1. Unions vs. Private Pension Plans: How Secure Are Union Members’ Retirements? Diana Furchtgott-Roth Senior Fellow, Hudson Institute July 16, 2008

2. The Problem Unions’ rank-and-file pension plans are not as well-funded as private sector plans Unions’ rank-and-file pension plans are not as well-funded as private sector plans Union staff and officer plans are well- funded relative to rank-and-file plans Union staff and officer plans are well- funded relative to rank-and-file plans Unions play politics with pension funds Unions play politics with pension funds 2

3. Funding of Union Pension Plans Compared to Private Sector Plans Thirty-seven percent of large non-union pension plans are fully funded, compared with 19% of union plans Thirty-seven percent of large non-union pension plans are fully funded, compared with 19% of union plans 3

4. Two percent of large, non-union defined benefit plans are in critical condition, compared with 11% of union plans. Two percent of large, non-union defined benefit plans are in critical condition, compared with 11% of union plans. 4

5. Thirty-three percent of non-union plans in critical condition paid at least their minimum annual charges in 2005, compared with only 8% of union plans. Thirty-three percent of non-union plans in critical condition paid at least their minimum annual charges in 2005, compared with only 8% of union plans. 5

6. In 2005, 17% of non-union plans made additional contributions due to funding deficiency, compared with 30% of collectively-bargained plans. In 2005, 17% of non-union plans made additional contributions due to funding deficiency, compared with 30% of collectively-bargained plans. 6

7. The average annual payment to correct a funding deficiency is higher for collectively-bargained plans ($2.9 million) than for non-union plans ($2.3 million). The average annual payment to correct a funding deficiency is higher for collectively-bargained plans ($2.9 million) than for non-union plans ($2.3 million). 7

8. Why Are Pension Plans Poorly- Funded? Poorly-funded plans Rely on past assets, or credits, to reduce payments; Rely on past assets, or credits, to reduce payments; Fall behind on payments; Fall behind on payments; Pay penalties and extra fees; Pay penalties and extra fees; Are unable to adjust contributions every year Are unable to adjust contributions every year Don’t put enough into pension funds. Don’t put enough into pension funds. 8

9. Union Officer and Staff Plans Do Better than Rank-and-File Plans The 21 largest pension plans for rank-and file union members had 67.7% of funds needed to meet obligations. The 21 largest pension plans for rank-and file union members had 67.7% of funds needed to meet obligations. The 23 officer and staff funds for the same unions were 88% funded. The 23 officer and staff funds for the same unions were 88% funded. Excluding the 7 staff and officer funds strictly for office employees, the remaining 16 were 98% funded. Excluding the 7 staff and officer funds strictly for office employees, the remaining 16 were 98% funded. 9

10. The SEIU Pension Plan Ratios, 2006 SEIU National Pension Plan (rank-and-file): 100,787 Workers, 75% Funded SEIU National Pension Plan (rank-and-file): 100,787 Workers, 75% Funded SEIU Employee Plan: SEIU Employee Plan: 1,305 Participants, 91% Funded 1,305 Participants, 91% Funded SEIU Officers and Employees Plan: SEIU Officers and Employees Plan: 6,595 Participants: 103% Funded 10

11. Thirteen SEIU local pension plans less than 80% funded Thirteen SEIU local pension plans less than 80% funded Massachusetts Service Employees Pension Plan fell from 110% to 70% funded in 10 years Massachusetts Service Employees Pension Plan fell from 110% to 70% funded in 10 years 11

12. The Sheet Metal Workers International Association In 2006, The Sheet Metal Workers National Pension Fund plan covered 136,000 people. In 2006, The Sheet Metal Workers National Pension Fund plan covered 136,000 people. It had guaranteed $7.45 billion in benefits, but only had assets of $3.1 billion ($22,879 per person)—a deficit of $4.35 billion It had guaranteed $7.45 billion in benefits, but only had assets of $3.1 billion ($22,879 per person)—a deficit of $4.35 billion Benefits were increased after the creation of the fund Benefits were increased after the creation of the fund 12

13. The SMWIA National Pension fund was 43% funded in 2006 ($22,879 per person) The SMWIA National Pension fund was 43% funded in 2006 ($22,879 per person) The SMWIA Staff Pension Plan was 81% funded ($230,848 per person). The SMWIA Staff Pension Plan was 81% funded ($230,848 per person). As rank-and-file members had their COLA benefits cut, the union staff's COLA fund more than tripled Union contributions entirely paid for the increase, with nothing from staff salary Union contributions entirely paid for the increase, with nothing from staff salary President Michael Sullivan received $133,198 in benefit plan contributions in 2006. President Michael Sullivan received $133,198 in benefit plan contributions in 2006.

14. Playing Politics with Worker’s Pension Funds Definition of “fiduciary duty” changed in 1990s when unions were allowed to consider effect of investments on communities and environment. Definition of “fiduciary duty” changed in 1990s when unions were allowed to consider effect of investments on communities and environment. Unions opposed Social Security personal accounts Unions opposed Social Security personal accounts Unions threatened pension fund managers over Social Security accounts. Unions threatened pension fund managers over Social Security accounts. 14

15. Union Pension Funds Used to Influence Corporate Decisions Resolutions to split CEO and board chairman Teamsters at Merrill Lynch, Coca Cola Teamsters at Merrill Lynch, Coca Cola Bricklayers at Walmart Bricklayers at Walmart Electrical Workers at Kohl’s Electrical Workers at Kohl’s Plumbers at Allergan Plumbers at Allergan 15