In The News

NW Labor Press: Congress to weigh letting union pension plans cut benefits to remain solvent

Nov 12, 2013  |   

By DON McINTOSH, Associate Editor

More than 10 million American union members are banking on union-sponsored multiemployer pension plans to provide a secure retirement after a lifetime of work. But a fraction of those pension plans are at risk of insolvency thanks to massive financial market losses.

When pension plans run out of money, the government insurance agency known as the Pension Benefit Guaranty Corporation (PBGC) takes them over and pays out benefits. But PBGC doesn’t guarantee the full pension benefit: Its current maximum benefit for multiemployer pension plans is $12,870 a year for a worker retiring at age 65 with 30 years of service. In some cases that’s only a fraction of the benefits the workers were promised. And the agency itself is at risk of insolvency; one or two big multiemployer pension plan failures would burn through PBGC’s reserves, leaving only current premiums to pay pension benefits. In that scenario, retirees who now get $1,000 a month would get $125.

Making matters worse, under the law, participating employers have to make up for pension plan financial losses. And if they want to leave the plan while it’s underfunded, they must pay an exit fee, known as “withdrawal liability,” equal to the total amount needed to pay current and future benefits for their employees. Those requirements are putting stress on many small unionized employers, making it harder for them to compete on price, and causing some to go out of business. And when participating employers fail, responsibility for rescuing the pension plan falls to the remaining employers, which makes it more likely that they too will fail.

It is no longer feasible for employers to be the backup for stock market performance.” Carol Duncan, owner, General Sheet Metal, Clackamas, Oregon

All that has led a trade group representing union benefit plans to propose the formerly unthinkable: a bill in Congress to let distressed pension plans reduce benefits for all participants — even current retirees — in order to prevent the plans from going under.

“This is a crisis that’s going to affect people,” said Randy DeFrehn, executive director of the National Coordinating Committee for Multiemployer Plans (NCCMP). “And it can’t go on the way it is.”

In 2011, staff members from the relevant committees of the U.S. House and Senate approached DeFrehn’s group to come up with legislative recommendations. NCCMP formed a Retirement Security Review Commission, composed of dozens of representatives from more than 40 unions, union employer groups, and pension plans. After more than a year of study and debate, the Commission published a report: “Solutions not Bailouts: A Comprehensive Plan from Business and Labor to Safeguard Multiemployer Retirement Security, Protect Taxpayers and Spur Economic Growth.”

To read the full text of this story, click here

 

Posted 12:09PM on November 12 2013 by Jessica
Categories: SNB in the News