Deal Would Cut Multiemployer Pension Benefits

Daily Herald (Arlington Heights, IL), December 11, 2014 | Go to article overview

Deal Would Cut Multiemployer Pension Benefits


Byline: Associated Press

WASHINGTON -- Retirees covered by financially troubled multiemployer pensions could soon see their benefits cut under a congressional spending deal to keep the government running.

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. George Miller, a California Democrat who worked the deal out with Rep. John Kline, a Minnesota Republican.

But it quickly drew fire from some labor unions and AARP, who denounced what they call backroom deal-making that will create hardships for older Americans. 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.

Q. What are multiemployer pension plans?

A. 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 Boston College's Center for Retirement Research.

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.

Q. How did things get so bad?

A. 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 Pension Benefit Guaranty Corp. The agency was established by Congress to take over failed and failing pensions when they run out of money.

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 $42.4 billion short of the money it would need to pay out pensions for plans that have failed or will fail. That's up from $8.3 billion in 2013.

The congressional proposal essentially shifts much of the risk from the government back onto the retirees and their funds.

Alicia H. Munnell, a Boston College professor and director of the school's Center for Retirement Research, says it was made out of desperation.

"They're at a point in time where it's impossible to cut benefits for new employees any further," she said. …

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