Pensions. Going, Going …

As Congress prepares to finish up the $1.1. trillion spending bill required to keep the government open, a deal that will significantly impact pension plans is coming into focus. If you believe this deal is about ‘saving’ or ‘fixing’ pensions,  you haven’t been paying attention.Pensions and DoDosThe Congressional proposal would allow plans that are projected to run out of money in the next 10 to 20 years to cut the benefits they pay to both current and future retirees. Provisions include those that would raise premiums, allow troubled pension plans covering more than one employer to cut retiree benefits, allow troubled plans to merge with healthier plans, and double the insurance premiums employers pay the Pension Benefit Guaranty Corporation (PBGC), the government agency that insures pension plans.

How many people could be impacted by legislative changes? According to the Bureau of Labor Statistics, about a quarter of the roughly 40 million workers – primarily in the trucking, manufacturing and other industries – who participate in a traditional defined benefit plans are covered by multiemployer plans. A quick note, A multiemployer plan, sometimes referred to as a ‘Taft-Hardy’ plan, is a collectively bargained plan maintained by more than one employer, usually within the same or related industries, and a labor union. These PBGC insurance programs were created as part of ERISA in 1974 to protect retirees’ pension benefits.

An Analysis of Multiemployer Plans [Bureau of Labor Statistics]

Under the proposal, benefits would not be cut for disabled pensioners or those 80 years and older, while cuts would be lessened for those between 75 and 80. The PBGC projects that more than 10% of the roughly 1,400 multiemployer pension plans, which cover more than 1 million workers and retirees, currently meet this criteria. As the law is currently written, cutting the benefits of those who are already retired is off-limits. Instead, troubled multiemployer plans can take other actions, like reducing the benefits employees earn going forward and raising employee and employer contributions to the plan.

Supporters of the legislation opine that the benefit cuts, along with other changes included in the legislation, will help preserve the plans for both retirees and current workers. Opponents, such as the AARP and the Pension Rights Center, argue that the other measures should be taken before slashing benefits. An example of the potential impact to an individual? An example I have seen, for a retired truck driver that is covered by a multiemployer plan, notes that his pension would go from $40,000 to as low as $15,000.

Plots Against Pensions [RetirementSavvy]

A plausible case could likely be made that this action is needed now, particularly after the PBGC noted last month that their reserves are running dangerously low and many larger employers have pulled out of the multiemployer plans. However, anyone that has been following the many stories – I have been following the story of Detroit quite closely – detailing the state of both public and private pensions knows that this is just one point on a long arc, one that ends with the demise of public and private pensions.

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.


  1. Interesting…I agree that there will be no more pensions in the very near future. Even what we have currently may disappear. How unfortunate for all the people, like those in Detroit, that thought they could retire without worries of their pensions. My heart goes out to all of them that were blindsided with THAT news! All we can do is hope for the best and as SavvyJames says, find multiple streams of income so we won’t have to worry whether they take our pensions or not!

  2. Dear Lord, help us. All the more reason to plan our own future NOW, but what about those already collecting pensions?? We just say “tough bounce” and leave them to fall by the wayside? It’s ridiculous. Congress seriously needs to learn to live within its means.

    • “All the more reason to plan our own future NOW.” Exactly. It seems to me that the writing is on the wall with respect to pensions being a central component of a retirement plan. People need to understand what is going on with both private and public pensions and prepare themselves accordingly. My overarching suggestion is that people develop multiple streams of income, both during their working and retirement years, with the expectation that something negative – beyond their control – will impact one or more of them.

      Thanks for taking the time to stop by and kick off the conversation, Laurie.

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