Garment Workers Pension Fund Rescued
WASHINGTON (AP) _ A pension plan covering 70,000 workers in the men’s clothing industry will be shored up under an unusual rescue plan crafted by the Labor Department, a garment workers union and clothing manufacturers.
The agreement announced Thursday seeks to rescue the Amalgamated Insurance Fund, a multi-employer pension fund that is suffering a $250 million shortfall due to numerous business failures in the men’s suit industry.
``This is the first agreement of its type covering an entire industry,″ Labor Secretary Robert Reich said at a news conference.
``Without this agreement, the companies remaining in this industry will be under a greater and greater load as they became responsible for the pension obligations of companies that exited,″ he said. ``The government and retirees might be left holding the bag.″
The rescue agreement involves the Labor Department, the Union of Needletrades, Industrial and Textile Employees, and the Clothing Manufacturers Association, which represents about 200 makers of men’s suits.
Under multi-employer pension plans, several companies in the same industry contribute to a single pension fund under terms spelled out in a labor contract. The states with the greatest number of active and retired workers in the fund are New York, Pennsylvania, Massachusetts, Maryland, New Jersey, and Illinois.
The Amalgamated Insurance Fund rescue plan is unusual, since the Pension Benefit Guaranty Corp., a Labor Department agency that protects pensions for 42 million American workers, isn’t taking over the fund. Instead, the rescue is designed to encourage healthy companies contributing to the fund not to withdraw, or as Reich put it, to avoid ``a run on the bank.″
A mass withdrawal from the fund would cause the pension benefit agency to step in to cover the fund’s obligations to retirees, which can result in reduction of workers’ monthly benefits.
Under the agreement, the employers will continue making contributions at the current rate, or about $29 million a year. In return for agreeing to participate, companies will be rewarded with a limited financial exposure if problems in the plan arise in the future.
Employers who decide to leave the pension plan will pay a stiff exit fee _ 150 percent of their normal liability. The benefits agency will step in and cover the obligations of any companies that go bankrupt, which means the pension obligations of the remaining companies won’t increase.
By encouraging companies to stay, the Labor Department estimates the Amalgamated plan’s underfunding will be reduced by $50 million over the next eight years. The Amalgamated fund currently has assets of $172 million and estimated liabilities of $425 million.
The deal was welcomed by union and companies alike.
``It’s about time,″ said Bernie Jaslow, chairman of Pincus Brothers Maxwell in Philadelphia, maker of Brooks Brothers suits and well as its own private PBM label.
Margaret Coombs, a Baltimore retiree and member of UNITE, agreed.
``As a retiree, I’m so happy to know my pension will be secure,″ she said.
Nell Hennessy, a benefits agency deputy executive director, said that companies representing about 80 percent of the fund’s contributions have agreed to the settlement, and she expects most of the companies to agree by later this month.