Some union workers and retirees need to be particularly
concerned about the solvency of their pension plans. At issue are multiemployer
plans, common in transportation, construction and some other industries, that
cover workers from many companies. Problems in some large multiemployer plans
are so severe that they are likely to bankrupt the federal safety-net
program for those pensions within the next decade, according the
government’s Pension Benefit Guaranty Corp.
The dire conditions reported in the PBGC’s 2014 annual report raise
the pressure on Congress to address the looming crisis. The PBGC report,
released Monday, didn’t name the troubled plans, but two have previously been
identified as a United Mine Workers plan and a Teamsters Central States plan.
Last year, a commission that included representatives from
employer and labor organizations issued a proposal to deal with the crisis that
would include the extreme step of cutting pension benefits for some current
retirees in the most troubled plans.
The Center for Retirement Research at Boston College
recently examined the possible effects of pension cuts for current retirees in
those struggling plans, using the Central States Teamsters plan as an example.
Its analysis, published last month, concluded that a 30% benefit cut on
average could allow the Teamsters plan “to remain solvent indefinitely and
increase the aggregate welfare of plan participants.”
The Boston College report noted that benefit cuts to current
retirees will occur in any case in the event of plan insolvency, and will be
more severe if the insolvency occurs after the exhaustion of the PBGC’s
multiemployer insurance fund.
The executive director of the Teamsters Central States
pension fund, Tom Nyhan, said Monday that the PBGC report underscores the need
for legislation to help his plan avoid insolvency.
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