It is truly unbelievable that the Joint Select Committee failed to produce a viable piece of legislation to protect the pensions for millions of Americans in Multiemployer pension systems by their self-imposed deadline (November 30th). I know that they’ve announced that they will continue talking, but talk is cheap, and as they play their collective fiddle, many Americans are seeing their financial futures go up in flames.
You may recall that earlier this year we wrote a post titled, “Let’s Focus On Carol” (8/22/18). Her story had been shared with me to highlight the potential impact to retirees who found themselves in struggling (failing) pension plans. Under MPRA, many plans have been seeking benefit cuts and more than a handful have been granted “relief”. Well, it is certainly no relief to the pensioners who are seeing their futures darkened.
Carol has shared with me an update on her situation.
“Well, I just got the letter from the PBGC confirming the cuts. It seems that between transferring the “original plan” to a new “successor plan” and taking 61% of my pension and a % from other retirees, the original plan will avoid running out of money in the future. So, on January 1, 2019, instead of my regular pre-taxed check of $2,249.00, I will receive a “new” pre-taxed check of $889.14. The way the letter is written, it almost sounds as if we should be happy that they found a way to keep Local 805 afloat. I am numb…. can’t even function. How could the government approve these cuts knowing that by doing so, they are putting people out on the streets? A cut of $20.00 a month is one thing, but cutting $1,359.86 from my income every single month will put me in an early grave (my emphasis). I feel like I’m living a nightmare….Is there any help for me after January 1st when the first cut comes?”
It truly is incredible (inconceivable?) that any government agency would permit the slashing of benefits to our retirees of this magnitude. Don’t they get that these individuals won’t have any recourse but to fall onto the social safety net, which they would absolutely prefer not to do? Furthermore, don’t they realize the potential impact on our economy from the lack of spending that will result from these terrible cuts?
Lastly, the draft legislation that has been floated calls for as much as $3 billion per year going to the PBGC to “sure up” this insurance fund and to meet future calls on this capital. If protecting the taxpayer was the rationale to not going forward with the Butch Lewis Act, how is a direct payment to the PBGC better than a 30-year loan to these struggling pension plans that would have protected the benefits for the pensioners in the critical and declining systems while extending the life of these plans? It certainly seems to me that loans totaling $30-$40 billion paid back in 30 years is far superior then paying the PBGC $3 billion per year with no cap on the number of years.
ALL THE RETIRES INVOLVED NEED TO BE IN WASHINGTON PROTESTING &JIMMY HOFFA SHOULD CALL A NATION WIDE STRIKE !!!!
I have thought the only way to get some evidence to the
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What sort of moderation
Unfortunately, the private sector has just about eliminated pensions for 401(k)s creating this level of pension envy that is extraordinary. Instead of trying to wreck the pension system, let’s figure out how to once again get pensions for everyone. The Butch Lewis Act would have been a great start, as it was a model that could work to support the public sector, too.
Why should pensioners whose companies are still in business suffer the same pain by Getting pensions cut as those whose companies when out of business 10 to 45 years ago and haven’t paid a dime into the pension plan since then?
Hi Robert – It is a very good question. However, the Butch Lewis Act legislation was designed to help all critical and declining plans and orphans within those plans. The proposed loan program would have worked and it was superior in design to just funding the PBGC to only help plans and their participants after they fail. It wasn’t a bailout, but any direct support of the PBGC certainly appears to be.
Central States actuaries stated that they needed 20-25 billion cash in addition to the 11-15 billion in bond proceeds under the Butch Lewis Act. Also there is absolutely NO guarantee that the investments would annualize 6.5% over a 30 year period as required for the Butch Lewis Act to “work”. Nevertheless, it is extremely dissapointing the the Joint Select Committee failed!
Good morning, Tom – Thank you for your comment, and you are correct to point out that three of the 114 critical and declining plans in the initial analysis still needed support from the PBGC. However, the additional support for those three plans was dramatically lower than that which would be required if all 114 plans were to fail. Furthermore, the 6.5% investment return used by Cheiron was much more conservative than the average 7.5% used by those plans today. In addition, because the loan proceeds were to be used to defease the retired lives and terminated vested participants, the investing horizon would have been greatly extended increasing the odds that the 6.5% hurdle would be achieved.
Hi Robert. I deferred 249,000.00 of my income into that plan over a 32 year period before my company filed bankruptcy I have not drawn a dime yet because I am not old enough. If you believe that I am the problem then please tell CSPF to give me back my money plus a very small return of 4 percent. That is about 600,000.00. Or do you think it is okay for you to take what I paid into the fund? Maybe we should ask your employer why they lobbied congress for 40 plus years not to raise PBGC a premiums. Their argument was. It is not needed ( We insure ourselves. When a company goes out of business then we will pick up the liabilities so let us keep our money instead of buying insurance). Also you should ask yourself this question. If my company goes under in the future am I okay with a 96 percent reduction to my pension ? You would be no different then than we are now
Davey, even assuming that your contributions were equal throughout the 32 years you would accumulate around 487k at 4%. But payments were significantly less 32 years ago, and have been increasing, so 400k is a better estimate. Even though your math is wrong, you do have a valid point.
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