President Biden will announce Thursday that he’s spending $36 billion of taxpayer funds to bail out a troubled Teamsters union pension plan projected to run out of money in 2025.
The money being doled out to the Central States Pension Fund is the largest-ever federal bailout of a pension plan. Mr. Biden is using money in his $1.9 trillion COVID-19 relief law to save the fund, which is facing insolvency.
A White House fact sheet previewing Mr. Biden’s announcement said the money will ensure 350,000 union workers and retirees will have their benefits remain solvent through at least 2051.
Without the funds, the plans would have their benefits cut by as much as 60%, according to the White House.
“Ensuring that workers and their families enjoy the retirement security they earned through a lifetime of work is a central part of President Biden’s economic plan,” the White House said. “President Biden is building the economy from the bottom up and middle out, including helping to ensure a dignified retirement for all American workers and their families.”
Established in 1955, the Central States Pension Fund provides benefits to union members in the trucking, car haul, warehouse, construction, food processing, dairy, and grocery trucking industries.
Mr. Biden will make the announcement at the White House Thursday afternoon. He will be joined by Labor Secretary Marty Walsh, AFL-CIO President Liz Shuler, and Teamsters workers and retirees.
The move comes just a week after Mr. Biden angered freight railroad unions by signing legislation that prevented a nationwide strike. The deal imposed by Congress on the unions and railroad companies includes one day of paid sick leave, a provision that prompted four unions to vote down the agreement.
The Central States Pension Fund has $7.4 billion in assets, according to its most recent quarterly financial report. It is spending more than $2 billion per year more than it is taking in from contributions.
Like other ailing pension funds, Central States has been plagued with a variety of problems. Rising costs, a weaker stock market and a drop in the number of active workers participating in the fund have crippled its revenue.
The Central States is not the only pension fund struggling as union membership declines. Other pension plans have warned they will run out of money soon.
A report by the Pension Benefit Guarantee Corporation (PBGC) found that out of roughly 1,400 insured multi-employer pension plans, 124 have reported that they will run out of money within 20 years. Those 124 pension plans represent about 1 million workers.
As plans become insolvent, they apply to the PBGC, a government organization aimed to protect the plans. But the multi-employer program was in bad shape and faced the likelihood of insolvency in 2026 and a “near certainty” of insolvency by 2027 due to the cost of covering pension failures.
In a gift to unions that have long backed Mr. Biden’s political career, the president pushed to include $86 billion in funding to aid failing pension plans in his $1.9 trillion COVID relief package, passed into law earlier this year.
Under the measure, pension plans can apply for federal grant funding, which would be used to pay retirement benefits to workers. Multi-employer plan sponsors can apply for the aid through 2025, and the funds must be invested in investment-grade bonds.
The measure was widely criticized by Republicans.
Sen. Charles E. Grassley, Iowa Republican, blasted the bailout in March, calling it a “blank check with no measures to hold mismanaged plans accountable.”