By Chris Parker
By Jesse Marx
By John Baichtal
By Olivia LaVecchia
By Jesse Marx
By Olivia LaVecchia
By Tatiana Craine
By Judy Keen
As added security, the union is an equal partner in fund management. A director and a group of trustees--five union appointees and five representatives of the employers--oversee it. Each is paid $230,000 a year. Because the Teamsters have a long and storied history of corruption--Central States was once dubbed "the mob's bank"--the fund has operated for the past 20 years under the oversight of a federal judge. Pension experts say it has remained squeaky clean.
Like most pension plans, Central States has never had enough money in its coffers at any one time to cover all of its future obligations. Instead, the fund takes in $1 billion a year and pays out $2 billion; investment income is supposed to make up the difference. It's the job of the plan's managers to accumulate enough of a surplus to ensure that bad years don't bankrupt the plan. In 1990, the fund had assets of $10 billion. Nine years later, the figure had more than doubled to $21 billion--more than enough for Young and his brethren to get all they had been promised, and more.
Many industrialized nations pay citizens' health and retirement benefits directly. But historically in the United States, people have been expected to find a job that offers a pension as one of its benefits; accordingly, companies get tax breaks and other rewards for offering pensions.
The idea behind the traditional employer-supplied pension was not unlike the reasoning behind linking jobs with health insurance. Just as health insurance is cheaper for everyone when healthy people and sick people are in it together, so, too, do retirees find prosperity in numbers. Some people quit their jobs before becoming vested; their contributions buoy workers who hang on. Some pensioners die early, while others live too long to get by on their own contributions alone.
Good benefits were believed to work to the employer's advantage, too: That promise of security earned worker loyalty. Plus, money that's pooled in a pension goes further. Studies show that for every dollar that has to be invested by an individual, a pension plan needs about 75 cents. By the mid-1970s, nearly half of American workers were covered by a traditional pension plan.
Of course, that half was typically made up of higher-paid workers. Everyone else was expected to save for themselves, assuming they earned enough, or to rely on Social Security to provide a subsistence-level threshold. The only ways to beat the system, if you were a blue-collar worker, were to get a civil service job as a cop or a laborer, join the military, or get a union job like Bob Young's.
In 1978, Congress created the 401(k), named after the chunk of the tax code that allows people to put off paying taxes on money they deposit in these private retirement accounts. Although the idea was to encourage thrifty workers to supplement their company pensions, it didn't take long for corporate America to realize that the 401(k) was much cheaper than the pension. In addition, it shifted the risks associated with investing to the employee.
Many companies rushed to convert their pensions to 401(k)s. By 1998, the number of workers who had only a 401(k) had far outpaced the number who had some stake in a pension. As a result, an entire generation of workers now thinks a company is generous if it makes any contribution at all to employees' 401(k) accounts.
"What you had on the part of the employer was a move to retreat from responsibility for employee retirement benefits," explains Karen Ferguson, head of the nonprofit Washington, D.C.-based Center for Pension Rights. "Companies increasingly feel they don't have to have these plans."
Unfortunately, she adds, "There's no evidence whatsoever that the [individual] investment approach will work... Some level of collective pooling of risk is critical if we're going to provide people with some sort of security."
National statistics indicate that, before the stock market crash, the average worker in his 50s or 60s had accumulated $57,000 in his private individual retirement account--exactly the kind of predicament Bob Young planned to avoid. If that were Young's situation, unless he somehow made a quick killing in the stock market or won the lottery, he'd be able to make it without his pension for about two years.
Shortly after his graduation from the University of Minnesota 31 years ago, Bill Jackson (not his real name) took a seasonal job helping United Parcel Service with the Christmas rush. Even though it was temporary, the job paid $4.75 an hour--quite a lot back then. Jackson had a science degree and some good prospects in the food industry, and planned to get serious about launching his career after the holidays. But UPS kept calling, and the money was so good, he recalls, "Who could say no?"
As he moved around the company, he met a lot of folks like himself: educated, marketable, but happy with the protection afforded them by the Teamsters. And all willing to put in 30 years in exchange for a solid pension--$100 a month for every year of service for life, to be exact.
He could have jumped ship at the 20-year mark, and had in fact gotten another degree in a relatively sought-after profession in the intervening years. But he and his wife, a professional in her own right, decided that sticking around for 10 years in exchange for the benefits was worthwhile. He could ply his new trade part-time after retiring from UPS, at least until the house was paid off and she was able to retire, too.