Treasury OKs First Pension Benefit Cuts by Financially Troubled Multi-Employer Plan
The U.S. Treasury, acting under a controversial law approved in a lame-duck congressional session in 2014, has approved the first benefit cuts for current retirees and survivors who depend on a financially troubled multi-employer pension plan.
But the cuts, affecting almost 1,000 pensioners and their families at Ironworkers Local 17 in Cleveland, will take effect only if a majority of the plan’s 1,995 beneficiaries vote for them in this month’s election. Ballots are due at the union office by Jan. 20. The catch is that any recipient – retiree or survivor – who doesn’t vote will be counted as a “yes” vote for the cuts.
And the second catch, the pension plan trustees point out, in their letter to the retirees on Local 17’s website, is the alternative: The plan will go broke by 2024. Then their pensions would depend on a federal agency, the Pension Benefit Guaranty Corp., which would cut the payouts, predicted to average 20 percent under the trustees’ proposal, even more.
The 2014 law lets boards of financially failing multi-employer pension plans seek Treasury OK to cut current benefits for retirees and their families in order to keep the plans alive and solvent for future retirees. The controversial law has nationwide impact.
Multi-employer pension plans cover an estimated 10 million workers, including Ironworkers, grocery workers, Teamsters and more. Hundreds of thousands of retirees and survivors – estimates vary -- are in financially failing plans.
Those are the plans that can seek cuts for current retirees and survivors. But plan trustees must prove their cuts would keep the pension plan solvent. The first – and largest – plan to try to prove its case, the Teamsters’ giant Central and Southern States fund, flunked. And its trustees’ request caused a nationwide uproar among Teamsters members.
Ironworkers Local 17 is the first request that passed. Treasury agreed its multi-employer plan would run out of money unless it could cut payments to current beneficiaries. So Treasury OKed the cuts, saying Local 17 trustees proved slashes would keep the plan solvent.
The average cut for current Local 17 retirees would be 20 percent, from $1,401 down to $1,120 monthly, the local said. The plan now serves 1,995 retirees or surviving spouses.
If the cuts pass, they’d take effect starting Feb. 1. But 52 percent (1,029 people) will see no cuts, Local 17 added. Those beneficiaries fall under various exemptions written into the 2014 law, such as for disabled workers, or for recipients aged 80 and older. Others will see cuts of varying sizes. For example, 265 (13 percent) will see cuts of 20 percent-30 percent while 30 people – fewer than 2 percent – will suffer the biggest cuts, 50 percent to 60 percent.
Three other multi-employer plans have pending cut requests: Bricklayers Local 5, also in Cleveland, Bricklayers Local 7 on Long Island, and the Automotive Industries Pension Fund, which covers the East Bay Automotive Machinists Lodge 1546 in Oakland, Calif. That lodge’s parent union, the Machinists, also strongly opposed the 2014 law. And Lodge 1546’s cut request has drawn the most flak since the Teamsters brouhaha: 284 comments to the feds.
“I think it is an utter travesty to be invested in the plan and to be told you can depend on it being there for you for the rest of your life, and then, a few years later, you are told it is not or that you are going to be reduced 61 percent,” wrote one Lodge 1546 retiree, Verne Pickrell Jr., from Emmett, Idaho.
“I have no other means of income, active or passive, other than my union pension and SSDI benefits to live on and I am unemployable” due to disabilities, added another, Raymond Pasquini, 64, of Douglas City, Calif. “It is difficult enough for me now with the benefits I am currently receiving, however, if they are cut it would be an undue and unfair burden resulting in catastrophe.”
Then Pasquini linked his plan’s problems to the larger causes that threw multi-employer plans into the red – and that led to the legislation.
“We worked hard and diligently all our lives and paid our dues and contributed to our pensions along with our employers. However, it is the managers and trustees, the Wall Street fund managers they used, and the federal government that fell asleep at the wheel and caused most of the pension fund's financial problems. They should be made to resolve this matter in favor of current and future retirees,” he wrote to Treasury, protesting the planned cuts.
“Please reject this effort to cut my pension by 60 percent,” pleaded Local 1546 retiree Dennis Siebert of Cape Coral, Fla. “My family is dependent on this income.” And Siebert, too, denounced “allowing the big banks and hedge fund managers to keep these funds while us older pensions pass away, one by one, living in poverty.”
