Roberta Dell has worked for 46 years making lollipops, and she loves her job. But she worries that retirement may not be as sweet as the Dum Dum lollipops she bags.
Dell works for the Spangler Candy Company in Bryan, Ohio - a family-owned business that employs 550 workers, and makes the venerable candy. Spangler was organized by the International Brotherhood of Teamsters labor union in 1950, and it became part of the Central States multiemployer pension plan in 1972.
But the outlook for her pension is highly uncertain. The Central States Pension Fund has said it is on a path to insolvency within 10 years. The fund, which covers more than 400,000 retirees and active workers, has become a symbol for all that has gone wrong with multiemployer pension plans - traditional defined-benefit plans jointly funded by groups of employers. These are typically small companies in industries like construction, trucking, mining and food retailing that would not typically sponsor a pension plan of their own.
“I always thought the pensions would be there for me when it came time to retire,” Dell said in an interview. “I thought of it as my savings plan.”
Dell, who is the Teamster chief steward at Spangler, testified earlier this month at a hearing of the special U.S. congressional committee in Columbus, Ohio, that examined possible solutions for workers like her.
More than 10 million U.S. workers and retirees are covered by 1,400 multiemployer pension plans. But roughly 200 plans are severely underfunded - the result of stock market crashes in 2001 and 2008-2009, and industrial decline that led to consolidation and declining employment.
The problems threaten not only the pensions of individual workers, but also could cause the multiemployer insurance program of the Pension Benefit Guaranty Corporation to become insolvent within a decade. The PBGC is the U.S. government agency that acts as a backstop to troubled pension plans by insuring the pensions of millions of American workers.
Almost four years ago, U.S. Congress passed legislation that aimed to head off an implosion of multiemployer plans. The Kline-Miller Multiemployer Pension Reform Act of 2014 (MPRA) allows troubled plans to seek federal government permission to make deep cuts to the future pensions of workers - and even for current retirees - if they can show that cuts would prolong the life of the plan.
The size of the cuts depends on what a plan proposes, and the tenure of the worker - but they can be severe. For example, a worker with 25 years of service and a $36,000 benefit could see her pension cut as low as $11,800 according to a cutback calculator created by the Pension Rights Center (bit.ly/1vZuiPE)
The MPRA pension reforms have met with stiff political resistance from workers asked to take steep benefit cuts, and in some cases from regulators. In 2016, the U.S. Treasury - which plays the key role under MPRA of reviewing applications - rejected a proposal by Central States to cut benefits, saying the plan sponsors had not met certain MPRA hurdles. Treasury said the plan failed to demonstrate that the cuts were properly estimated to avoid plan insolvency, and that it did not distribute reductions equitably or explain the actions to plan participants in an understandable way.
Congress this year empaneled a special committee to seek new solutions. The joint special committee was instructed to write a report and deliver proposed legislative language by Nov. 30. This month, the committee has been holding hearings to obtain feedback from stakeholders like Dell, as well as pension experts.
A LID ON GROWTH
Dell is 65 and widowed - her husband also worked at Spangler before his death from cancer in 2015. She expects to work a few more years before retiring, and expects her pension to pay about $1,200 a month. Social Security will provide another $1,400. But as things stand now, pension benefit cuts loom in 2025.
At the Columbus hearing, Dell spoke alongside Spangler’s president, Bill Martin, who urged the committee to back one reform idea under consideration - a plan to offer low-cost loans to aid troubled pension plans like Central States.
In an interview, Martin pointed to another side-effect of the multiemployer pension mess beyond the threat it poses to workers’ retirement security. The pension woes have put the lid on growth for Spangler, dampening job-creation in Bryan, a community of about 8,000. The cost of pension contributions has jumped 85 percent over the past decade, with more than half of the higher costs going to cover so-called orphans - retirees from companies that have exited the plans.
Employers also are assessed penalties - which are levied using a per-employee formula - in the event they withdraw from the plan. Martin said he would like to be expanding the business more aggressively, but cannot add to his current base of 550 workers due to the withdrawal fees. “As employers in Central States, we’re stuck,” he said.
“We can’t grow because every employee adds over $200,000 to withdrawal liabilities. If we hired 100, that would add $20 million. What company in its right mind would do that?”
Under the loan plan, the U.S. Treasury Department would sell bonds to large investors, lending proceeds to troubled pension plans to help stabilize them. The other approach that has been floated is to shift some of the liability for orphaned participants to the Pension Benefit Guaranty Corporation, in essence a partition. That would put plans in better position to fund their ongoing costs with contributions.
Partition is a better long-range solution, according to Alicia Munnell, director of the Center for Retirement Research at Boston College. “The entire liability to the PBGC would be between $35 billion and $66 billion,” she said. “That’s a situation where the government is ideally suited to solve the problem - once you remove orphan liabilities, the problem for plans becomes more manageable.”
But she thinks loans will be more palatable politically than direct assumption of cost by the government.
Meanwhile, Dell is optimistic that something will be worked out. “I truly believe in all these folks,” she said. “I’m a very optimistic person.”
(The opinions expressed here are those of the author, a columnist for Reuters)