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Unions vs. Private Pension Plans: How Secure Are Union Members’ Retirements?

Unions vs. Private Pension Plans: How Secure Are Union Members’ Retirements?. Diana Furchtgott -Roth Senior Fellow, Hudson Institute July 16, 2008. The Problem. Unions’ rank-and-file pension plans are not as well-funded as private sector plans

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Unions vs. Private Pension Plans: How Secure Are Union Members’ Retirements?

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  1. Unions vs. Private Pension Plans:How Secure Are Union Members’ Retirements? Diana Furchtgott-Roth Senior Fellow, Hudson Institute July 16, 2008

  2. The Problem • Unions’ rank-and-file pension plans are not as well-funded as private sector plans • Union staff and officer plans are well- funded relative to rank-and-file plans • Unions play politics with pension funds

  3. Funding of Union Pension Plans Compared to Private Sector Plans • Thirty-seven percent of large non-union pension plans are fully funded, compared with 19% of union plans

  4. Two percent of large, non-union defined benefit plans are in critical condition, compared with 11% of union plans.

  5. Thirty-three percent of non-union plans in critical condition paid at least their minimum annual charges in 2005, compared with only 8% of union plans.

  6. In 2005, 17% of non-union plans made additional contributions due to funding deficiency, compared with 30% of collectively-bargained plans.

  7. The average annual payment to correct a funding deficiency is higher for collectively-bargained plans ($2.9 million) than for non-union plans ($2.3 million).

  8. Why Are Pension Plans Poorly- Funded? Poorly-funded plans • Rely on past assets, or credits, to reduce payments; • Fall behind on payments; • Pay penalties and extra fees; • Are unable to adjust contributions every year • Don’t put enough into pension funds.

  9. Union Officer and Staff Plans Do Better than Rank-and-File Plans • The 21 largest pension plans for rank-and file union members had 67.7% of funds needed to meet obligations. • The 23 officer and staff funds for the same unions were 88% funded.  • Excluding the 7 staff and officer funds strictly for office employees, the remaining 16 were 98% funded.

  10. The SEIU Pension Plan Ratios, 2006 • SEIU National Pension Plan (rank-and-file): 100,787 Workers, 75% Funded • SEIU Employee Plan: 1,305 Participants, 91% Funded • SEIU Officers and Employees Plan: 6,595 Participants: 103% Funded

  11. Thirteen SEIU local pension plans less than 80% funded  • Massachusetts Service Employees Pension Plan fell from 110% to 70% funded in 10 years

  12. The Sheet Metal Workers International Association • In 2006, TheSheet Metal Workers National Pension Fund plan covered 136,000 people. • It had guaranteed $7.45 billion in benefits, but only had assets of $3.1 billion ($22,879 per person)—a deficit of $4.35 billion • Benefits were increased after the creation of the fund

  13. The SMWIA National Pension fund was 43% funded in 2006 ($22,879 per person) • The SMWIA Staff Pension Plan was 81% funded ($230,848 per person). • As rank-and-file members had their COLA benefits cut, the union staff's COLA fund more than tripled • Union contributions entirely paid for the increase, with nothing from staff salary • President Michael Sullivan received $133,198 in benefit plan contributions in 2006.

  14. Playing Politics with Worker’s Pension Funds • Definition of “fiduciary duty” changed in 1990s when unions were allowed to consider effect of investments on communities and environment. • Unions opposed Social Security personal accounts  • Unions threatened pension fund managers over Social Security accounts.

  15. Union Pension Funds Used to Influence Corporate Decisions Resolutions to split CEO and board chairman • Teamsters at Merrill Lynch, Coca Cola • Bricklayers at Walmart • Electrical Workers at Kohl’s • Plumbers at Allergan

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