The approximately 270,000 members of the Teamsters CentralStates pension plan facing cuts to promisedretirement benefits “put too much faith in the people that we’resupposed to be looking out for us,” according to one witness’stestimony before a Senate Finance Committee hearing this week.

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Rita Lewis, the widow of Central States member Butch Lewis, adecorated Vietnam veteran and 40-year teamsters member thatrecently died from a massive stroke, told lawmakers that memberswere given no indication their pensions were at risk prior to thepassing of the Multiemployer Pension Reform Act of 2014.

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Read: California pension fix leads torisk

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That controversial law gave trustees of the most criticallyunderfunded multiemployer plans the power to cut promised benefitsin order to remain solvent.

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The Central States plan is one of three multiemployer planscurrently wending through a process administered by the TreasuryDepartment that authorizes pension cuts. Central States isproposing an average pension cut of 23 percent for qualifiedworkers.

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But Mrs. Lewis testified that many members are facing cuts up to70 percent.

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MPRA was negotiated behind close doors, said Lewis. “This wasdumped on us overnight,” she said. “Some say it is better to get ahair cut today than a beheading tomorrow, but this (law) is abeheading for most of us.”

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Sen. Orrin Hatch, R-Utah and Chair of the Senate FinanceCommittee, called the prospect of pension claw backs, which couldpotentially affect more than 1 million union members nationwide, “asobering moment for our country.”

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The issue is perhaps most sobering in coal country.

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Cecil Roberts, president of the United Mine Workers of America,detailed what ravages the depression in the coal industry has hadon not just the pension prospects of the 90,000 members facingcuts, but also the communities in which they live and work.

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“This is a desperate time for coal miners,” testified Roberts,who noted that over the decades tens of thousands of union membershave died in mines or from conditions resulting from theirwork.

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The United Mine Workers 1974 pension plan has more than 115,000total participants, with 9.7 inactive participants for every oneactive member.

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Last October, the Department of Labor informed plan trustees andparticipants that the fund was in “critical and declining” status,making it eligible to apply to make pension cuts to the TreasuryDepartment. DOL said the plan is projected to go insolvent in 2025,but did not say what the plan’s funding status is.

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If Congress does not act, 21,000 coal miners will lose theirhealth care by the end of this year, and all will eventually loseretirement benefits, said Roberts, who testified that the plan isexpected to be insolvent by as early as 2020.

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Should the plan to go insolvent, taxpayers will be on the hookfor $4.6 billion, said Roberts.

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Moreover, more than $1 billion in commerce is created annuallyfrom miners’ retiree benefits. Stifling that source of revenuewould crush communities throughout Appalachia that are alreadystruggling to survive, he said.

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Josh Gotbaum, former director of the Pension Benefit GuarantyCorp. and a guest scholar at the Brookings Institute, toldlawmakers that repealing MPRA, which several proposed pieces oflegislation would do, would “guarantee the collapse of themultiemployer system.”

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He defended MPRA as the best of bad options, calling theproposed 23 percent cuts by the Central States plan “a tragedy,”but better than the 50 percent cuts that would be suffered if PBGCwere to take over the plan.

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Worse yet would be if PBGC’s multiemployer insurance programwere to go insolvent. Central States retirees would see theirpensions cut up to 90 percent under that scenario, said Gotbaum.The agency says the program has a 50percent chance of going insolvent by 2025.

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“MPRA is the best alternative, miserable though it is, becauseit gives plans a chance to keep benefits about PBGC levels,” saidGotbaum.

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He also recommended sponsors in multiemployer plans pay more inpremiums to PBGC.

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“No one likes to pay higher premiums, but without them PBGCwon’t be able to do its job,” he said.

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Gotbaum testified that multiemployer premiums are up to 90percent lower than what sponsors and participants pay outside themultiemployer premium.

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But Mr. Roberts said sponsors in the miners’ multiemployer planwould fold if they had to pay higher premiums.

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He told lawmakers that premiums have already increased more than100 percent since 2007. Three large bankruptcies have caused a 40percent reduction in contributions, said Roberts.

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Roberts said the best option is to pass the bipartisan MinersProtection Act, which would cost taxpayers $2.2 billion to protectcoal miners’ pensions.

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That would be less than the expense to taxpayers if allmultiemployer plans projected to go insolvent seek pension cutsthrough MPRA, said Roberts.

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.