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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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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

  • Union staff and officer plans are well- funded relative to rank-and-file plans

  • Unions play politics with pension funds


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


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


  • 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.


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


  • 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).


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.


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.


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


  • Thirteen SEIU local pension plans less than 80% funded 

  • Massachusetts Service Employees Pension Plan fell from 110% to 70% funded in 10 years


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


  • 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.


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.


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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