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New York union pension fund goes insolvent, becoming the first in what is expected to be a domino effect

New York union pension fund goes insolvent, becoming the first in what is expected to be a domino effect

While several public and private pension funds in the U.S. have had to enforce changes due to massive underfunding, on Feb. 28 a New York Local Teamsters pension fund officially went insolvent and now their member retirees will have to take less in monthly benefits through the Pension Benefit Guaranty Corporation.

Cited as the first pension fund in the U.S. to completely run out of money, this event is expected to soon trigger a domino effect across the country as the Federal government refuses to bail these funds out, while at the same time states are wary of raising taxes on their constituents to supplement their own pension shortfalls.

The New York Teamsters Road Carriers Local 707 Pension Fund has won the unfortunate award for “First Pension to Officially Run Out of Money.”  According to the New York Daily News, and a host of angry former truck drivers who’ve had their pension benefits slashed, the Pension Benefit Guaranty Corp. (PBGC) has officially been forced to step in and take over payments to retirees of the Local 707, albeit at a much lower rate.

Teamsters Local 707’s pension fund is the first to officially bottom out financially — which happened this month.

“I had a union job for 30 years,” Chmil said. “We had collectively bargained contracts that promised us a pension. I paid into it with every paycheck. Everyone told us, ‘Don’t worry, you have a union job, your pension is guaranteed.’ Well, so much for that.”

“It’s a nightmare, it has just devastated all of our lives. I’ve gone from having $48,000 a year to less than half that,” said Chmil, one of five Local 707 retirees who agreed to share their stories with the Daily News last week.

“I don’t want other people to have to go through this. We need everyone to wake up and do something; that’s why we’re talking,” said Ray Narvaez. – Zerohedge

The pension question is one where there are no victors as the problems are due to a combined lack of fiduciary responsibility at nearly all levels.  On the union side, representatives for workers barged through extraordinary pension benefits during the boom times in the 90’s and middle 2000’s when the economy was blasting away on the rocket fuel of cheap money.  And when these financial bubbles burst, and the economy went into severe recessions, these same unions were not willing to cut back on the benefit gains, which in some cases have seen teachers and first responders in some cities make more per year in retirement than they did while working.

Then there is the central bank, who over the past decade has killed the fixed income market and made it impossible for public and private pension funds to earn enough in returns to supplement their benefit payments.

Finally there are the Federal and state government’s themselves, who hired Wall Street bankers to manage these funds, and who in many cases actually cost them more in fees than they did in the returns they provided.

Like nearly all benefit programs that include medicare, social security, and welfare, the nation’s pension system is at best wildly underfunded, and at worst completely and utterly insolvent.  And what is taking place today for the Local 707 Teamsters Union regarding the collapse of their own pension fund will soon come to pass all across the country as Peter no longer has any money for Paul to steal.

Kenneth Schortgen Jr is a writer for The Daily Economist, Secretsofthefed.comRoguemoney.net, and Viral Liberty, and hosts the popular youtube podcast on Mondays, Wednesdays and Fridays. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.


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