Why do we need pension reform? Here is another example of action being taken by a pension system as it tries to protect what little is left in the pot. The Teamsters’ Building Material Drivers Local 436 Pension Fund of Valley View, Ohio, has applied to the Treasury Department for a reduction in benefits under the Multiemployer Pension Reform Act of 2014 (MPRA). Without these cuts, the plan is expected to deplete the fund’s assets by 2023.
Under the board of trustees’ proposed reduction plan, the benefits of plan participants would be reduced to 110% of the Pension Benefit Guaranty Corporation (PBGC) guarantee, which is the maximum reduction in benefits allowable by law (aren’t they so generous). Remember, this is a multiemployer plan, and not a single employer plan that has the PBGC protecting benefits to as much as $67,295/year for a 65-year-old. No, the benefits are protected at just $12,875 for a 30-year veteran at age 65. Shocking? Absolutely!
There are some minor exceptions to how much the benefits can be cut. For instance, excluded in the benefits reduction under federal law are disabled participants and their beneficiaries, and participants who are at least 80 years old on May 31, 2021. The benefits of participants who are at least 75 years old as of that date, and their beneficiaries, are partially protected, and the older the person is, the less the benefits can be reduced. How magnanimous!
Can you imagine investing more than 30 years in a career only to be told that your promised benefits are to be reduced despite the fact that the participant likely contributed to the plan, while also deferring salary increases? Worse, the US government is sanctioning this activity. Just how bad is the impact? Well, a member who has 32 years of credited service who will be 70 years and 5 months old as of May 31, 2021 would see their $2,148.24 monthly benefit reduced (slashed, gashed, hacked) to $1,258.40 beginning on May 1, 2021, under the proposed reduction plan. Can you believe that a 70-year-old, who has likely been retired for years, is going to be whacked with a nearly $900/month cut. How are they to make up for that loss?
Please don’t think that this is an isolated event. As we’ve been reporting for years, there are more than 130 plans and nearly 1.5 million American workers who are on the verge of receiving draconian cuts to their promised benefits. The impact of these cuts won’t just be felt by the individual participants and their beneficiaries, but also the communities that they live in that depend on their spending to support local businesses.
Action to sure up our pension system is long overdue. A further delay is not acceptable.