CHARLOTTE, N.C. ( TheStreet) -- As the Teamsters union seeks to raid mechanics at US Airways (LCC), the toughest question the union has to answer concerns the impact that a change could have on the mechanics' pensions.
The International Association of Machinists provides members, including 3,500 US Airways mechanics, access to the IAM National Pension Fund, the fifth-largest multi-employer pension fund in the U.S. which has a record of strong performance. By contrast, the biggest Teamster pension plan, the Central States fund, is troubled, although the International Brotherhood of Teamsters said US Airways mechanics would be able to choose among hundreds of other Teamster pension funds if the Teamsters win a union election.
Not only is the IAM fund financially strong but also the IAM has battled to preserve members' access to it, most notably at United (UAL - Get Report), which emerged from bankruptcy in 2006 with only IAM-represented fleet service workers and passenger service agents still covered by a defined benefit pension plan. In 2010, United merged with Continental, which provided a corporate defined benefit pension plan to its workers; ongoing contract negotiations will determine the future of that plan.
Three weeks ago, the International Brotherhood of Teamsters announced that it had filed enough signatures with the National Mediation Board to prompt a union election among US Airways mechanics. On Tuesday, the IBT said it had also filed with the NMB for an election among American mechanics, who are represented by the Transport Workers Union. The IBT is not part of the AFL-CIO, which prohibits members from raiding other members.Pension funding is a controversial issue. Central States, like many corporate plans, is considered to be underfunded, partially as a result of historically low interest rates, which under accounting standards are the basis for computing the future value of the plans. However, even applying these standards, the IAM National Pension Fund is funded at 106%, fund director Steve Sleigh said in an interview. "We're strong because we have a diverse membership base and we don't have a single concentration from one industry or region," Sleigh said. "We have a very strong contribution base, which is a key thing in these multiemployer funds. Because of our diversification across the country, we continually have new employers joining."
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts