Thursday, December 4, 2014

Congress could soon allow pension plans to cut benefits for current retirees...From the Washington Post

 Congress could soon allow pension plans to cut benefits for current retirees
Michael A. Fletcher
© Paul Sancya/AP Photo In a Thursday, July 3, 2014 file photo, Detroit retirees Mike Shane, left, and William Davis protest near the federal courthouse in Detroit. Workers and retirees approved pension cuts in Detroit's bankruptcy by a landslide, the city reported Monday, a crucial step to emerging from the largest municipal…

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.

“This proposal would devastate retirees and their surviving spouses,” said Karen Friedman, executive vice president of the Pension Rights Center, a nonprofit group. “The proposal would also torpedo basic protections of the federal private pension law . . . that states that once benefits are earned they can’t be cut back.”

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 now 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.

“The plans that are headed for insolvency would have benefit cuts under existing law,” said Randy G. DeFrehn, executive director of the National Coordinating Committee on Multiemployer Plans. “At least this proposal would preserve benefits above existing law.”

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 UPS, 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.

“Members are still discussing the details about a possible legislative solution to the multiemployer pension crisis and remain hopeful Congress will act before the end of the year,” said a bipartisan statement for the House Committee on Education and the Workforce. “Any decisions regarding how a possible solution might move through the legislative process will be made by leadership at the appropriate time.”

Multi-employer plans are formed by businesses and unions that join forces to provide pension coverage for a wide range of 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 share 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.

This is nothing less than a declaration of war by Congress on American retirees,” said R. Thomas Buffenbarger, international president of the International Association of Machinists and Aerospace Workers. “Allowing cuts to existing retirees’ pensions is simply the wrong way to address the problems of a few troubled pension plans. . . . The long-standing promise of a secure pension system must not be overturned by unaccountable lawmakers in a lame duck session of Congress.”

Since 1974, the federal law governing the nation’s private-sector pensions have 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.

“Retirees, most of whom are living on modest incomes, have few alternatives, and no ability to plan for or absorb cuts in their benefits,” said Joyce Rogers, senior vice president of government affairs for AARP, the lobbying group for older Americans. “Before demanding reductions in the pension income of current retirees, Congress should first require the key stakeholders to take every possible action permitted under current law to restore their plans to solvency.”



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Stealth Bill Would Allow Cuts to Current Pensions

October 22, 2013 / Jane Slaughter

UPDATE: Congress is holding hearings today on changing ERISA to allow cuts to the pensions of those already retired. In a surprise turnaround, the Teamsters union has come out against the cuts. Problems in the Teamsters' huge Central States Pension Fund were a big impetus for the proposed changes described below.

To watch the hearings, click here. You can also contact Congress members from the same site.

Congress is taking up a little-publicized proposal that would leave some pensioners high and dry.

Current law says pension plans can’t cut the pensions of those already retired. But some multi-employer plans are in big trouble, so their unions and employers are uniting to lobby for the right to slash members’ benefits.

“Until now,” said Karen Ferguson of the Pension Rights Center, “it was unheard of that benefits of a multi-employer retiree would be cut, except in the very rare instance that their pension plan runs out of money.” Multi-employer plans are more likely to be healthy than single-employer plans, precisely because they aren’t dependent on one company.

But a coordinating committee for multi-employer plans, a group that includes both unions and employers, is pushing for what it calls a “solution” for “deeply troubled plans”: the right to preemptively cut promised benefits for everyone in their plans, including those already retired.

Multi-employer pension plans represent 10 million workers in construction, mines, grocery, hotels, health care, and Teamster employers. The plans had worked well for 40 years, and 60 percent are still in good shape. But others could run out of money in 15 to 20 years, hit by employer pull-outs, stock market reverses, deregulation, globalization, deunionization, and low interest rates.

The Teamsters’ Central States Fund, with members in 24 states from the South to the Midwest, is the poster child for an ailing plan. Deregulation of trucking brought hundreds of non-union companies into the industry and drove most union firms out, thus reducing contributions into the fund and to Teamster plans in other regions.

The union failed to organize the non-union companies and even let the largest contributor, UPS, pull 45,000 workers out of Central States in 2007 in exchange for a big one-time payment. There are now 62,000 active workers in the fund and 211,000 retirees.

Central States is one of the architects of the proposal that Congress may take up before the end of the year.

THE RIGHT TO SLASH NOW

Under the 2006 Pension Protection Act, which is up for renewal next March, if a plan goes bust, the Pension Benefit Guaranty Corporation (PBGC), a government agency, takes over paying out benefits—though these are cut to the bone.

The top amount the PBGC will guarantee currently for a multi-employer fund member is $12,870 a year, for someone who’s worked 30 years (much less for others). This is true even if the union had negotiated a decent pension of, say, $36,000 a year.

Both the Teamsters and employers such as UPS are saying that, to forestall that scenario for troubled funds later, benefits should be cut now.

Ferguson counters, “If the economy turns around in 10 or 15 years and the plans become healthy again, those who got their benefits cut now will be dead, literally.”

She argues that if the pension fund can’t be saved and will have to turn to the PBGC eventually anyway, then it’s a lot better to keep paying full benefits and spend down the assets, rather than cutting preemptively and subjecting thousand of retirees to poverty in their last years.

The proposal on its way to Congress would give plan trustees the authority to cut pensions now to 110 percent of the PBGC-guaranteed figure, or $14,157 a year for the best-off.

A ROSY VIEW

It’s ironic that the premiums and guarantee levels originally set up for the PBGC assumed that multi-employer pension plans would always remain in good shape. Employers in such plans pay premiums to the PBGC of just $12 per year per worker, while those in single-employer plans pay $42. If a single employer goes bust, the maximum its workers can get from the PBGC is $27,500, more than twice the level for those in multi-employer plans.

Ferguson said the proposal has been heavily lobbied for and has support from both parties in both houses of Congress. The Teamsters for a Democratic Union (TDU) caucus, the Machinists, and some other unions are opposing it, along with the AARP.

Sandy Pope represents Teamsters at dozens of small shops in New York—precisely the workers who would be hurt by the changes. She’s angry that her international is going for preemptive concessions. “When we bargain, we ask for $2 when we hope for $1,” Pope said. “Here they’re leading with what should be a last resort.”

TDU member Dave Scheidt, who worked at Roadway, wants the government to step in, but not this way. He noted, “In 1980 our government put deregulation of trucking in place and that’s what brought this about.”

Pope thinks the government should increase premiums and fund the PBGC adequately.

Of course, those with defined-benefit pensions from any source are a minority now. “With all the baby boomers with crappy 401(k)s,” Pope said, “people have their heads in the sand about what the economy is going to look like 10 years from now. Giving people their pensions now would help.”

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