Multiemployer Pensions Could Face Cuts
Architects of the proposal said it was the best way to keep the pension plans viable and benefits flowing to retirees.
"We have a plan here that first and foremost works for the members of the unions, the workers in these companies and it works for the companies," said Rep.
But it quickly drew fire from some labor unions and
A vote on the overall spending plan was expected before week's end.
Some questions and answers about multiemployer pension plans and the impact of the congressional move.
WHAT ARE MULTIEMPLOYER PENSION PLANS?
These plans are usually found in industries that have many small employers that would not ordinarily put together a pension plan on their own, according to a report from
More than 10 million people are covered by the plans, which involve agreements between labor unions and a group of companies. Many plans cover those who work in construction, but they are also can be found in the transportation, retail and trade sectors.
All told, there are about 1,400 multiemployer pension plans.
HOW DID THINGS GET SO BAD?
About 150 to 200 of these plans covering 1.5 million people are in financial trouble and could become insolvent within a few years, according to estimates from the
The plans were once thought to be secure, but a decline in unionization and financial crises like the Great Recession have left them with fewer workers to pay into them.
The PBGC says it's about
The congressional proposal essentially shifts much of the risk from the government back onto the retirees and their funds.
"They're at a point in time where it's impossible to cut benefits for new employees any further," she said. "It's sort of impossible to ask employers for any more money, so the question is what do you do?
"It's a place where there's no good options."
WHAT KIND OF CUTS ARE LOOMING?
This can vary widely, depending in large part on the financial condition of the plan and the wages paid in the industry.
"We have plans where a 10 percent cut will be enough to allow them to survive and thrive," said
In other cases, cuts as high as 30 percent may be necessary.
Some cuts may eventually be restored. That depends on factors like the industry, the plan's location and how much trouble it was in when the cuts were made.
"It's a function of a lot of different things," DeFrehn said.
People will know whether their plans face a cut because they will have to vote on the cuts.
WHAT ABOUT OTHER PENSION PLANS?
Single-employer pension plans are much more common, covering about 31 million workers and retirees in around 22,300 plans.
The PBGC said in June that it was "highly unlikely" that its single employer program would run out of funds in the next decade.
The improving economy, better market returns and an
"It's a well-functioning pension insurance program, it's adequately funded, it's in fine shape," Munnell said.
The PBGC does not guarantee government pensions, and those were targeted for cuts in the
"In the end, the cuts to pensions in
WHAT'S THE REACTION?
Among unions, it's mixed.
The
"Today, we have seen the ugly side of political backroom dealings as thousands of retirees may have their pensions threatened by proposed legislation that reportedly contains massive benefit cuts," said
The
Murphy reported from
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