On Friday, John Elliot, a partner at New England Pension Consultants and a 2005 recipient of the Taft-Hartley Consultant of the Year from Money Management Letter, came on the podcast to tell us about the timeline of regulatory missteps and economic upheavals that led 130 plans to the brink of insolvency. We also touched on pension reform and hybrid plans.
In this clip from The Pension Crisis: How We Got Here only on The World of Multiemployer Benefit Funds Podcast, John explains the variable defined benefit plan otherwise known as a “hybrid” plan:
A variable defined benefits plan combines aspects of a defined contribution and a defined benefit plan. As John mentioned on the podcast, the variable defined benefit plan adjusts benefits up or down based on the investment return. An assumed rate of return – usually between 4% and 6% determines whether benefits increase or decrease during the plan year for participants.
Unfortunately, hybrid plans are too new, so there isn’t much data on them. Ten states have enacted hybrid pension plans. Since May 2018, the New Orleans Carpenters Pension Plan added a variable plan design that was nearly 100% funded before the pandemic. Variable plans are not one-size fits all. Some plans may create reserves while others may set floors if benefits fall during market dips. Some trustees may add variable features to current plans, so benefits change going forward while others may begin a new variable plan and manage it alongside their existing legacy plan.
Hybrid Plans and a Serious Concern
I realize hybrid plans are controversial. I understand your concern. I have them, too.
I grew up in a union family. My father was president of UFCW International from 1994 to 2004. Growing up, he drilled into me that “collective bargaining is the foundation and life-blood” of the unions, but my union family isn’t just limited to members of my immediate family. My childhood friends were future organizers, business agents, and union presidents. I was as close with them as I was with any of my own biological brothers and sisters. I take my union family very seriously.
I work with Taft-Hartley funds because I care about my union family’s healthcare and their retirements. If I don’t believe in the product, I cannot sell it. I want those working-class people I knew and loved growing up and their families to have good pensions and to be able to save for vacations.
We Shouldn’t Be Afraid
I don’t think we should be afraid. We are living in a new golden age for organized labor. Popular opinion has never been more favorable towards unions.
Union favorability has reached an all-time high. According to a Pew Research Center Study, 60% of Americans view labor unions favorably and three-quarters of 18- to 29-year-olds, the next generations of members, hold a favorable view. Millennials and Generation Y are the fastest-growing union members. Seventy-five percent of all-new union members in 2017 were under the age of 35 according to the Center for Economic and Policy Research. Millennials also added 198,000 workers to union memberships which offset the 75,000 union jobs lost for workers aged 45 to 54 over the same period.
Organization fever has broken out all over the country. Workers in Alabama are preparing for a historic vote to organize a union at Amazon. Due to the pandemic, frontline jobs like teaching and nursing have seen a surge in organizing and members. Union organizing is no longer limited to only blue-collar occupations. Alphabet, the parent company of Google, saw tech workers organize a grassroots organization called the Alphabet Workers Union across the US and Canada.
I created this podcast because it bothers me that 130 plans will be insolvent over the next two decades. I find it distressing that one million plan holders belong to troubled plans and may not ever receive their promised benefits or have them drastically reduced. I will be talking to experts to help us find the best solutions and the way forward – whether it be legislation to protect workers’ rights including the right to organize and collectively bargain.
About The World of Multiemployer Benefit Funds Podcast
Listen to the full podcast with John Elliot on The Pension Crisis: How We Got Here, click HERE
Full podcast episodes of The World of Multiemployer Benefit Funds with union and client advocate, Traci Dority-Shanklin, are available on Apple Podcasts or check out our full library on our website.
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