Steamship Authority (SSA) members have negotiated a new arrangement with the New England Teamsters and Trucking Industry Pension Fund, which covers about 166 terminal and maintenance employees.
The new arrangement, precipitated by the failure of other employer contributors to the Teamsters fund, will cost the SSA $25 million over 25 years and reduce the rate at which pension benefits accrue for the covered workers.
“Initially,” SSA general manager Wayne Lamson wrote in a memo to Vineyard SSA member Marc Hanover, “this agreement results in a financial hit to the Authority of around a half a million dollars a year, but we have stopped the hemorrhaging instead of continuing to kick the can down the road.
“By 2015, only four years from now, we will be paying less in combined contributions and withdrawal liability payments per year than what we would have been paying in contributions alone if we had stayed in the original plan.
“By 2018, we will break even entirely and, after that, we will continue to pay less each and every year than if we had stayed in the Pension Fund’s original plan, or if we had withdrawn from the Pension Fund and started our own retirement plan for our employees.
“And, importantly, we no longer have any exposure to what would have been an ever-increasing withdrawal liability if a subsequent Board had found itself in a situation where the Authority would have had to withdraw from the Pension Fund in the future.”
The Wall Street Journal, in a June 1, 2010 editorial page article warning of efforts to shift the responsibility for such failed union, multi-employer pension plans, wrote, “The plans are predominately run by unions and for years have distinguished themselves by poor management. The Labor Department in 2008 listed 230 multi-employer plans that were either endangered (less than 80% funded), or critical (less than 65% funded), or that had applied to government for funding relief. By 2009, that number had soared to 640. The financial crash is partly to blame, but even before 2006, only about 6 percent of multi-employer plans were fully funded, compared to about 31 percent of single-employer plans. The real problem is that multi-employer plans have become a sort of pension Ponzi scheme.”
The Steamship Authority’s pension contribution for these employees was about $1.4 million a year in 2010. When the Teamsters plan found itself in jeopardy, because employer members had failed during the mid-decade economic struggles and the plan’s investments had suffered, the plan’s funding had to be increased from 50 percent to 65 percent. The remaining employer contributors, including the SSA, were required by their participation agreements to pick up the slack by making extra contributions to a “rehabilitation plan.” For the SSA, catch-up meant that the SSA, according to Mr. Lamson, would need to increase its contributions by 137 percent over 10 years, along with other employers still in the plan. And despite the increased contributions, pension payouts to retirees would be frozen at 2005 levels.
The law permitted the SSA to withdraw from the Teamsters plan, but doing so required that the SSA pay about $2 million a year for 20 years. Plus the boatline would have to establish and fund a replacement plan. If 10 years hence, the SSA wanted out of the Teamsters plan, doing so would have been a $90 million hit, Mr. Lamson explained.
The negotiated settlement keeps the SSA in a Teamsters plan, but reduces the catch-up costs to $1 million annually, plus a $1.2 million contribution to the new plan.