Sunday, April 1, 2018
Peeps and Pensions: Serious Litigation Ensues
Those ubiquitous peeps appear like clockwork on the shelves of grocers, drug stores and confectioners along with the chocolate Easter bunnies and those other candies destined for someone's Easter basket. An article last week in the Washington Post. Trouble in candy land:How Peeps, pensions and a lawsuit threaten to upend the American retirement system discusses the issues regarding the company's pension coverage for workers. The company participates in a multi-employer pension plan and offers current workers (who are members of a union) a traditional pension plan. The company wants to leave that system and offer new works a 401(k) without paying a $60 million fee imposed pursuant to federal law. This $60 million fee does have a specific purpose: "to ensure future retirees’ benefits are covered, and if [the company] succeeds in escaping it, union officials fear the unprecedented ruling would prompt thousands of other firms to do the same. This chain reaction could divert workers and money at a time when new employees are seen as crucial to ensure ample funding for the wave of retiring baby boomers — putting payouts for millions of pensioners at risk."
The dispute resulted in a strike and, as is typical in a town where one company can mean so much, people taking both sides of the dispute. Matters deteriorated and now there is a lawsuit from the company against the union, asking for compensation and claiming the strike was unlawful. The suit will have far-reaching ramifications since multi-employer pension plans exist beyond this one:
In total, 10 million current and retired workers participate in multi-employer pensions, according to the Pension Benefit Guaranty Corporation. These pensions allow employees to move from one job to another within the same pension and carry their retirement benefits with them.... Many of these multi-employer pensions are on track to run out of money. If the pension runs out of money, retired workers might only get a small percent of the money they thought they had earned through decades of work.
There's a bit of a domino effect in these kind of pension plans, since, as the article notes, "[i]f one of the companies paying into the multi-employer plan falters, the other firms are left on the hook to pay even more to stabilize the fund."
Not sure how this will all come out in the end, but for now, go enjoy your peeps!