Union Pensions in the Red

Labor chiefs are doing better than the workers.

We’ve all read about underfunded corporate pensions, but here’s an unreported story: Union pensions are even more in the red, and it’s one reason union chiefs are so eager to rig organizing rules to gain more dues-paying members.

Only last week, the country’s largest union local re-opened the contract for its 145,000 members two years early and gave up raises and reduced retirement benefits for future hires. The SEIU’s United Healthcare Workers East struck this unusual deal so employers could instead plug a gaping pension hole.

In April, the SEIU National Industry Pension Fund—which covers some 101,000 rank-and-file members—announced that its pension has been put into what the feds call “critical status,” or “red zone.” In other words, it lacks the cash to pay promised benefits and may have to cut them. As of 2007, the last year for which it reported results to the government, the fund had 74.4% of the assets needed to pay its benefits.

Thirteen of the bigger plans operated for the Teamsters have, together, a mere 59.3% of reserves necessary to cover obligations. Or consider that 26 pension funds at the food workers union, the UFCW, are at 58.7%. Seven locals at the United Brotherhood of Carpenters fare better at 67%. As a rule of thumb the government considers a fund to be “endangered” at below 80%, and in “critical” status at below 65%, and requires them to come up with a plan to get off probation within a decade.

You don’t hear labor leaders touting this kind of performance in their organizing riffs, and not many workers are patient enough to review the Form 5500 filings submitted to the IRS and Department of Labor that track these retirement savings. But the data show a steady decline in recent years that can’t be explained merely by the stock market.

For example, Unite HERE’s National Retirement Fund stood at 115% in 1998 and dropped to 83.4% by 2007, well before the crash. The SEIU fund that was put into a “red zone” in April was at 103.4% as recently as 1998. On average, the asset to liability ration at so-called multi-employer plans, which union funds make up the bulk of, stood at 66% in 2006, according to the Pension Benefit Guaranty Corporation. By contrast, single employer plans, basically most company-provided pensions, were funded at 96%.

Poor management probably deserves a lot of the blame for the union decline, but the exact causes are a mystery. An even bigger mystery is that the unions do a far better job with funds created for their officers and employees than for mere workers. The SEIU Affiliates, Officers and Employees Pension Plan—which covers the staff and bosses at its locals—was funded as of 2007 at 102.2%. The plan for the folks at SEIU international headquarters was funded at 84.8%.

Union officer benefits are also far more generous than anything dues-paying workers enjoy. Consider again the SEIU, probably the country’s most powerful union. Their officers and employees get a yearly 3% cost of living increase, but SEIU members get none; officers qualify for an early pension at 50 or after more than 30 years of service, but workers can’t retire early with a pension; officers qualify for disability retirement after a year’s service, but workers need 10 years. In the land of union retirement, some workers are more equal than others.

We suspect most current union members would be surprised to learn how their leaders are handling their hard-earned retirement money. The 93% of the private workforce that doesn’t belong to a union, but that might have little choice if Big Labor’s agenda becomes law, would be even more interested.