Bricklayers’ pension plan between rock and hard place; retirees face steep cuts this fall

Dana Donohew began working with brick many decades ago at the age of 12, earning $40 a week, rain or shine, next to an uncle.

“I worked hard all my life,” said Donohew, an Atwater Township resident.

Donohew, now 78 and a widower for 10 years, retired at age 66 as a member of Bricklayers Local 7, a union dating back to the 1800s in Northeast Ohio. Members work with materials such as brick, stone, and masonry, building things and doing restorations.

“I was a foreman for one company in Akron for about 30 years,” Donohew said. “I was a working foreman. I worked with my tools every day. I never sat on the bench. I worked in all kinds of weather. You just take a beating.”

Despite the decades of hard work that included setting aside money for retirement, Donohew and as many as 400 to 500 others from the local face drastic cuts soon in their union pension checks. The Bricklayers, like the Central State Teamsters and other unions, have a multi-employer pension plan that at one time was fully funded but now is in danger of failing. Without drastic cuts or a bailout of some kind, the Bricklayers Local 7 pension checks eventually could end toward the end of 2022, according to projections.

To make sure the pension doesn’t run out of money, trustees for the union fund are proposing hundreds of monthly retiree checks in many cases be permanently cut in half or more starting in October, according to plans filed with the federal government. The goal is to provide retirees with slightly more money each month than if the plan went bankrupt and payments were taken over by the Pension Benefits Guaranty Corp.

Donohew is told he will get a reduction of more than $17,000 a year in his retirement income under that plan. He noted that he and other union members for all their working years had money taken from their hourly wages that went into the fund. And he says he can’t go back to work to make up that kind of income loss.

“Luckily, I’m still healthy,” Donohew said. “But I’m not healthy enough to lay 12-inch block.”

The pension plan’s trustees, three union and three employer representatives, have filed a reorganization plan with the federal government that will, if approved in upcoming months, cut monthly benefits.

By way of example, documents filed with the government say a retiree with 25 years service under age 75 and getting a monthly pension of $1,490.95 will get a permanent cut to $983.12 a month starting Oct. 1. Another retiree getting $3,234.81 a month would get a cut to $1,101.10 a month. Retirees ages 80 and older would not have their pensions reduced.

Assets in decline

Since 2000, just after the big tech stock rout, the Bricklayers pension fund “has gone from bad to worse,” said Noah Carmichael, the union local business manager.

From 2006, when the local plan had $26,539,420 in assets, the value has declined significantly. Over the years, contributions have also fallen. The result, as of May 1, 2019, plan assets were valued at $9.5 million, while vested benefits — future outlays — were at nearly $41.3 million.

Cutting benefits is the last thing the trustees want to do, Carmichael said.

“It’s obviously a terrible situation,” Carmichael said.

But math is working against the pension fund from rebounding to a healthy state, he said.

The union local has about 115 active members who still pay into the plan, along with at least 32 employers, according to Carmichael and pension plan documents. That’s far fewer active union members now than in decades past.

Couple that decline in active membership with hundreds of retirees who currently draw benefits means the money will run out, Carmichael and others said.

“It’s not really a substantial pension anymore,” Carmichael said.

Path to insolvency

The plan did not get into financial trouble because of any malfeasance, said Tim Piatt, lawyer for the plan’s trustees.

At one point decades ago, the Bricklayers plan was at or near 100% funding, and that actually contributed to its current woes, Piatt said. Under federal law, once plans reach that level of funding, contributions by employers are no longer tax deductible, he said. So the businesses cut back on paying into the pension.

The pension at that point also was required to increase its liabilities, meaning that benefits went up — and once increased, benefits were not allowed to be reduced, Piatt said.

That worked fine when the stock market had strong returns and union members had plenty of work, he said.

But stock market crashes and continuous attacks on the labor movement have taken a strong toll, Piatt said.

Union membership dropped. And increasing numbers of people who qualified for high benefits retired and started drawing from the pension plan, Piatt said.

In 2008, the Bricklayers plan was considered solvent but by a “razor thin” margin, Piatt said.

That also was the year of the Great Recession. The stock market plunged. Union work dried up.

And solvent became insolvent.

“2008 killed it,” Piatt said. In 2009, the Local 7 plan was declared to be in “critical status,” meaning it was not bringing in enough money to pay future benefits, he said.

“It’s gone down and down and down,” he said.

Federal legislation passed in 2014 now allows multi-employer pension plans to cut payouts to retirees to help keep the funds solvent. Other proposed federal legislation looks to shore up the troubled plans but so far nothing has passed.

Looking to Washington

Donohew said Washington has had at least 16 years to help troubled private pensions but “nobody’s done anything about it. They’re going to, they’re going to, they’re going to …”

The Pension Rights Center in Washington keeps tabs on pension issues and has been working to get meaningful reforms passed to help retirees stay whole. One proposal, the The Emergency Pension Plan Relief Act, was included in the Heroes Act that recently passed in the House and was sent to the Senate.

George Surgen, 68, a Randolph Township resident who retired about six years ago after 40 years as a journeyman bricklayer, said any government help may come too late to help him and others. He said his pension is set to be cut in October by two-thirds to about $700 a month. He noted that his monthly mortgage payment for the next eight years will be $800.

“I think I’ll still get by with my Social Security,” he said. Surgen said he’s trying to bank as much money as he can now, including no longer paying an extra $100 a month to pay down his mortgage, before his retirement money gets permanently slashed.

Meanwhile, Donohew noted that the federal government was able to find trillions of dollars to shore up the economy and help people during the ongoing coronavirus pandemic.

“Look at how much money they’re throwing away hoping it would stick,” he said.

But legislators so far have not been willing to outlay what would be significantly less money to help hundreds of thousands of people who depend on now-failing pension plans such as Bricklayers Local 7, he said.

Donohew has written to Sherrod Brown and Rob Portman — Ohio’s U.S. senators — as well as Rep. Anthony Gonzalez, R-Rocky River, his district representative in the U.S. House of Representatives. He’s held meetings at his home with fellow retirees.

“The workers in this country, they’re the backbone of this country,” Donohew said. “They’re not scamming people. They want to be self sufficient.”

Jim Mackinnon covers business. He can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com. Follow him @JimMackinnonABJ on Twitter or www.facebook.com/JimMackinnonABJ.