Ironworker union’s bid to cut pension benefits is rejected
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Specifically, regulators took issue with the union’s use of an outdated mortality table based on population data from the 1960s, while mortality rates have declined significantly.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.