If you watched TheIrishman this weekend and wondered whatever happened to that Teamsters pension fund, here's your answer. How the Teamsters pension fund disappeared more quickly under Wall Street than the mob
This is the first of a two-part series on the Central States pension fund. The second part looks more closely into why its investment performance suffered.
When the experiment blew up, rather than exhume the devastated portfolio to better understand the problem—and perhaps seek accountability—Central States administrators lobbied Congress to pass legislation giving them authority to cut retirement benefits by up to 50% after Treasury Department approval.
That’s when federal tax authorities agreed to defer a statutory funding-deficiency notice for a decade, under an accord that required Central States to immediately begin repairing the pension’s finances. And it corresponds to increased allocations of stocks, particularly compared to most Taft-Hartley union plans, and also lower-rated bonds, including mortgage securities.
•Has the Labor Department appropriately reviewed Central States’ decisions regarding changes in investment managers and strategies? Central States is considered to be a multiemployer plan because thousands of independent trucking companies paid into a shared retirement fund for union drivers. One problem with multiemployer plans is that as some employers went bankrupt, or otherwise shirked their obligations, the remaining employers faced larger liabilities, and the pensioners fewer funds.
Union officials and company executives who served as pension trustees were removed from investment decision-making, but that did “not diminish” their obligation “to monitor the performance of the fund’s investment managers, or relieve of any fiduciary liability,” the GAO said. The Central States administrator itself “is not responsible for the fund’s asset allocation and management of the fund’s investments,” Executive Director Tom Nyhan told me. Rather, investments were the exclusive province of the fiduciaries—Goldman Sachs GS, -0.16% and Northern Trust NTRS, -0.42% during the crisis—who were vetted and approved by the Labor Department, under the consent decree.
McGarr’s reports are among the few public records available about how the pension and its fiduciaries wrestled with their finances. And these records are invaluable. But McGarr produced only three quarterly reports during the final year of his service, and there were other untimely lapses even though presiding Judge Milton Shadur credited the reports as “thorough,” “detailed” and meticulous”—so much so they “obviated any need for further questioning or commentary.
A: No. Central States’ portfolio allocation was about two-thirds stocks, and less than one-third bonds entering the 2008 financial markets crisis. That is much more aggressive than the 48% median allocation to stocks by all Taft-Hartley Union plans at the beginning of 2008; and well above the median allocation of 59% of Taft-Hartley plans with assets of more than $2 billion.
Q: Has the Labor Department appropriately reviewed Central States’ decisions regarding changes in investment managers and strategies?
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