Friday, July 22, 2016

Losses under Goldman, Northern Trust accelerated Teamsters cuts

One of America’s most battle-hardened pension funds was flying high last decade with large bets on stocks, lower-rated bonds and real estate. But even during the best of times, the Central States Pension Fund needed to draw down at least $1.2 billion a year in capital to pay for overhead and Teamsters union drivers’ benefits

And when the global financial markets crash struck in 2008, an astonishing $11.8 billion—or 40% of the plan’s total investments—disappeared that year alone. What remained and was recovered afterward couldn’t cover the fund’s long-term obligations.

Today, the Treasury Department is weighing Central States’ application to cut the retirement benefits of two-thirds of the plan’s more than 400,000 American workers, retirees, dependents and survivors who’ve have waited a lifetime for them.

The pain unfolding at the Central States fund is a cautionary tale for all Americans because it underscores the reality that no social safety net is secure.

Pension administrators in Rosemont, Illinois, made the benefits-slashing proposal under a law they themselves helped get Congress to pass. Norman Stein, a senior policy advisor at the Pension Rights Center in Washington, says House legislation authorizing the reductions was passed with “no committee vote or debate” in December 2014, as part of a much larger funding bill, and that any Senate amendment “would have resulted in a closure of the federal government.” In a letter to Treasury Secretary Jacob Lew opposing the plan, Stein argues “it is unlikely” the measure “could have survived any open and transparent legislative process.”

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