WASHINGTON, D.C. — The Treasury Department late Friday said an Iron Workers union retirement fund in Cleveland can cut retiree pensions deeply for the sake of keeping the fund solvent. This gives the green light for the Iron Workers Local 17 fund to reduce pensions — for men and women who erected the iron and steel that frames Cleveland’s modern skyline — by nearly 50 percent for some.
“I’m disheartened,” said Pat Overstreet, the wife of Walter Oversteet, an iron worker who framed the Standard Oil of Ohio headquarters, later called BP Tower, in the early 1980s. He also worked on what is now Progressive Field and on a control tower at Cleveland Hopkins Airport, making about $50,000 in good years.
“I don’t know what to say,” Pat, who has tried to organize opposition to the cuts, said when told the news. “It’s so unfair.”
This is the first federal approval since Congress passed a controversial law in 2014 that let multi-employer pension plans reduce retirees’ pension incomes. Treasury in May turned down a proposal from a better-known and bigger pension plan, the Teamsters’ Central States Fund, saying it was not persuaded that deep cuts would save the struggling fund.
But despite Treasury’s approval in this new case, it will be up to Local 17 members to decide whether to accept the cuts proposed by their pension fund’s trustees, a group composed of union members and employer representatives. Treasury’s approval was merely a first but crucial step, with Treasury concluding that the proposal met federal guidelines.
The chief considerations for Treasury:
- Without the cuts, the entire pension fund will run out of money within a decade, its projections show. Iron Workers Local 17 earlier this year reported $224 million in long-term liabilities and only $90 million in assets.
- The pension fund’s calculations were realistic on what it can accomplish with the cuts, as well as its projections for future income from investments. This is largely what makes Local 17’s request for cuts different from Central States’.
The coming vote by mail ballot in January will likely pit retirees who want to keep their full pensions against current workers willing to accept smaller pensions when they retire. They would rather get something than risk getting nothing if the fund goes broke.
The vote very well could stave off the cuts, for now, at least, because of the local union’s roughly 2,000 members, fewer than 700 are active, according to Treasury officials. Some of the remainder have gone on to other fields, but if they vote “no” along with retirees, they could save the pensions.
But reaching and persuading them all, including some who are elderly, might be tough, Pat Overstreet said. And anyone who fails to turn in a ballot during the 21-day voting period will be counted as voting to approve the cuts, which would kick in Feb. 1.
Pension trustees said in their filings with Treasury that if the cuts aren’t made, the fund will ultimately go broke. Teresa Pofok, the pension fund’s legal counsel, told cleveland.com in August that the request for cuts derived from only one motivation: “survival” for the fund.
Unlike most pension plans, multi-employer plans — generally serving union workers who go from job to job doing similar work but on different projects for different employers — cannot simply tap the federal Pension Benefit Guarantee Corp. if they go broke. Their combined liabilities are too big, risking bankruptcy of the entire federal fund. Many of the multi-employer union funds were hit by a double whammy of declining membership — so fewer new dollars were coming in — and investment losses during the last recession.
So Congress in late 2014 quietly approved a new law, folded into a year-end government-funding bill, laying out a process to save struggling multi-employer funds. The process, coordinated by Treasury, broke tradition by allowing pension cuts to current retirees — but only if the fund trustees could persuade Treasury that those cuts, combined with cuts to future retirees, would keep a multi-employer fund solvent.
Some Congress members are displeased with this system, saying it violates a social pact that retirees counted on. Iron Workers retirees feel that way in particular, saying they put in hard work, in dangerous conditions and at great heights.
Some say they were encouraged to retire early and only agreed to it because they thought their pensions would carry them into old age.
Local 17 pension officials say they tried to keep that pact and sought the cuts solely to make sure there is money for everyone rather than bankruptcy.
“The good news here is the final decision rests with the workers,” said U.S. Sen. Sherrod Brown, an Ohio Democrat critical of the system.
“But we see too many retirees facing this uncertainty all across Ohio, and the solution can’t be to cut benefits that people worked their whole lives for each time a plan is in jeopardy. I will work with my colleagues in the new Congress to find a bipartisan solution that protects what workers have earned.”