The federal rescue package is intended to protect 22,500 carpenters from pension cuts

A troubled union pension fund for more than 22,500 carpenters and millwrights in the Detroit area is getting a $635 million federal bailout to spare retirees big cuts to their pension checks over the next decade.

The Metro Detroit Carpenters Pension Trust Fund was approved Thursday for the special pension program created by the $1.9 trillion 2021 American Rescue Plan signed by President Joe Biden.

The grant will increase the pension fund’s funded status to over 60%, up from 34.3% in 2022, according to Tom Lutz, president of the Michigan Regional Council of Carpenters and Millwrights, whose members receive pension benefits from the fund.

Without this help, the fund would be on track to be insolvent and insolvent by 2033. And if that scenario had occurred, the federal Pension Benefit Guaranty Corp. would have had to intervene, which would likely have resulted in massive cuts to pensioners’ pensions, with checks of up to 70%.

Lutz said that based on their actuarial assumptions, which assume 6.5% annual investment returns and constant work hours for currently active contributors, funding levels are expected to increase over time and retirees will receive 100% of their expected pension checks.

“It’s life-changing,” Lutz said.

“People say bailouts, but I keep telling people that the difference between bailouts is that the money goes to people who didn’t pay,” he added. “In this case, I promise you that there is no pensioner who has not paid taxes throughout his working life and does not pay taxes on his pensions today.”

The $635 million donation comes specifically from Pension Benefit Guaranty Corp.’s new Special Financial Assistance Program.

The Zimmermann Retirement Fund had previously asked the U.S. Treasury Department for permission to cut its members’ pension checks by amounts such as 16% to 26% in hopes of delaying even larger cuts later, but has withdrawn its request for those short-term cuts because of the new infusion .

“Millions of people work for years and look forward to the day when the promise of a secure, dignified retirement is fulfilled,” Acting Labor Secretary Julie Su said in a statement. “Today, the Biden-Harris Administration is delivering on that promise for 22,576 carpenters.”

The carpenters’ pension fund ran into trouble for several reasons, including losses in the early 2000s and the Great Recession of 2007-09, a decline in carpenters’ working hours as there were more than two pensioners for every active contributor – plus over $100 million dollars in risky investment deals, including a time-share resort in Hawaii that wasn’t built and a rural northern golf course that never made any money.

The Carpenters’ Retirement Fund is classified as a multiemployer plan because multiple companies employ the unionized workers and contribute to their pensions. Such plans tend to be financially worse off than those tied to individual employers.

More: The Metro Detroit union poured more than $100 million into risky trades – now retirees could pay the price

Contact JC Reindl: 313-378-5460 or [email protected]. Follow him on X @jcreindl

This story has been updated to add video.

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