Pension benefits for retirees used to be untouchable, but thousands of former workers are being told that their monthly checks could take a hit.
One of the largest pension funds in the country says it needs to cut benefits for 273,000 current and future retirees.
If the cuts aren’t made, the Central States Pension Fund could to run out of money in 10 years, said Thomas Nyhan, executive director of the fund.
The fund pays pension benefits to workers and retirees from more than 1,500 companies across a variety of industries including trucking, construction, and even Disneyland workers.
The proposal, which still needs approval from the Treasury Department, will spare retirees age 80 or older from any cuts as well as anyone receiving disability protections.
And reductions would be less severe for those older than 75 or widows and widowers receiving spousal benefits.
While they vary, cuts will average about 23% and could happen as soon as July.
“These people did nothing wrong and worked hard all their lives. We’re doing our best to preserve what we can so that we’re able to provide more benefits for a longer period of time,” Nyhan said.
Workers from the trucking industry once made up a majority of participants in the Central States Pension Fund. But a lot of those companies went bankrupt after the industry was deregulated in the 1980s.
That’s part of the reason the fund is in trouble now. In 1980, the fund had four active workers for each retiree. Now, it has flipped, with five retirees for every active worker. That means for each $1 the fund takes in, it pays $3 out in benefits.
The fund was also hit hard by two major market downturns in 2000 and 2008. The recent recession was “catastrophic,” Nyhan said.
Before last year, these kinds of cuts would have been illegal. But a controversial law passed last December allows multi-employer pension funds to cut benefits if they are projected to run out of money.p
A lot of these funds, which cover more than 10 million workers, are in financial trouble.
The Pension Benefit Guaranty Corporation, which is supposed to insure these funds, also risks insolvency, Nyhan said.
He and others proposed legislation years ago that would allow the use of taxpayer dollars to shore up the funds, but it stalled in Congress.
Now, Democratic presidential candidate Bernie Sanders is in favor of a similar plan. Nyhan said he would embrace that kind of solution, but believes it’s “wishful thinking” that today’s Congress would support a bailout.