The ILWU Pension, Health and Welfare Plans

The 1984 coastwise strike laid the ILWU s foundation. The 1930s and 40s secured the Union and workers' rights in hiring and on the job. However, prior to the 1930s, there were no industry-wide pension or medical plans for active or retired workers, or paid vacations and holidays for actives. The employers had no obligation to retired workers. Workers who retired before the 1980s got nothing. Workers retiring after the 1980s received only a social security benefit from the government.

The ILWU, along with several other progressive unions such as the United Mineworkers and United Auto Workers, pioneered the establishment of health and welfare plans. The union achieved the first medical package for active longshore workers In December 1949. The 1951 contract brought the first negotiated pension language.

By creating these benefits the ILWU helped turn longshoring from a casual industry with casual workers into a lifetime job. We became a stable group of workers with a real investment to protect. Today the annual cost of the medical and pension benefits exceeds $200 million, funded almost entirely by the employers.

THE ILWU-PMA WELFARE PLAN

The agreement establishing the ILWU-PMA Welfare Plan set up a trust fund administered by a six person Board of Trustees --- three from the ILWU and three from the PMA.

The purpose of the joint-trust fund is to receive employer and employee contributions from which benefits are paid. The benefits, that is the cost of doctors' services, hospital stays, laboratory tests, dental work, etc., are paid either directly out of the fund or a premium is paid to an insurance company or health maintenance organization that in turn pays the doctor, hospital, etc

The ILWU-PMA Welfare Plan was one of the first welfare plans in the country that attempted to prevent illness rather than only treating an illness after it develops. Most welfare plans at the time (and through the 1960s and 1970s), such as those offered by Blue Cross, paid doctors for treating illnesses, but not for regular checkups and examinations. So doctors were financially rewarded for treating sick people, but not for keeping them healthy in the first place.

The ILWU reversed this fee-for-service system. In its HMO plan a flat per person fee was negotiated with the doctors and hospitals serving ILWU members. Under this arrangement, the doctor or hospital received the same payment whether the covered person was sick or well. It reversed the incentive so that it was more economical for doctors and hospitals to keep their patients healthy though regular checkups and examinations.

As an alternative to HMO's the union later negotiated an indemnity plan allowing participants to choose any health provider. This plan pays 80 percent of the usual, customary and reasonable fee (UCR) and the participants pay 20 percent. Recently the union added a Preferred Provider Plan (PPO) in which the PPO pays 90 percent of a fee structure negotiated with the provider and the member pays ten percent.

Throughout the years the ILWU negotiated improvements to the ILWU-PMA Welfare Plan, such as raising limits and adding new benefits like dependents' medical coverage, the first dental care benefit in the country, life insurance, an accidental death benefit, prescription drugs, the alcohol and drug recovery program and well baby care.

MAINTENANCE OF BENEFITS (MOB)

A major difference between the Pension Trust and the Health and Welfare Trust is that the pension trust has funding and vesting requirements imposed by the government. But the government does not require any specific funding level for the Health and Welfare trust. This makes health and welfare maintenance of benefits (MOB) extremely important.

Beginning in the mid-1970s when inflation started taking off, and particularly in the 1980s when health care inflation sky-rocketed, the ILWU came under a lot of pressure to restrain health care costs. During this time, workers around the country including many unionized workers, were being hit with increasing deductibles, co-insurance in greater and greater amounts and benefit cut backs.

The longshore division of the ILWU was able to resist these take aways by standing firm in negotiations and bringing cost saving improvements like the PPO plan, prescription solutions and case management that benefit our members and the plan.

In the beginning the union negotiated a benefit and a method of funding it. Later the concept of negotiating a benefit and letting the employer figure out how to pay for it became the cornerstone of our plan. Most unions negotiate a money figure to pay for the benefit. 

If that does not cover the cost of the benefits actually needed, benefits may be cut. The ILWU's progressive strategy was to negotiate the benefit and whatever it costs, the employers must pay for it. The rank and file has made very clear to its negotiating committees and the employers that this maintenance of benefits was and is a strike issue.

THE ILWU-PMA PENSION PLAN

The agreement establishing the multi-employer ILWU-PMA Pension Plan, like the welfare plan, setup a trust fund administered by a six person Board of Trustees --- three from the ILWU and three from the PMA.

The first retirements under the ILWU-PMA Pension Plan were In 1952 when 1,175 individuals were awarded a pension benefit. Today there are more than 8,000 retired longshore division workers and surviving spouses.

The first retirement benefits in 1952 went to the work force that fought and won the 1934 strike. It was $100 a month from the pension trust. Some old timers whose fathers retired under this contract remarked that their dads thought this was an amazing amount of money to receive for not going to work anymore. Establishing the pension locked the employers into a new benefit that through negotiations increased over the years.

The original pension benefit was subject to reduction if the funds to pay the benefits fell short. Today, the Employee Retirement Income Security Act (ERISA), enacted in 1974, prohibits reductions in pension benefits. The monthly pension benefit of $100 in 1952 was about 48 times the hourly straight-time wage rate of $2.10.

The maximum benefit available now under the ILWU-PMA Pension Plan is $2,520. This benefit is nearly 100 times the hourly straight-time wage rate. Clearly, the benefits under the ILWU-PMA pension plan have increased at a faster rate than the wage rate.

In the years that followed, up to and including the present, the Pension Plan was improved by increasing benefits, liberalizing eligibility criteria so that more workers could receive a benefit, and adding new benefits like the 50 percent widow's benefit. In 1993 the ILWU negotiated the largest pension increase ever The benefit jumped from $39 per month per year of service to $69.

One unique aspect of ILWU pension negotiations is that we address the pension benefits of existing retirees. Individuals who retired between 1966 and 1971 with a $285 per month pension benefit have seen that benefit raised to $1,100. 

In most industries --- union and non-union alike --- whatever amount someone retires with is what they get for the rest of their life. We always have and always will honor our obligation to our pensioners and widows.

PENSION PLAN FUNDING

The ILWU-PMA Pension Plan, up until recent years, was poorly funded. In 1966 the plan had liabilities- (benefits promised to active and retired participants) equal to about $204 million. The plan had assets of only $41.5 million, or about $1 for every $5 in promised benefits. In other words, the plan was 20 percent funded. 

By 1988 the liabilities had increased to $731 million (due to higher and better pension benefits negotiated by the ILWU) and the assets had increased to $214 million. The funded portion of the plan increased from 20 percent in 1966 to 29 percent in 1983.

In 1984 the ILWU and PMA sought an exemption from the Pension Benefit Guarantee Corporation, the government agency overseeing pension plans, from the employer withdrawal rules so that the rules in effect for the construction industry would apply to the ILWU-PMA Pension Plan.

This exception was granted, but the requirements were that the funded level of the plan must be improved (by a set schedule) so that by 2004 the plan would be at least 80 percent funded and the annual employer contributions would not be less than the administrative expense and the cost of pension benefits paid for that year

As a result of this accelerated funding schedule, and the earnings from investments remaining in the plan, the Pension Plan has reached the point where it is now fully funded. 

That is, for every dollar of benefit promised to a retiree or active worker there is at least a dollar in assets. From 1983 to 1998 the Pension Plan went from 29 percent funded to 100 percent funded. The assets in the Pension Plan are approximately $2 billion, while the liabilities are approximately $1.8 billion.

The agreement with the PBGC was amended in 1998 to immediately increase the funding floor to 85 percent and to eliminate the requirement that the employers contributions for each Plan Year could not be less than the total of administrative costs and pensions benefits paid during the Plan Year. 

The employers are still obligated to follow ERISA guidelines, but we must make sure that we, as well as the employers, benefit from the 1998 amendment.

The ILWU has always been visionary in designing pension and medical benefits. Today we again have the opportunity to make major gains in the pension and funding for our medical benefits. We have a fight on our hands to ensure that our benefits package continues to meet out needs and the needs of our families.

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This article from the "Dispatcher" is the third in a series about central issues in upcoming longshore contract negotiations under preparation by the members of the Longshore Education Committee: 

Joe Wenzl (19), Art Almeida (13, retired), David Arian (13) Dennis Brueckner (54), Kevin Clark (40), John Bush (200), and Coast Committeeman Ray Ortiz. Research arid editorial assistance provided by Steve Stallone, Dispatcher Editor, Russ Bargmann, ILWU Research Director and George Romero, ILWU Benefits Specialist.