A change by one of the nation’s largest union pension funds is expected to affect many hundreds of local workers now and in the years to come at AK Steel and elsewhere.
The International Association of Machinists National Pension Fund recently disclosed that it will cut retirement benefits by 40 percent despite its overall fiscal health.
The rehabilitation plan will eliminate all early retirement subsidies moving forward and also force employers to chip in an additional 6 percent of wages to the fund.
IAM also will change how benefits are calculated, moving away from a service time-based approach to a flat 1 percent of monthly contributions.
In an April 29 letter to union members, IAM Local Lodge 1943 President Neil Douglas said the lodge had “no prior knowledge that these changes to our pension plan were even being considered.”
“We were completely appalled and shocked to say the least,” wrote Douglas.
Douglas told this news outlet Friday afternoon that Local Lodge 1943 is “looking into the matter further and will continue to update our membership as we find out more information.”
IAM Local Lodge 1943 represents nearly 1,800 workers at AK Steel’s fully integrated steel mill, Pilot Chemical, RMB Trucking, and Cummins/Bridgeway.
In 2005, while the local lodge was still an independent union (the AEIF), AK Steel informed employees that in the upcoming 2006 negotiations, they would be locking and freezing its pension plan and doing away with retirement benefits, Douglas said in the letter. That, he said, gave workers a 401K option and meant they would work until they were Medicare eligible at age 65.
When the union did not agree with this during negotiations, a lockout of more than a year ensued.
Prior to that lockout, the AEIF executive board knew AK Steel was going to freeze the pension plan, so it started looking to join other unions. It joined the IAM to gain access to its pension fund.
Douglas, in his letter to members, said he told a grand lodge representative that the IAM decision “has gutted our Local like a fish and we are going to completely melt down.”
“I explained that this is devastating to all the members and families, not just at AK Steel and Bowling Transportation, but Butler Works as well,” Douglas wrote in the letter. “Butler is UAW, but joined the IAM pension plan by proxy.”
Douglas said he was informed that once the trustees of the IAM Pension Plan put the plan in the “Red Zone,” all early retirements by law are eliminated and no concessions can be made.
A “Red Zone” is a a label applied to plans that are in danger of insolvency within seven years and only have a 65 percent funding rate.
“As a result of a challenging investment environment and the decline of the Fund’s credit balance, the IAM National Pension Fund Board of Trustees has made the difficult but important decision to voluntarily elect to place the fund in the Red Zone for 2019,” IAM National Pension Plan Fund wrote in an April 26 letter. “This action was taken to protect the Fund’s participants’ core retirement benefits and strengthen the Fund’s financial health over the long term.”
Later in the letter, the pension fund says that “the Trustees have always acted prudently to maintain the long-term financial health of the Fund and provide core retirement benefits.”
An IAM National Pension Fund April 30 correspondence obtained by this news outlet notes that the boards decision to voluntarily elect Red Zone status and adopt a Rehabilitation Plan was made by the fund’s board of trustees on April 17. Participants, union and employer representatives all received notification by U.S. Mail on April 26.
The plan changes are scheduled to go into effect on Sept. 1.
The IAMNPF is the fifth largest multiemployer defined benefit pension fund in the country with more than 100,000 actively working men and women, 92,000 retirees and beneficiaries, and approximately $11 billion in assets.
Douglas said Local Lodge 1943 members would be contacting AK Steel and Bowling Transportation to negotiate for a preferred schedule that would ensure that there will be no change to the 30-and-out early retirement before Jan. 1, 2022, or in other words, “no difference in what we have now.”
“We believe that the companies will agree to the preferred schedule,” Douglas wrote in the letter. “Once that is done, you will still be able to retire with the 30 and out as long as you have submitted a completed IAM Pension Application before January 1, 2022.”
AK Steel officials declined to comment.
In his late April letter, Douglas said he and the other Eastern Territory union representatives have been called to a mandatory May 30 staff meeting in Chicago to discuss the issue “face to face” with the territorial staff.”
He also said he, along with other union representatives, would be meeting with IAM this week in Washington, D.C. to discuss the matter, which he said will “devastate many lives.”
“If there is anything we can do to change this or improve our situation, we will seek it out,” Douglas wrote.