Workers’ Union Withdrawal Bankrupts Company

Pension rules forced owners to pay off obligations to debt up front

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Labor's pension crisis forces a family-owned business to shut its doors after workers voted to withdraw from their union, according to a report.

J-Con Woodworking in Thomaston, Conn., closed its doors after 34 years in operation in order to cover $633,667.80 in retirement and health benefits as part of a multiemployer pension system maintained by the Carpenters Union. The mass payout was triggered after the company's eight union carpenters decided to withdraw from the union in a unanimous vote, according to reporter Marc Fitch.

"They wiped us out," Hilary Converse, who owns the business with her husband Mark, said in an article posted at the Yankee Institute for Public Policy. "We basically have nothing left."

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The Converse family liquidated all of its assets and sold off its machinery to cover expenses resulting from a suit brought by the Carpenters Labor-Management Pension Fund. Multiemployer pension funds were developed for union laborers who fulfill numerous contracts for different companies over the course of their careers. Participating employers pool their resources together to cover the retirement costs and provide defined benefit plans to the workers in the same manner that an automotive or manufacturing worker does from his lifelong employer.

Federal law mandates that companies participating in those plans are able to withdraw, but only after paying off their obligation to the system's pension debt. Normally, this process begins when a company exits it voluntarily or because it goes out of business. The Converse family, however, was prevented by federal labor law from interfering in its workers' decision to drop the Carpenters Union.

The Connecticut Carpenters Pension Fund currently does not have enough money to cover its looming pension debt, according to its 2016 annual report. The fund holds assets valued at $433 million compared with obligations ranging from $543 million to as much as $913 million. It is now in the midst of merging into the New England Carpenters Pension Fund in a bid to "strengthen the Funds financially now and into the future." The Converse family told Fitch the union has refused to release how it calculated their share of the debt.

Congress is working to address the private sector pension crisis that has the potential to bankrupt the Pension Benefit Guaranty Corporation, a federal program funded by user fees that serves as a backstop for depleted funds. In 2014, the Obama administration adopted policies that would allow struggling funds to slash benefits for the first time with federal approval. In 2017, Democrats introduced a plan that would bail out struggling pension funds with loans from the Treasury Department. On Tuesday, Rep. Phil Roe (R., Tenn.) and Rep. Donald Norcross (R., N.J.) introduced legislation that would allow healthy plans to head off a downward spiral by allowing them to diversify benefits with 401(k)-style defined contribution plans.