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Report Shows No Smoking Gun Behind Central States Pension Woes
Teamsters members were looking for an easy answer to explain why their pension fund is failing, they’re not going to find it in two reports by the Government Accountability Office. It’s been nearly two years since members of Congress asked the GAO to look in to what led to the insolvency problems facing the 400,000-member Central States, Southeast and Southwest Areas Pension Fund. In two reports issued June 4, the GAO said that while the fund’s investment returns were low, they generally weren’t lower than returns from similarly situated plans and that the Labor Department’s oversight was consistent with its responsibilities.
In one report, the federal auditor found that Central States’ investment returns were in line with returns of similarly situated multiemployer plans from 2000 through 2014. During this time, Central States’ investments were selected by court-appointed fiduciaries that included Goldman Sachs, J.P. Morgan Chase, and Northern Trust Co. The Central States fund is the largest multiemployer fund and it’s projected to be insolvent by 2024. Multiemployer plans are collectively bargained between unions and employers in the same industry, such as trucking or construction. The plan’s current financial situation is due to the “collective impact of multiple factors, with the two biggest being the steep decline in the number of active participants in the plan over time and the plan’s investment performance,” Frank Todisco, GAO’s chief actuary, stated. A 1982 consent decree gave oversight of a number of the fund’s activities to the Labor Department, a court-appointed special counsel, and a federal court.
They were focused primarily on preventing the fund from engaging in corrupt conduct and being influenced by organized crime—circumstances that came to light during investigations in the early 1980s. The other report by the GAO found that the Department of Labor has been meeting the limited responsibilities it has under the consent decree. The GAO didn’t do a full forensic audit of the fund, which lawmakers, such as Rep. Marcy Kaptur (D-Ohio) and some retirees had hoped it would do. “I’m not surprised by the GAO’s findings as I was told early on that they weren’t doing a full forensic audit of the plan’s investments,” Michael Walden, a retired Teamster from Ohio who is executive director of the National United Committee to Protect Pensions, recently stated. If the GAO had done a full forensic audit, it may have revealed how much harm Wall Street firms did to pension plans, like Central States, in the period leading up to the 2008 financial crisis, he said.
The NUCPP, which consists primarily of retired Teamsters who belonged to the Central States fund, has been lobbying Congress to come to the rescue of more than 100 plans heading toward insolvency, which affects about 1.5 million workers and thousands of employers. A bipartisan House-Senate Joint Select Committee on Solvency of Multiemployer Pension Plans has been working to resolve the crisis and is slated to hold its next meeting sometime in the next few weeks. It has until the end of November to find a solution. “It is our hope that this report provides important context about funds in crisis, like Central States, as well as a sense of urgency that immediate action is needed for the entire multiemployer pension system,” Kaptur added. “The Bipartisan Select Committee on Pensions has a huge charge to shore up these pension funds so the workers that paid into pensions for years receive the benefits they earned.”
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