Union pension funds holding up for trades workers

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Although one of Wisconsin’s largest union pension plans for retired construction workers recently took a step backward, it’s nowhere near having to reduce payouts in order to remain solvent.

Mike Gantert, director of the Elm Grove-based Building Trades United Pension Trust Fund, said that he saw the fund he manages slip last summer out of what regulators call the “green zone” and into the “yellow zone.” To be in the green zone, a pension fund has to contain enough money to cover at least 80 percent of its obligations over the next 15 years.

Gantert said the Building Trades United Pension Trust Fund was deemed able on Aug. 31 to meet 77.9 percent of its future obligations. Although not taking the dip into the yellow zone lightly, Gantert said it was far too small a decline to make him and his colleagues even consider taking advantage of a relatively new federal law that allows benefits payments to be reduced to keep pension funds solvent.

“We are not even close to that,” he said.

Gantert said his office was flooded with calls and emails after news came out in September that the Central States Pension Fund — which primarily provides retirement benefits to members of the Teamsters union — had asked the government for permission to cut payouts. The reductions, which have yet to receive federal approval, are meant to ensure the solvency of the fund, whose $35 billion in liabilities at the start of 2014 was nearly double its assets.

Central States’ request to lower payouts was allowed under the federal Multiemployer Pension Reform Act of 2014. In the construction industry, the law was generally supported as a way to ensure union-pension funds could remain solvent over the long term, even if that meant reducing benefits already promised to retirees.

Gantert said he is aware that some construction pension funds in Wisconsin have required current workers to contribute more, but he knows of none that is seeking the sort of relief allowed under the new federal law. The Building Trades United Pension Fund has $1.8 billion in assets and provides payments to retirees from 11 trades, including laborers, carpenters, ironworkers, steamfitters, plumbers and roofers, most of whom had worked in or around Milwaukee.

He said the main cause of the fund’s slip into the yellow zone is the fact that retirees are living longer. For that reason, he and other managers have to count on paying individual workers for more years than previously expected, which adds to the cumulative burden on the fund.

Gantert said the Building Trades United Pension Fund pays out more than $150 million in benefits a year.

“It’s a good reason,” he said. “You are living longer, and your benefits are guaranteed.”

Even as longer lifespans are putting more pressure on the fund, other developments are helping to shore it up. For one, Gantert said, trades employees who are now in the workforce are spending more time on the job.

Hours have been up particularly as the industry recovers from the recession of the late 2000s and struggles to find enough new qualified workers to keep up with demand. The increased time on the job helps pension plans because the money they receive is tied directly to the number of hours that future beneficiaries work.

The building trades fund meanwhile, Gantert said, is also being bolstered by successful investments, mostly in the stock market. Gantert said he and his colleagues had expected to get a 7.5 percent return on their investments of fund money in the 12-month period leading up to May 31. In the end, they got 8 percent.

Other union pension funds in the state are benefiting for the same reasons. John Schmitt, president and business manager of the Wisconsin Laborers District Council, said the pension fund associated with his organization has been slowly regaining its footing in the years following the recession.

Like most similar funds, the laborers’ account was hit hard by the economic downturn of the late 2000s, when both the numbers of hours worked plummeted and investment returns dwindled as a result of low interest rates. Schmitt said those sources of instability have begun to go away, and he now expects his organization’s fund to soon find itself in the green zone.

“It might not be this year,” Schmitt said, “but all our retirees are getting what they always have. And I have no reason to think it will not continue to happen.” Follow @TDR_WLJDan