Federal officials reject proposed Central States pension cuts

A plan to cut retirement pensions for thousands of Teamsters truck drivers has been denied by the U.S. Treasury Department. The plan proposed by officials of the Central States Pension Fund, first announced in September, would have cut pensions b...

A plan to cut retirement pensions for thousands of Teamsters truck drivers has been denied by the U.S. Treasury Department.

The plan proposed by officials of the Central States Pension Fund, first announced in September, would have cut pensions by as much as 70 percent for some current and future retirees covered by the fund.

U.S. Treasury Secretary Jacob Lew informed congressional leaders of the denial on Friday afternoon.

Lew said Central States’ effort to salvage the failing fund by cutting benefits didn’t meet the requirements set out by Congress in a December 2014 law.

“Earlier today, we informed the Central States Pension Fund (Central States) that its application for benefit suspension was denied for failing to satisfy the requirements set out in the Kline-Miller Multiemployer Pension Reform Act of 2014,” Lew wrote to lawmakers.


“Specifically, the application failed to meet the requirement to demonstrate that the proposed benefit reductions are reasonably estimated to allow the plan to avoid insolvency, the requirement that reductions be equitably distributed, and the requirement to provide notices that are understandable to the average plan participant.”

The proposed pension cut would have slashed benefits for about 270,000 of the 440,000 pension plan participants across some 38 states, including thousands in Minnesota and Wisconsin.

Friday’s announcement was great news for retirees such as Sherman Liimatainen of Cloquet, a former Teamsters local union official. Liimatainen has been working for months to stop the cuts, driving hundreds of miles across the Midwest to rally opposition.    

“It’s wonderful. It’s a joyful moment to succeed on behalf of the people I represented for 26 years. I’m overjoyed for the people,” Liimatainen said. “But there’s more work to come now. We still have to get these trustees off the board at Central States and get people in there who know how to run a pension fund. We have to get this fund going again so the (trucking company) employers and employees have the confidence to stay in.”

U.S. Rep. Rick Nolan, D-Crosby, said he was “overjoyed” to get the news Friday, calling the proposed cuts unfair and unjust.

“I worked to get this outcome for those hard-working people to save their pensions,” Nolan said.

But Treasury Department officials warned Friday that the pension fund remains in a precarious position and that something will need to be done to keep the fund from going broke, leaving thousands of retirees with nothing at some point in the future.

“The Central States plan, like a number of other multiemployer plans, remains severely underfunded and is projected to become insolvent within the next 10 years,” Lew said in his letter.


Moreover, by the time Central States might become insolvent, the federal backstop for pensions, the Pension Benefit Guaranty Corporation fund, “may itself already be insolvent,” Lew noted.

Nolan said there is about a 10-year window to fix the pension situation.

“There are ways to beef up what we have in the Pension Guaranty Corporation. There are some taxes that are suitable that we have to consider to keep money in there,” Nolan said. “The workers paid in every nickel and every dime they were contracted for. The workers had their commitments taken out of their paychecks. But through bankruptcies and reorganizations and buyouts and sales, a lot of companies didn’t put their fair share in.”

“There has to be some other solution to this than cutting someone’s retirement check,” Nolan added.

“This is the right decision for Minnesota retirees,” said U.S. Sen. Al Franken, D-Minn. “And now Congress needs to have an open and honest debate on the long-term solvency of our multi-employer pension system, because we must uphold the promises made to all workers.”

U.S. Sen Amy Klobuchar, D-Minn., who voted against the bill that allowed the cuts to be considered, said Friday’s decision “will give time to find an alternative that could provide a more secure retirement for the workers.”

Central States officials said they were disappointed in the decision.

“Although the decision by our trustees to file this application under provisions of the Multiemployer Pension Reform Act of 2014 was gut-wrenching, we are disappointed with Treasury’s decision, as we believe the rescue plan provided the only realistic solution to avoiding insolvency,” the trustees said in a news release.


In Minnesota, the Central States fund pays benefits of about $143 million a year. The proposed cuts would have wiped out two-thirds of those payments, affecting some 15,000 workers and retirees. The proposed cuts averaged about 34 percent but ranged to 50 percent or more. Anyone over age 79 or who is disabled would have been exempt from the cuts.

About 1,500 Twin Ports-area retirees would have been affected, Teamsters officials noted.

Trustees of the Chicago-based Central States Pension Fund said the cuts were needed to keep some money flowing to all retirees. With the majority of trucking companies now nonunion and fewer active union members left to pay into the pension fund, Central States officials have said the fund is currently paying out $3.46 for every $1 it takes in and will be insolvent by 2027.

But opponents to the cuts countered that the pension fund was well-stocked with money out of union members' pockets yet was mismanaged by trustees, poorly invested by Wall Street financiers and ignored by federal regulators who should have been guarding the money.

Retirees have repeated the cry that the fund is short because of criminal mismanagement and lack of government oversight.

John Myers reports on the outdoors, natural resources and the environment for the Duluth News Tribune. You can reach him at
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