Reg­u­la­tors also said the union’s es­ti­mate of how much em­ploy­ers will con­trib­ute to the plan in com­ing years was “sig­nif­i­cantly op­ti­mistic.”

The amount of money em­ploy­ers con­trib­ute has been de­clin­ing for years, but the union pro­jected in its ap­pli­ca­tion that con­tri­bu­tions would re­main steady through 2046.

In its state­ment, the union de­fended its pre­dic­tions about mor­tal­ity and fu­ture plan con­tri­bu­tions.

“If those as­sump­tions are changed to meet Trea­sury’s crit­i­cism, any re­vised res­cue pro­gram would re­sult in even larger cuts in re­tiree ben­e­fits,” the board said.

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