Three retired United Parcel Service Inc. workers sued the federal government July 31 challenging the Treasury Department’s decision to allow their pension benefits to be reduced.
The lawsuit is the first to challenge the Multiemployer Pension Reform Act, also known as the Kline-Miller Act. The 2014 law allows a multiemployer plan to request Treasury’s approval to cut benefits if the plan shows that doing so would avoid insolvency.
The retirees seek to hold the U.S. government liable for engaging in an “uncompensated taking of their property” by authorizing—through the Treasury—those pension cuts. The retirees, who participate in the New York State Teamsters Conference Pension and Retirement Fund, seek to represent 21,250 similarly situated workers.
Multiemployer plans are collectively bargained between unions and employers in the same industry. More than 100 of these plans have indicated that they’re heading toward insolvency within the next 20 years. At least five pension funds, including the New York State Teamsters, have received Treasury approval to cut benefits.
The lawsuit challenges the “nascent practice” of having the government authorize plans to cut vested pension benefits. These cuts, the retirees allege, benefit the government by reducing or eliminating the coverage risk of the government’s insurer, the Pension Benefit Guaranty Corporation.
Multiemployer plans pay insurance premiums to PBGC. The agency takes over after plans are unable to pay benefits to its participants. PBGC’s multiemployer program has been struggling in recent years, and it will likely run out of money before the end of fiscal year 2025.
MPRA reflected Congress’s concern that PBGC would face harm unless vested pension benefits were cut, the retirees said. MPRA was allegedly designed to lower the government’s insurance costs and to “prop up” PBGC, the retirees said. If the PBGC became insolvent, it would have paid hundreds of millions of dollars in claims, and the government would face “crushing political pressure” to cover any losses beyond the amount that the PBGC could cover, the retirees said.
The lawsuit comes amid Congress’s efforts to address the pension funding crisis that wasn’t fixed by the enactment of the MPRA. In the past few months, Congress has been holding meetings—through the House-Senate Joint Select Committee on Solvency of Multiemployer Pension Plans—to come up with a solution for the insolvency issue. The committee has until November to come up with a proposal.
The U.S. Department of Justice didn’t immediately respond to Bloomberg Law’s request for comments.
Messing & Spector LLP represents the retirees.
The case is King v. U.S., Fed. Cl., No. docket number unavailable, complaint filed 7/31/18.
(Updated with additional reporting throughout. )