NEW YORK (CNN/Money) -
Teamster union-controlled pension funds are in worse shape today than in the era of union corruption when money from the funds were used by mobsters to buy casinos in Las Vegas, according to a published report Monday.
|United Parcel Service is the largest contributor to Teamsters' multi-employer pension plans.
The New York Times reported that multi-employer funds such as the Central States pension fund, is in serious financial trouble, even though since 1982 the fund has operated under federal oversight and has been run by top Wall Street firms. Morgan Stanley was the first Wall Street firm to take over running the fund, followed by Bankers Trust, Goldman Sachs and J. P. Morgan, the paper reported.
The paper said the fund today has only 60 percent of assets needed to cover benefits owed to present and future retirees, a far worse ratio than some single-employer pension funds which have failed. It said that a large investment in stocks rather than real estate or bonds hurt the funds when U.S. stock markets declined in 2000.
The paper said that some of the Teamster funds did not have so much of their investments in stocks, and have done better than Central States since the 2000 market decline. For example, the The Western Conference of Teamsters fund is much more heavily weighted to 20- and 30-year Treasury bonds and other high-grade fixed-income securities. It saw an asset gain of $834 million from 2000 to 2002. During the same period the Central States fund lost $2.8 billion, according to the paper's report.
Still, the paper reported that the Central States fund's investments in recent years closely track median annual returns for corporate pension funds, according to Mercer Investment Consulting. While the fund lost 4.5 percent of asset value in 2001 and 10.9 percent in 2002, it gained 25.5 percent in 2003, according to the fund's executive director and general counsel, Thomas Nyhan.
The paper reported that starting in the early 1960's, the Central States fund loaned tens of millions of dollars for investments in Las Vegas casinos according to Edwin Stier, a former federal prosecutor hired by the union as part of its efforts to clean house. Stier told the paper that Central States pension fund had loaned an estimated $600 million to people connected with organized crime.
But the Times said the funds' real estate portfolio actually saw better returns than the stock market during the period.
The paper's report does not detail how much of the funds' financial problems is due to radical changes in the trucking industry since deregulation in 1977.
Since that time, the unionized carriers have seen strong competition and continued market-share losses to non-union carriers that had trouble getting started before deregulation. Many of the industry's largest unionized carriers have gone out of business since 1977. Others have merged operations and cut much of their union staff.
But since the union pension funds are multi-employer plans, they continue to pay retirees of companies which are no longer in business to make contributions to the funds. As much trouble as the nation's airline pension funds now find themselves in, they are not responsible to pay the retirees of airlines that have gone out of business such as Pan Am or Eastern Airlines.
The Central States fund today has 200,000 retirees collecting benefits of more than $2 billion a year.
United Parcel Service, the nation's largest trucking company and the largest Teamster employer, took a 15-day strike, the worst in its history, in 1997 in an unsuccessful effort to get the union to agree to allow it to exit the multi-employer funds and set up UPS-only pension plans for its Teamster-represented employees.