Congress to Pensioners: "Tough Luck!" by Nilus Mattive
I have been chronicling our nation’s simmering pension crisis for many years now, repeatedly warning that it would eventually explode onto the front pages of every newspaper in America. And that is exactly what’s starting to happen.
A few weeks ago, I pointed out that the Pension Benefit Guaranty Corporation — the quasi-governmental organization that backstops private retirement plans — was quickly going bankrupt.
Now, Congress is working on a plan to mitigate some of the fallout ... a pill that will be pretty hard for millions of pensioners to swallow.
On Saturday night, the Senate approved a provision attached to the government’s $1.1-trillion omnibus spending bill. It’s aimed at shoring up multiemployer pension plans covering more than 10 million American workers and retirees in areas like transportation, construction, and mining.
Developed by the National Coordinating Committee for Multiemployer Plans (NCCMP) — a coalition of plan sponsors and workers unions — the provision’s most shocking aspect is that it opens the door to benefit cuts for CURRENT retirees.
Proponents of the plan say this is the only way to get these pension plans back on track, especially given the continued deterioration of the Pension Benefit Guaranty Corporation.
This new provision would:
Fundamentally alter the protections afforded by the Employee Retirement Income Security Act (ERISA), a piece of legislation that is, ironically, celebrating its 40th-year anniversary ...
Double the premiums paid by plan sponsors to the PBGC ...
And, most importantly, give plan trustees the power to slash retired workers’ benefits if doing so would demonstrably extend a pension plan’s lifespan.
Right now, current law forces pension plans to pay out existing retirees their full benefits unless all assets have been used up. At that point, the PBGC begins paying out reduced benefits.
Here are a few additional specifics:
• The legislation still protects vested plan beneficiaries over the age of 80 ...
• It provides some protection for retirees over 75 ...
• And it allows participants to vote before changes take place.
Still, the reality is that lots of folks in their 50s, 60s, or early 70s could take big hits. And the idea of voting will essentially pit younger workers against older participants. The largest troubled plans would still be allowed to make cuts even if retirees voted against them, too.
External Sponsorship
Based on the PBGC’s analysis, as many as 1.5 million retirees are in multiemployer plans that will fail over the next 20 years ... which means some workers could see their benefits slashed 50%, 60%, or even more.
Just imagine that: Today you’re getting a pension worth $40,000 and next year you’re only getting one worth $12,870!
The latter number is the maximum amount guaranteed by PBGC to a multiemployer pension plan participant with 30 years of service. And obviously if the PBGC goes bankrupt, even the $12,870 guarantee would disappear!
The Fundamental Takeaway Here Is That Retirement Promises Are No Longer Sacred ...
Up until very recently, nobody would have ever talked about cutting a current retirees’ promised benefits — in the public sector OR the private sector.
However, the grim reality is that the promises are just too big to keep now that the bills are coming due.
In Detroit, we’ve already seen retirees accept lower benefit payments in the hopes of saving their troubled municipal pension system.
In California, we had a recent ruling that gave cities the ability to erase their pension obligations by declaring bankruptcy.
And in Washington, D.C., the Social Security system is already essentially taking away a good chunk of what they promised by taxing as much as 85% of retirees’ benefit payments.
I take no pleasure in telling you that this is still just the beginning of the great unraveling.
But the message is clear: The old rules of retirement are being erased, and the only thing you can count on is the private nest egg you build for yourself.
Best wishes,
Nilus
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Poster Comment:
The U.S. has been bankrupt since 1933. If you do not know this, you need to study the issue.
According to the Trading With the Enemy Act of 1918, as Amended, the people of the United States are the enemy of the government, ;)