17 July 2019

Congress Could Cut Pensions in Ailing Plans

Share This Story
Congress could soon allow the benefits of current retirees to be cut as part of an agreement to address the fiscal distress confronting some of the nation’s 1,400 multi-employer pension plans. Several unions and pension advocates opposing the move, which would be unprecedented, say that permitting financially strapped plans to cut retiree benefits would violate the central promise of traditional pensions: that they would provide a defined benefit for life.

Several of the nation’s large multi-employer pension plans are on a course that would leave them insolvent within a decade. If that occurred, the federal insurance fund that protects the retirement benefits of more than 10 million Americans in multi-employer plans could collapse.

In a proposal made more than a year ago, a coalition of plan trustees and unions said the only way to salvage the most distressed pension plans without a government bailout is to allow them to cut retirement benefits before they run out of money. The reductions would be voted on by the trustees of individual plans, as well as retirees, under proposals being negotiated by lawmakers. Advocates point out that the plan laid out by the coalition would leave pensioners in distressed plans with more than what they would receive from government pension insurance if their plans failed.

In recent weeks, negotiations over the proposal have heated up on Capitol Hill. Still, some key elements are unresolved, including a way to satisfy objections from United Parcel Service, which withdrew from one of the most distressed plans in 2007 but would be on the hook to make up for any pension cuts affecting its retirees. If those details can be ironed out, congressional aides said an agreement is possible before the current session of Congress ends this month.

Multi-employer plans are formed by businesses and unions that join forces to provide pension coverage for working-class Americans, from truck drivers to grocery store clerks and construction workers. Their finances have suffered over the past decade in large part because of stock market plunges and a decline in employment and union membership, leaving the plans with a growing proportion of retirees to current workers.

Employees covered by the plan are part of a diminishing share of private-sector workers who are still covered by pensions that pay them a fixed percentage of their pay for the rest of their lives. The idea of allowing cuts to benefits now being paid to retirees is supported by some unions, even as it is adamantly opposed by others.

Since 1974, the federal law governing the nation’s private-sector pensions has prohibited cuts to the benefits of workers who have already retired — a precedent that is now endangered. Opponents have accused Congress of negotiating the deal “behind closed doors.” Also, while the general proposal has been aired in legislative hearings, they say the specific legislation now being hammered out has not.

Click here to access the full article on The Washington Post.

Join Our Online Community
Join the Better Way To Retire community and get access to applications, relevant research, groups and blogs. Let us help you Retire Better™
FamilyWealth Social News
Follow Us