The following was found on the U.S. Department of the Treasury’s website:
“On December 16, 2014, the Kline-Miller Multiemployer Pension Reform Act of 2014 (MPRA) was enacted into law. In MPRA, Congress established a new process for multiemployer pension plans to propose a temporary or permanent reduction of pension benefits if a plan is projected to run out of money before paying all promised benefits.
MPRA requires the Treasury Department, in consultation with the Pension Benefit Guaranty Corporation (PBGC) and the Department of Labor, to review a multiemployer pension plan’s application to reduce benefits and determine whether it meets the requirements set by Congress.”
The idea of proposing a “temporary or permanent reduction” sounds so simple and almost painless; as if the reduction is nothing more than a slight tax increase. But, the pain inflicted on these innocent participants is real and in many cases, devastating to the pensioner’s financial and psychological well-being, as we’ve heard of situations in which the benefits have been slashed by more than 50%!!
You may recall that we’ve written about Carol (blog posts from 8/22 and 12/3), who is a member of Local 805. Carol was given an early retirement (she worked for 26 years for Panasonic) with the promise of $2,600/month for life. Unfortunately, Local 805’s pension system filed for benefit relief under MPRA, and it has resulted in Carol’s monthly pension being slashed from $2,600 to $1,022 per month, an incredible 61% decline! The reduction was to begin in January 2019.
We’ve just heard from Carol, who shared with us the latest in her unimaginable saga. These are her words: “This afternoon, I went to the bank to see if they could check on the reason my pension check didn’t post yet. I called the pension first, and they said that it must be a problem with the bank. Anyway, I have been afraid to see it in print, but I had a good week to keep repeating the amount I will get….$889.14. That is $1022.00-13%. My forever check was $2262.00, which was $2600.-13% So the bank officer said here it is, it just posted..Local 805 Union in the amount of $671.45. To say I had a meltdown is putting it mildly! I started arguing with the guy, and then I broke down in tears…he couldn’t understand me…I was shaking…I felt physically sick. He got me a glass of water and I sat there talking outloud to myself for a while. Then I pulled out my phone and called the union. I got the same girl as I did earlier. She asked for my SS# then got back on the line and said in a jovial voice, “Oh, I see what they did…you were getting $338.00 deducted from each check for taxes”…I said yes I know…13%, so I figured my new amount deducting 13% and it should be $889.14. So she said, “well I guess instead of figuring it out, they just carried over the amount you always had deducted”..I was screaming at her…I said this will barely pay my gas and electric…how could you take over $200.0 more out of a pension that was already cut 61%? She said it wasn’t them, it was the government…she will send me a form I have to fill out, mail to the tax department and they will change it!’ How screwed up is that? Who the hell knows if I will get that $217.69. I’m done… I’m just done. I should be able to sleep because I’ve been living on cat naps, but I cant. Thanks for being here because I had to let it out…it won’t change things, but I still had to vent.”
The ability to significantly reduce a beneficiary’s pension is an incredibly callous action with absolutely no regard for the individual’s future. The fact that Congress has permitted this action is unacceptable. I guess that we shouldn’t hold out much hope that they will see the error of their ways and finally pass legislation that will help preserve and protect the potentially millions of “Carols” that are facing a similar fate. The longer that they delay (where are we with the Joint Select Committee on Solvency of Multiemployer pension plans?) the more likely that we will see the list of critical and declining plans expand.
Furthermore, we are more than 10 years into a stock market recovery that is showing signs of exhaustion. Funded status hasn’t improved much during this recovery despite outsized equity returns. Just how devastating will another market correction be on these plans and pensioners? We need action now, as Carol, and millions more, are counting on us to remedy this nightmarish situation. There is a retirement crisis that needs our attention. Will you be part of the solution?