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Check this out from Mark Miller of The New York Times. Thanks to Mark for an informative story that was accurate and balanced!
Saving One Million Pensions
A special congressional committee is racing to head off an insolvency crisis, one that could lead to sharp cuts in pension benefits for over a million workers and retirees, and sink a federally sponsored insurance backup program.
The problem centers on so-called multiemployer pension plans. Over 10 million workers and retirees are covered by 1,400 of these plans, which are created under collective bargaining agreements and jointly funded by groups of employers in industries like construction, trucking, mining and food retailing.
Plans covering 1.3 million workers and retirees are severely underfunded — the result of stock market crashes in 2001 and 2008-9, and industrial decline that led to consolidation and sliding employment. Cheiron Inc., an actuarial consulting firm, recently forecast that 121 plans might fail within 20 years. Plans are underfunded by a total of $48.9 billion, the firm estimated. Three plans alone account for 65 percent of all unfunded liabilities, led by the Teamsters’ Central States fund, which is falling short by $22.9 billion.
Meanwhile, the Pension Benefit Guaranty Corporation, the federally sponsored insurance backstop for defunct plans, projects that its multiemployer insurance program will run out of money by the end of the 2025 fiscal year, absent reforms.
Congress approved an overhaul in 2014, the Multiemployer Pension Reform Act, but the legislation has faced strong resistance from retiree organizations, consumer groups and some labor unions.
The act allows troubled plans to seek government permission to make deep benefit cuts, if they can show that the reductions would prolong the life of the plan. Benefit cuts vary widely depending on what a plan proposes and the tenure of the worker — but a worker with 25 years of service and a $2,000 monthly benefit could see that benefit cut to as low as $983, according to a cutback calculator created by the Pension Rights Center, an advocacy group. To date, nine plan restructurings have been approved.
This year, the special congressional committee appointed to create a replacement for the pension reform act missed an end-of-November deadline to issue its recommendation. But a draft proposal raises the guaranteed minimum benefits paid by the Pension Benefit Guaranty Corporation if a plan fails. It also would inject federal funds into the agency — perhaps $3 billion annually — to expand its partition program, which allows it to take on benefit payments to so-called orphans — people who earned benefits from employers who have dropped out of plans, often because they have gone out of business.
“It would rely less on cutting benefits, and more on raising money from existing pension plans and taxpayers,” says Joshua Gotbaum, a guest scholar at the Brookings Institution and a former director of the federal pension backstop.
The sticking points in the discussion have included the assumptions used to measure plan liabilities, and how much respective stakeholders, including the government, should contribute to maintain a viable multiemployer system, says Karen Friedman, executive vice president of the Pension Rights Center. “We’re hoping they can find a fair, comprehensive solution that can save these plans, the P.B.G.C. and protect workers and retirees.”
Read the rest of Mark's story by clicking on the link below...
https://www.nytimes.com/2018/12/20/...l?smprod=nytcore-ipad&smid=nytcore-ipad-share
#1
Check this out from Mark Miller of The New York Times. Thanks to Mark for an informative story that was accurate and balanced!
Saving One Million Pensions
A special congressional committee is racing to head off an insolvency crisis, one that could lead to sharp cuts in pension benefits for over a million workers and retirees, and sink a federally sponsored insurance backup program.
The problem centers on so-called multiemployer pension plans. Over 10 million workers and retirees are covered by 1,400 of these plans, which are created under collective bargaining agreements and jointly funded by groups of employers in industries like construction, trucking, mining and food retailing.
Plans covering 1.3 million workers and retirees are severely underfunded — the result of stock market crashes in 2001 and 2008-9, and industrial decline that led to consolidation and sliding employment. Cheiron Inc., an actuarial consulting firm, recently forecast that 121 plans might fail within 20 years. Plans are underfunded by a total of $48.9 billion, the firm estimated. Three plans alone account for 65 percent of all unfunded liabilities, led by the Teamsters’ Central States fund, which is falling short by $22.9 billion.
Meanwhile, the Pension Benefit Guaranty Corporation, the federally sponsored insurance backstop for defunct plans, projects that its multiemployer insurance program will run out of money by the end of the 2025 fiscal year, absent reforms.
Congress approved an overhaul in 2014, the Multiemployer Pension Reform Act, but the legislation has faced strong resistance from retiree organizations, consumer groups and some labor unions.
The act allows troubled plans to seek government permission to make deep benefit cuts, if they can show that the reductions would prolong the life of the plan. Benefit cuts vary widely depending on what a plan proposes and the tenure of the worker — but a worker with 25 years of service and a $2,000 monthly benefit could see that benefit cut to as low as $983, according to a cutback calculator created by the Pension Rights Center, an advocacy group. To date, nine plan restructurings have been approved.
This year, the special congressional committee appointed to create a replacement for the pension reform act missed an end-of-November deadline to issue its recommendation. But a draft proposal raises the guaranteed minimum benefits paid by the Pension Benefit Guaranty Corporation if a plan fails. It also would inject federal funds into the agency — perhaps $3 billion annually — to expand its partition program, which allows it to take on benefit payments to so-called orphans — people who earned benefits from employers who have dropped out of plans, often because they have gone out of business.
“It would rely less on cutting benefits, and more on raising money from existing pension plans and taxpayers,” says Joshua Gotbaum, a guest scholar at the Brookings Institution and a former director of the federal pension backstop.
The sticking points in the discussion have included the assumptions used to measure plan liabilities, and how much respective stakeholders, including the government, should contribute to maintain a viable multiemployer system, says Karen Friedman, executive vice president of the Pension Rights Center. “We’re hoping they can find a fair, comprehensive solution that can save these plans, the P.B.G.C. and protect workers and retirees.”
Read the rest of Mark's story by clicking on the link below...
https://www.nytimes.com/2018/12/20/...l?smprod=nytcore-ipad&smid=nytcore-ipad-share