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The Voice of the Black Community

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Pension funds canít keep up with demand
 
Published Thursday, December 6, 2018
by Maria Magher, Correspondent

Davey Grubbs isn’t old enough to draw a pension, but he already knows that he may not have a chance to when he retires. He’s 56 now, so that doesn’t leave him much time to figure out a solution.

His friend, James Dale Hanner, was forced to retire early when his company, Allied Business, closed in 2013. He’s drawing on his full pension, but he knows that’s a short-lived scenario. He’s 64.

Both worked for the same trucking company that was part of a multistate pension plan that is predicted to fail, cutting their pensions by up to 70 percent, potentially. Now, both are lobbying to find solutions to save their pensions and those of thousands of others.

“Dale and I have been to Washington over 25 times in the last three years lobbying on this,” Grubbs said. “They would like to tell you that more people are drawing on [the pensions] and less are paying in. That is having an effect.”

But what Grubbs said is the bigger problem behind the failing pension plans is that the federal government took over these multistate plans after claiming they were being mismanaged, and they were not properly invested. In addition, deregulation of the trucking industry in the 1980s led to a loss of thousands of employers that would have been paying into these funds, helping them to stay solvent.

“Deregulation took a huge toll on our pension fund,” Grubbs continued. “Deregulation eliminated many trucking pension jobs.”

Others argue that the plans are buckling under the weight of so many retirees – the Baby Boomer generation aging out of the system in huge numbers. Two major recessions in the last two decades also took a major toll on the economy and these pension plans.

Grubbs and Hanner are both part of the Central States Pension Fund established in 1955. It has nearly 400,000 participants across the country, with almost 13,000 in North Carolina. The fund is expected to run out of money by 2025 or sooner.

“It’s one of three plans that will bankrupt the PBGC when it runs out of money,” Grubbs said.

The PBGC is the Pension Benefit Guaranty Corporation, which was established in 1974 to guarantee pension plans. It’s like insurance for pension funds. If the fund goes under, the PBGC kicks in and covers those benefits to the participants. However, with so many of these multistate funds predicted to fold – included another 15 in November – the PBGC is also expected to fold under the pressure. It won’t be able to pay all of the pensions either.

“By allowing our pension plan to fail, then we’re going to fall on the backs of the taxpayers under the PBGC,” Grubbs said.

Right now, the Congressional Budget Office estimates that it will cost between $78 billion and $101 billion to fully fund the PBGC to cover all the pension funds that are expected to collapse in the coming years. Not only would funding the PBGC be a major burden to the taxpayers, Grubbs argues, but allowing the situation to deteriorate to this point would also mean that underfunded retirees would not be paying into the system, so hundreds of millions would be lost in state and federal revenues, as well as overall economic activity.

“People like to shove this off as unions mismanaging money,” he said. “The unions don’t have the money; they never had the money. Since 1982, the Department of Labor and the federal court system have overseen those trustees. There’s no argument about mismanaging money or stolen money; it’s just not there.”

Currently, Grubbs and Hanner are lobbying on behalf of the Butch-Lewis Act, which would implement an emergency loan system to these flailing pension plans. The loans would be funded through the sale of treasury bonds, which are stable, and they would be made on a longer, 30-year term. The idea behind the plan is that the loans would get these pension plans through the lean times to the days when they have more people paying into the system and fewer drawing on it. Then they can pay back the loans and build up their coffers once again.

The estimate cost of the bill is $34 billion, though some have said it would cost even less. That estimate is less than half of what is projected to fund the PBGC once these funds start failing.

“On the Democratic side, we’ve got nothing but support,” Hanner said. “On the Republican side, we’ve got a lot of negatives on it. We feel like it has to do with us being the labor. If we were a business, we feel like this would have been settled.”

Grubbs agrees. “I’ve got comments from Republicans up here that we’re not bailing out union clans,” he said. “We want the taxpayer to understand that we are not looking for a bailout. If anything, we’re looking for ways not to become a burden on the taxpayer” since many retirees without the income they were relying on would end up on food stamps and other social assistance programs.

Even if Congress doesn’t pass The Butch-Lewis Act, Hanner says, he and others want representatives to at least come together and discuss possible solutions, which he says doesn’t seem to be happening. “We’re just trying to get them to come to the table and work out a plan, hash out a plan,” he said. “We feel like we’ve got the basis of a plan, and they can work out a model.”

 

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