By Kevin Mooney
Labor unions market themselves to prospective members by promising an array of benefits that include generous, well-funded pension funds guaranteed to endure through retirement. However, the most recent government data available show that union negotiated plans are severely underfunded and perform quite poorly in comparison with non-union plans.
Among the larger pensions, those with 100 or more participants, 35 percent of non-union plans were fully funded as opposed to just 17 percent of their collectively-bargained counterparts, according to a Hudson Institute analysis of U.S. Labor Department records. While 86 percent of non-union funds had 80 percent or more of funds needed to cover costs, only 59 percent of union funds could cover the necessary financial threshold, the Hudson scholars concluded.
Although there is no requirement that says retirement plans must be fully funded at a given moment to be considered stable, the Pension Protection Act of 2006 spells out specific criteria.
Pensions with less than 80 percent of the assets needed to cover present and projected liabilities are considered “endangered,” while those that fall below a 65 percent threshold are classified as “critical” under the legislation.
Union workers who have been promised substantial payouts upon retirements should become acquainted with these figures and with government records that point to disconcerting financial trends. Plan managers are required to file a document known as Form 5500 that highlights the ratio of assets to liabilities with the Labor Department. There is normally a one to two year delay in submitting these documents, which means the full effects of the financial collapse that begin in late 2008 are not reflected in the reports now available.
Nevertheless they are instructive.
Eight of the largest unions have underfunded plans the most recent 5500 reports show, including the Service Employees International Union (SEIU), the United Food and Commercial Workers (UFCW), the International Brotherhood of Electrical Workers, the Laborers International Union of Northern America, the International Association of Machinists, the United Brotherhood of Carpenters, the International Union of Operating Engineers, and the National Plumbers Union.
Union leaders are culpable here because they continue to press for pension plans that are more generous than can what actually be afforded, Diana Furchtgott-Roth, a Hudson Institute scholar said in an interview. Moreover, she added, these same officials often claim in their public communiqués that their pension plans are strong and stable when in reality they are in trouble.
For example, the SEIU claims on its web site that its 1199 pension fund, which covers SEIU workers in the New York area, is flush and well funded. But the 5500 form shows this same fund only has the resources to cover 58 percent of future obligations.
“The problem is that there is a lack of accountability required of union leaders and no clear union pension financing rules,” Furchtgott-Roth observed. “Our report shows that union members have few assurances that the trustees of their pension funds are acting in their best interest. Given the continued poor status of union-run pension plans, it can be said that union trustees are not adequately working to ensure that rank-and-file members have the stable financial futures they deserve.”
Demographics are at least partially responsible for the collapse of pension assets within unionized plans, Furchtgott-Roth and other labor analysts have concluded. Private-sector union membership has fallen from about 20 percent in 1980 to 7.6 percent in 2008 and 7.2 percent in 2009, the U.S. Bureau of Labor Statistics reports. For the first time in U.S. history, a majority of union members work for the government rather than in the private sector.
But the collapse of union pension plans could threaten the retirement security not just of union members, but also non-union employees if the proposed Employee Free Choice Act (Card Check) becomes law as is currently written or is imposed in some form administratively, Brett McMahon, a representative with Associated Builders and Contractors (ABC) has noted.
EFCA includes provisions that would abolish secret ballots in union representation elections in the workplace and impose a form of binding arbitration process that greatly favors unions.
Although the legislation lacks support on Capitol Hill, it could conceivably be repackaged and implemented through the National Labor Relations Board (NLRB), free market groups have warned. President Obama has just announced the recess appointment of Craig Becker, an SEIU attorney, who has argued in favor of making policy changes without congressional approval.
“The situation we have with union pension funds is like Social Security on steroids,” McMahon said. “We are talking about a systemic, demographic problem where there are too few people paying in into plans that can’t earn enough returns to make up for the difference.”
Apparently, the fallback position here for union bosses is to push for policy changes that would coerce more members of the private workforce into joining unions. EFCA is just one small part of the equation here as the new healthcare legislation would also open the way for greater unionization. As more Americans are forced into buying insurance, the demand for healthcare will expand, as will employment in the healthcare field.
This in turn makes more healthcare centers available for unionization. A scenario the SEIU has entertained with relish as is apparent from a quick review of their site.
Hold onto your wallets.
Kevin Mooney is the editor of TimesCheck.com and a Liberty Features contributor.
