New law lets some pension plans cut promised benefits
WASHINGTON, D.C. — For years we have heard about the threat of failed pension plans and what this will mean to the economy at large if these plans began to fail or lacked the funds to continue operations.
Many of these plans involved employees of government entities, where promises have not been kept, such as those in Detroit and elsewhere.
Often, governments offered substantial benefit programs to employees in lieu of salaries. So as the economy declined, pension plans became stressed.
While this article deals with private sector plans, the implications for these government plans are real and cannot be ignored.
For some retirees, Congress has played the Grinch this holiday season. Tucked into the recently passed federal spending bill were provisions to allow certain struggling multi–employer pension plans to reduce benefits already being received by retirees.
The move was the result of an alarm from the Pension Benefit Guarantee Corp. that multi–employer plans covering more than 1 million participants are substantially underfunded and, without legislative changes, will probably fail.
The deficit for PBGC’s multi–employer insurance program has jumped to $42.4 billion, up from $8.3 billion last year.
The PBGC said it has enough assets to meet the needs of plans in trouble, but there are insufficient funds to cover benefits for plans expected to run out of money in coming years.
The Pension Rights Center is getting calls and letters from people who are scared. They are the most vulnerable. They can’t go and get another job. They were told they would have a pension for the rest of their life, now this promise is in jeopardy.
But there are many retirees who don’t even know they are affected. The Department of Labor keeps a list of multi–employer plans that are in “critical” and “ in danger” status.
You can find the list by going to www.dol.gov and searching for “2014 Critical Status Notices.”
But just because a pension plan is on the list doesn’t mean there will be cuts to benefits. But it’s going to take a while for all of this to get settled.
The Pension Rights Center has a good summary of the pension provisions on its website at www.pensionrights.org. There also is a calculator to help you figure out how much your benefits might be cut.