Two significant developments in the multi-employer pension world emerged in September, developments which could give manufacturers concern.  While this is not the time to panic (we have plenty of time to panic), readers should take notice.

Development number one was the filing on September 25 of the Teamsters’ Central States Pension “Rescue Plan” to cut the benefits of tens of thousands of active employees and retirees.  Development number two was the September 11 decision of the Ninth Circuit Court of Appeals in Resilient Floor Covering Pension Trust Fund Board v. Michael’s Floor Covering imposing withdrawal liability on a company which had never previously contributed or been obligated to contribute to the pension fund.  Separately, each is troubling.  Combined, they might cause nightmares.

In this posting, we will examine the continued saga of the Central States Pension Fund.  In a future posting, we will examine the Resilient Floor Covering decision.

Frequent visitors to this blog will recall postings about the recently adopted Multi-Employer Pension Reform Act of 2014 (MEPRA), which gave multi-employer pension plans unprecedented legal authority to cut vested retiree benefits.  Almost immediately after MEPRA’s adoption, the Teamsters’ Central States Pension Plan announced its intention to seek to implement benefit cuts.

On schedule, during September, the Central States Pension Plan published and filed its proposal to cut benefits for active employees and retirees.  Key aspects of the Rescue Plan include:

  • Almost 100,000 retirees (labeled “orphan retirees,” those whose former employers discontinued operations without paying owed withdrawal liability) will have benefits cut to the lowest levels – 110% of the minimum pension benefit guaranteed by the Pension Benefit Guaranty Corporation. Some report that these cuts could amount to a 50% cut in pension payments.
  • Active employees will witness benefit accruals reduced by 25 percent (from 1% per year to .75% per year).
  • Between 2021 and 2021, the minimum retirement age for participants will increase from age 62 to age 65.
  • Some 48,000 participants will not see any benefit reduction because, in its agreement with the Teamsters Union, UPS agreed to make up any difference in pension payments as a result of authorized benefit cuts.
  • As required by the MEPRA, retirees receiving a disability pension or those age 80 and older will not suffer any pension reductions, but other retirees will see their pensions reduced based on a sliding scale of age and years of service.
  • Finally, any retiree experiencing a reduction in benefits will be able to return to work as a result of the relaxation of reemployment rules.

The Central States Pension Plan has set up its own website (Central States Pension Plan Rescue Plan Website) and the details of the Plan can be found here as well (Central States Pension Plan Rescue Plan).


As the first plan to seek relief under the new law, the Central States Rescue Plan will likely become a “model” for troubled multi-employer pension plans going forward.  Obviously, imposing pension reductions on active employees and retirees will result in significant hardship to some.  But the prospect that pension plans in future years may seek relief similar to Central States’ Rescue Plan means that manufacturers and others may be faced with new bargaining demands in anticipation of future developments.  For example:

  • Using the UPS model, unions may begin demanding that employers agree to make supplemental payments to retirees whose future pension benefits are reduced as a result of fund insolvency or the imposition of a Central States-like “rescue” plan.
  • Unions may seek to increase benefit contributions to offset reductions in accrual rates or otherwise seek to supplement pension benefits.
  • To the extent retirees suffering from benefit reductions may desire to return to the workforce, manufacturers may have to confront complicated “re-employment” issues – employee retraining, “probationary” periods, bumping rights, and benefit bridging to name just a few.

Only time will tell how unions and manufacturers will address these issues.  Stay tuned.