$1400 and a $1.9 trillion Covid-19 response bill is big news at this time. With some glitches, electronic transfers and checks are on the way. Yet another big story included in the response bill centers around $86 billion set aside to stabilize distressed multi-employer pension funds for the next three decades.
Employee pension funds are built on employee contributions over a period of time, some stretching into decades. Those working pay in to cover their pension at retirement but in fact help pay for fellow employees that have retired. A fund remains solvent if there is a strong workforce paying in, making steady contributions.
There are 1.5 million active and retired union workers affected nationwide, including about 23,000 Minnesota retirees who paid into the Central States Pension Fund. Trouble in funding these retirement benefits did not come over night.
In the financial collapse of 2008, too much of the reserve pension fund money had been invested in high yield Wall Street schemes that lost value quickly. Healthy reserve fund balances disappeared even though those workers contributing continued to apply their share into the same pension plans. At the same time there continued a loss of union jobs nationally which also put pressure on the pension funds.
Many of the pension plans started paying out more to retirees than workers were sending in. The trustees or supervising staff of these pensions warned that without Federal action the money would run out in 2025. Former Minnesota Congressman John Kline was successful in legislation that did not give more Federal aid but did give the trustees the right to cut retiree benefits.
Some retirees faced pension cuts in the range of 47%. Senator Tina Smith met with labor leaders specializing in the pension issues in 2018, realizing how many workers were affected by this issue. She remembered hearing from one woman in Duluth who said, “I saved and I did everything right . . . losing my pension looks like I will be living under a bridge.”
US House of Representatives input on this issue for inclusion in the stimulus package came from Reps. Bobby Scott (D-VA) and Ritchie Neal (D-MA) and Senator Tina Smith kept up the pressure in Senate deliberations. They were successful when the whole act was signed by the President.
Local Cloquet labor activist and long time member of the Teamsters Union Sherman Liimatainen co-chaired the American Pension Justice group that lobbied for several years for Federal action. Liimatainen commented, “Of course investing in the pension funds is economic stimulus. Renewed pension funding will stimulate years of robust spending for our local and national economies.”
Not all unions have had members working during this Covid-19 period. The Musicians Union, for example, has seen Broadway theaters shut down, regional theater and concerts cease, and musicians struggling in local venues. Barbra Eliason Dunkel, native of Kettle River and an attorney in New York now living in Minneapolis, was married to a symphony conductor and who was a member of the Musicians Union.
Eliason Dunkel observed, “Members of the union that have pensions have been told their income will face cuts from that source, some losing half of their monthly check. This pandemic has crippled the music industry and has dried up pension funding.”
When will the first money go out to pension funds? Liimatainen cautioned patience. Even though the funding is available, this new Federal money will take a period of time for rule making and major discussions on how the program will be implemented. It is estimated that some affected pension plans would not be allowed to submit applications for financial assistance until March 11, 2023.