When Milton Acosta retired after two decades of bruising warehouse work in 2004, he banked on his $2,300 monthly check from Teamsters Local 707. He now must make do on a third of that.
Acosta, 74, is one of 4,000 Local 707 members who will see their benefits slashed by more than 60 percent after the union drained its pension fund amid failing businesses, the 2008 stock market crash, and the inability to cut benefits.
The Pension Benefit Guaranty Corporation, an independent federal agency that operates without taxpayer dollars, announced on Wednesday that it would contribute $1.7 million each month to help maintain some benefits for workers, though "only 7 percent of current retirees and beneficiaries will receive their full plan-promised benefit amount."
The average payout is expected to be $570, less than half the average payout of $1,313.
"For the past year, the 707 Fund has been unable to pay full benefits at the levels promised under the plan, and reduced retirees' benefits to levels that were supportable by available plan assets," the agency said in a release. "The insolvency of the 707 Fund is the first among a number of larger financially troubled multiemployer plans with benefit levels that significantly exceed the PBGC guarantee limit."
Acosta's monthly pay out will now be $760 after taxes. He told the Washington Free Beacon that his family is struggling to stay afloat. The stress of his four-decade career in manual labor has left him without any employment prospects and he has turned to his construction worker son and Social Security to help him make his mortgage payments, which are roughly $2,300 each month.
"Right now, I'm struggling. I got pills to pay. I had to declare bankruptcy in 2016 after [the first pension] cuts," Acosta said. "A lot of guys out there are going to have to sell their houses and move because it's so expensive."
Acosta took a pay cut when he first joined the Teamsters. He said he was attracted to union work because of the long-term retirement security that came with the union's defined benefit system.
"I went to the union thinking that's going to be my livelihood until I die, that my wife would be taken care of after I passed away," he said. "We thought the pension was solid and all of a sudden we turn around and it's gone. We got thrown under the bus."
Acosta said that the union had been forthcoming about the financial peril facing the pension fund, sending out updates about its pending collapse as early as 2008. Local 707 President Kevin McCaffrey told the Free Beacon that the state of the trucking and warehouse industry led to the demise of many of the companies that contributed to the pension fund.
It sent a letter to all members in 2012 informing them that the fund would run out in five years of paying out $48 million while only taking in $7 million.
"A lot of our companies started falling like dominos. Everything's great until these companies go out of business," McCaffrey said. "Neither Warren Buffett nor Harry Houdini could've saved this pension plan. Our fund and many others need actual assistance from the government to stay alive."
The union applied to numerous federal agencies seeking relief or permission to cut benefits, such as the annual 13th check provided to members every Christmas. McCaffrey said that members were willing to make such concessions in order to keep the fund viable, but ran into roadblocks because promised retirement benefits are considered binding under the law.
The bankruptcy of the plan appears to have doomed the prospects of the union bailing itself out by winning more lucrative contracts or organizing new workplaces.
"You can’t organize because nobody wants to get into these plans. And no companies want to work with us because they don’t want to be stuck holding the bag," he said.
McCaffrey, who will also take a 66 percent pay cut from his pension, has been fielding frenzied calls from members and widows over the past years. He called the experience "frustrating" because of the unions inability to deliver on its promises.
"They're broken down, beat up and can't get back to work and now they've had the rug pulled out from under them. It's not fair to them," he said. "The toughest calls are from widows. … They say 'my husband told me not to worry because the union will always take care of me.' It's frustrating when you can’t live up to your promises that people expected of us. It's devastating."
The Local 707 is not the only pension program in jeopardy.
The PBGC itself is in trouble of running out of money as more and more union and multi-employer retirement plans go bust. The agency was created in 1974 to preserve failed pension plans and is entirely funded by investing premiums paid by pension plans and sponsors. PBGC Director Tom Reeder warned that it is on track to exhaust those funds by 2025.
"The insurance program for insolvent multiemployer plans is in dire financial condition and, absent reform, is likely to run out of money by 2025," he said in a release.
McCaffrey and Acosta both said that the federal government should issue a bailout on par with the Obama administration's multi-billion dollar package for General Motors.
"The only way this is going to get settled is if the government steps in. If they helped the automobile industry, why not us? We're American citizens and we worked hard," Acosta said.