Congress Considers Drastic Cuts to Pension Plans
For the first time ever, Congress may move to cut pension benefits to current retirees. Proposed legislation, which would take the form of an amendment to a $1.1 trillion spending bill, would cut benefits for multiemployer plans, common in the grocery, trucking, and construction industries, and often managed jointly by employers and unions.
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Nasdaq reports that the bipartisan agreement was announced on a conference call with reporters on Tuesday night by Representatives John Kline (R., Minn.) and George Miller (D., Calif.), the chairman of House Committee on Education and the Workforce.
“We have a plan that first and foremost works for the members of the unions, the workers … and it works for the companies,” said Miller.
Many union members and retirees’ representatives disagree.
“After a lifetime of hard work to earn their pensions, retirees don’t deserve to receive a bad deal, in which they have had no say, cut behind closed doors and secluding the very people who would be impacted the most,” said Joyce Rogers, a senior vice president for AARP, in a statement.
Approximately 10 million workers participate in multiemployer plans — about a quarter of all workers who belong to defined benefit plans, which guarantee a monthly payment based on earnings, and are often sponsored by the employer rather than relying on contributions over time from workers, like 401ks.
Defined benefit plans are still subject to the whims of the market, however, and since 2008, many multiemployer plans have taken a hit. In addition, they’ve had to cope with the financial fallout from declining union enrollment. CNBC reports that the Department of Labor has notified participants in more than 600 multiemployer plans that they are in “critical or endangered status.” There are about 1400 plans total, according to the Pension Rights Center.
Single-employer pension holders wouldn’t be affected by this legislation, but it could set a precedent. And for multiemployer pensioners, the effects would be drastic: for some, up to 50 percent of their annual earnings. As Karen Friedman of the Pension Rights Center tells Bloomberg, it breaks promises that employers have made to their workers.
“It’s going to lead to a society where nobody can depend on anything,” she says.
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