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Bloomberg News: Twinkies Bankruptcy Exposes Peril to Some U.S. Pensions: Economy

By Lorraine Woellert
Feb 26, 2014

Feb. 26 (Bloomberg) -- Greg Rayburn, founder at Kobi Partners, recounts the labor issues that brought about the Hostess bankruptcy on Bloomberg Television’s “In The Loop.”

When Hostess Brands Inc. went bankrupt in 2012, it triggered anxiety among employees at Ottenberg’s Bakery, a family-owned enterprise in Maryland. The companies shared a pension plan, and if Hostess couldn’t pay its retirees, Ottenberg’s would have to pick up the tab.

Gary League, 53, who has delivered Ottenberg’s bread for almost three decades, worried he might lose his nest egg, maybe even his job.

“If you have all these guys out on retirement and you only have Ottenberg’s paying into it, the math doesn’t add up,” League said. “I was thinking I would have to work forever.”

Last week, he got the good news -- the U.S. government saved his benefits by sacrificing those of Hostess’ drivers, who will now get a reduced payout financed by the government.

League is one of 10.4 million Americans with retirements tied to multiemployer pension plans, large investment pools long considered low risk because they don’t rely on a single company for financing. Two recessions, industry consolidation prompted by deregulation, and an aging workforce have funds facing a $400 billion shortfall that has some near insolvency. Dozens already have failed, affecting 94,000 participants.

Things are dire enough that a coalition of employers and labor unions is asking Congress for permission to cut benefits to retired truck drivers, miners and others as a last resort in order to prevent plans from going under. The proposal has divided unions and their allies, triggering a lobbying battle as a legislative deadline approaches and retirement security looms large as a growing economic concern.

 

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Posted 12:12PM on February 26 2014 by
Categories: SNB in the News