One of the many obscure provisions jammed into a last-minute budget bill in 2014 endorsed and signed by President Obama is leading to what would be the first cuts in earned pension benefits to current retirees in over 40 years.
The Washington Post reports that the Treasury Department is on the verge of approving an application from the Central States Pension Fund – a plan that covers Teamster truckers in several states – to cut worker pensions by an average of 23 percent, and even more for younger retirees. Over 250,000 truckers and their families would be affected. Workers over 75, or those who have acquired a disability, would be exempt from the changes.
The bill that enables this — known as the “CRomnibus” because it was partially a continuing resolution to fund the government (CR) and partially an omnibus spending package to fund other parts of the government for a full year — was littered with riders, nonbudget changes in law that attached themselves to the legislation like barnacles to a ship. These riders included the elimination of an entire section of Dodd-Frank derivatives regulations (as written by Citigroup lobbyists) and a large increase in the donation limits to party committees.
Despite the riders, Obama endorsed the bill and even whipped for its passage, assisted by JPMorgan Chase CEO Jamie Dimon.
The pension changes in the CRomnibus enable trustees of multi-employer plans — union-negotiated pension benefit funds that cover employees across entire industries like trucking or construction — to apply to the Treasury Department to cut benefits for current retirees in order to stretch the fund’s resources. This changed the ban on cutting such benefits written into the Employee Retirement Income Security Act (ERISA) of 1974, which governs private-sector pension plans.
There were no public hearings on this change to pension law, and the details were only made available days before the vote. The bill’s sponsors, Republican John Kline and now-retired Democrat George Miller, insisted that the rider was necessary to extend the life of the pension plans through collective sacrifice. Roughly 150 to 200 multi-employer plans covering 1.5 million workers face significant fiscal strains that could cause a drain on funds in the next 20 years.
But Michael Hiltzik of the Los Angeles Times warned in 2014 that “panicky trustees — usually union and employer representatives — could act prematurely, cutting the income of retirees who can’t make it up from other sources.”
The Central States Pension Fund was the first to take advantage of the law and apply for a benefit cut. The trustees deemed this necessary to extend the solvency of the fund, which could otherwise run out by 2025. Investment losses during the financial crisis, increased numbers of retirees, and fewer companies contributing to the plan put the fund in precarious financial straits.
Retirement security advocates fear that the Central States decision will trigger a number of other pension funds to use the new law to shirk obligations made to workers for decades. Three other pension plans have already applied to make benefit changes.
The Treasury Department’s main criterion for approving Central States’ and other pension funds’ plans is that they extend the solvency life of the fund. Since cutting benefits would do so by definition, approval is fairly likely.
One safeguard — a vote of approval on any pension changes by both active workers and retirees — may not save Central States pensioners. The Post writes, “Even if a majority of the members vote against the proposal, the pension fund is so large that the Treasury Department may still be required to implement the cuts.” That’s because the Treasury has an obligation to protect the Pension Benefit Guaranty Program, the government entity that aids bankrupted pension funds.
Treasury has a deadline of May 7 to announce its decision. Cuts to retiree paychecks would begin July 1.
Sen. Bernie Sanders introduced legislation last year to repeal the CRomnibus rider that allowed for the pension cuts. “We made a commitment 40 years ago to workers in this country that companies will never renege on a pension promise,” Sanders said in a statement accompanying the bill. “We need to restore that commitment.”
Top image: Teamsters union retirees protest cuts to their pension benefits on April 14, 2016, at the U.S. Capitol.
People will ask”what has Sanders done?” Again Vote Imp-GOPtent = Vote Death!!
Multiemployer Plans: Why Participant Benefit Cuts Over A PBGC Bailout
https://burypensions.wordpress.com/2014/12/13/multiemployer-plans-why-participant-benefit-cuts-over-a-pbgc-bailout/
hmmmmm
I would like to share a different perspective from the article and from the comment thread. I worked for many years n the labor movement as an organizer and a pension trustee.
The PBGC, the government insurance program for private sector pension plans, has two distinct programs, one for single-employer corporate pension plans, and one for multi-employer Taft-Hartley (union) pension plans. The multi-employer program is badly underfunded and would have definitely gone insolvent without this law – and even with it, it’s not yet in the clear.
Both plans are funded by premiums that the pension plans pay for each member they have. The premiums for the multi-employer plan are too low. They were $13 per participant annually when the bill passed in 2014, and the bill doubled them to $26 per participant per year. They will still need to increase further, which will hopefully happen through phased-in increases rather than all at once. That will require further legislation.
Contrary to the article’s assertion, there were committee hearings in both houses of Congress on the bill. The need for the legislation was because there are a number of large Taft-Hartley pension plans that are at risk of going broke, probably none more so than the Central States Teamsters fund. When a Taft-Hartley fund goes broke, the PBGC steps in and pays benefits to the retirees of the plan, but those benefits are capped at less than $13,000 a year. This is a very low benefit, so the PBGC guarantee is not worth much.
Even with this low level of maximum benefits, the PBGC’s multi-employer benefit fund is seriously underfunded. And while there are literally hundreds of multi-employer funds at risk of insolvency, there are several very large ones that could, by themselves, swamp the PBGC fund and render it insolvent.
The only ways to remedy this situation are to: 1) vastly increase the insurance premiums, which most funds could not afford; 2) pass the legislation the article describes; or 3) a Congressional bailout.
While a Congressional bailout sounds good – if they could bailout the banks, why can’t they bailout the pension funds? – most of the serious people in the labor movement realized that such a bailout was highly unlikely with Republican control of Congress, and if it were to happen, it would almost certainly come with a price tag of eliminating defined benefit pension funds for Taft-Hartley plans. Many unions did not support the legislation for the direct benefit of their own members, but rather to ensure that Congress was not given the opportunity to get rid of all defined benefit plans in the unionized multi-employer world.
What the legislation does is allow those funds that are at risk of insolvency in the near future (10-15 years) apply to reduce benefits now so as to preserve the pension fund for the future. The benefit reductions have to be as little as possible to preserve the solvency of the fund, and in no event can they be less than 10% more than the PBGC maximum. So the idea is, cut the benefits less now than they would be if the PBGC took over, and preserve the solvency of the fund going forward.
Many liberal politicians – like Bernie Sanders – have tried to score cheap points by siding with the pensioners who are understandably upset about their pension being cut. The reality is this was the best way out of a bad situation, and a major coalition of unions and unionized employers worked on it for more than 3 years before it was passed as part of the CRomnibus at the end of 2014. Any legislator who says he or she didn’t know what was in it wasn’t paying attention, because the coalition’s report (Solutions Not Bailouts) was out for more than a year before the bill passed, and there was major lobbying on the bill in the months leading up to its passage.
The commenters can lament the influence of Wall Street and the corruption of “the system.” Most of the underfunded plans got to be that way because of long-term economic trends, such as deregulation, the decline of manufacturing, and market volatility. These underfunded plans generally have a very high ratio of retirees to active workers, with little hope of sufficient contributions that will make their funding improve in the future. Folks can rant and rave all they want, but this bill will enable current retirees more income than if their pension were taken over by the PBGC, and spares the oldest as well as disabled retirees from cuts, while at the same time ensuring that the pension fund will be able to pay out benefits to future retirees as well.
For those who say they support defined benefit pensions, this bill was the best way to accomplish that end.
I have yet to hear anyone who advocates repealing this bill come up with an alternative plan for funding and preserving deeply troubled Taft-Harley pension plans that are in danger of insolvency.
Contracts were signed. How do excuse that?
Why does Bernie continue to play by the rules when there are no rules.
Is anybody going to tweet this to Bernie and ask him to make direct mention of it as an example of Obama AND Hillary’s ties to Wall Street and the banks?
Obama will get his pension. That’s all that matters to him. When someone becomes president, they start planning for the rest of their life, and passing laws that will ensure that they live the good life until the age of 100, no matter whose expense it comes at.
When the default right-wing corporatist Clinton gets the baton from the current one, she will go after Social Security/Disability as Shrub failed to do in ’05. What cannot be done under a GOP president can only be done under a ‘Democrat’, such as NAFTA, killing Glass-Steagall, welfare “reform”, and of course arbitrary drone killings and/or murder of any American citizen anywhere, at any time, to mention just a few.
When are we going to stop typing about it online and start doing something to root this out? When will average citizens and workers get the courage back that they once had, to get in the streets and fight the now-militarized police state that oppresses them?
Inspired by you rcommnt i ran out rh street
ouch truck ran me oveeeeeeeeeeeeeeeeeeeer
keep up ptr fighhhhhhhhhhhhht
Keep typing and rehashing stupidity. It’s done us worlds of good so far.
are you the real Che Guevara? I have all your posters and t-shirts.
Evidently your parents didn’t bother to waste the money on your education.
Voters haven’t even tried simply voting out the corrupt Democrats and Republicans. Let’s try that in addition to protests such as the recent Democracy Spring; the Green Party has some great candidates to vote for.
The most effective solution would be to stop paying your taxes- everyone. Our Masters can’t wait to fill their private prisons. The system is imploding and Bernie is just a messenger. The only consolation is that HRC will be blamed for the next crash.
oh I remember this one….this had all kinds of terrible stuff in it….Obama has done so much pandering for the utterly foul but on this one he actually needed Republicans like crazy because even a lot of the more on-board D’s drew the line at this one.
amusing write-up of the damage here:
http://www.zerohedge.com/news/2014-12-14/senate-passes-cromnibus-here-who-voted-no-and-what-it-actually-contains
Tactical note: Seems like support for pensions would be (would have been) a good pitch to the older voters resisting Sanders?
Did you work hard and expect peaceful retirement? Well don’t. The Congress made another money shift from the retirement fund to almost bankrupted from fraud and corruption SSDI (disability fund). Now this bill…Have you noticed the rise in Medicare premium, reduction of benefits? Did you get the offer to put more money for the retirement saving? The retirement fund, which was also affected by ex-prisoners and fired from work who retired at their 40 y.o. with the help of lawyers, still has money to sustain for about 10 years, because the majority are old people, working hard entire life, unlike SSDI, were majority are healthy frauds. This money shift will bankrupt eventually both funds, which was predicted in 7-10 years (see multiple publications). Because the Ponze scheme cannot be fixed by money shift from place to place or by making another round of people to pay more or longer (till 67 – 70 y.o, whatever will be the new age limit) to these funds.
The Social Security Administration (SSA) has been and continues to be an enabler in the SSDI fraud, as they give information on their website about using an attorney in the application process. The only thing an attorney can do that a claimant cannot do is to proffer a kick back to an Administrative Law Judge for a favorable decision. Until they start prosecuting more judges, attorneys and psychologists who come up with an IQ of 49 or less for every claimant they see, the fraud will persist on a systemic basis.
“unlike SSDI, were majority are healthy frauds”
Source, please. Statements such as yours are gobbled up by people not interested in facts which makes life considerably more difficult for those of us who are disabled. You’d be shocked to hear people’s insults because they believe that everybody receiving SSDI is a “healthy fraud” simply because of rhetoric such as yours.
Amen. The blame for the fraud is often misdirected toward the disability claimant, rather than the guilty parties I cited above. In my 27 years as an adjudicator and later as a hearings officer, I become aware of every trick in the book perpetuated by attorney reps and Administrative Law Judges, often to the detriment of the claimant. “Advocacy”, my ass.
I neglected to include that I saw many cases in which deserving claimants had to wait over a year or more to receive their benefits due to attorney rep machinations.
Yet another reason to prefer 401k over the antiquated pensions! It’s all my money, I control it, I invest it (with greater return) and I choose when to collect. Only at gunpoint (i.e. social security) could you get me to gamble my retirement to the government or a corporation, either of which could go bankrupt before I die.
I’d prefer a few percent in social insurance to the very poor, but anyone making above average wage should have no problem taking care of their own retirement.
Your individualistic investing will crash around you in the coming future. The market is trading not on capital value, but derivatives of. Best of luck.
Sure it will, like it did in 2000, 2008, 1929, 70 etc.. But it always comes back. As long as you hold on the market is best way for regular people to become rich and financially free and independent. Not trusting government to do it for you.
Your faith in the alleged morality of capitalism is impressive if misguided. Hope the timing of your retirement doesn’t coincide with the next inevitable market crash. And don’t forget to say “screw you” to all those people working for minimum wage into their 60s and 70s with no possibility of a 401k on your way to your Bermudan condo.
Also, you do realize that your 401k investments are, in fact, reliant upon corporations that could go bankrupt before you die, right?
I depend on no morals. So what if there’s a market crash? You don’t liquidate your portfolio the day you retire! The market will still go up again and I’ll have 30+ years. Run a simulation of a 2007 retirement and you’ll see that it worked fine, 2000 as well.
What exactly did I personally do to screw over 60 year olds? Me saving my money is harming them? That’s my fault? I assume you don’t save anything and give it all to poor widows?
Yes stocks are dependent on corporations that go bankrupt. That’s why I have shares of 10,000 of them, rather than one (1!) government.
Under your words is the assumption that government is corrupt, that all people want to be rich, financially free and independent.
It is your underlying assumptions that I disagree with. I don’t want to be independent, I want to live in community with others as a social being. Define rich? I am sure we have different ideas of what it means. Same for being financially free.
The bottom line is this, for you to live rich, financially free, and independent means that someone else goes without.
If you were a thinking man, able to synthesize a variety of information and evaluate it, you would know the great harm your assumptions and following actions have and do cause this world. Then, assuming you were a moral man, you would stop with your foolishness.
I would encourage you to wake up and start asking questions about your lifestyle and choices and the consequences of such.
What a load of nonsense. Because I work and save money someone else has to go without? Frugality is evil?! So I have a moral obligation to wasted all my money on crap I don’t need? And actually, me buying shares lets other who are retired sell theirs so they can live, so I am helping the old.
FYI I used redundant terms. My definition of rich is the same as financially independent; I can support myself without being dependent on or burdening others. But I guess this is offensive to you too? Ohnoes someone took responsibility for themselves, can’t have that!
My actions cause harm to the world? In what way do you make such overbearing judgement? Because I work hard and provide for my family efficiently, not wasting or buying junk, and saving our money I’m “harmful and evil”? wow.
So, the final nail is in the coffin. The big banks rape the homeowners, take the homes that aren’t even theirs (banks are NOT proving they own the underlying debt), take the good paying jobs overseas, and finally screw the pensioners that are owed this money BY CONTRACT.
So, will the serfs NOW rise up and revolt? Or will these screwed Americans just go watch another football game with a cheap brew (cuz now no money for the good beer)?????
Remember when people thought Obama was a socialist? A lot of energy wasted on that assumption.
Remember when pensions were part of a comprehensive Democratic platform?
Meanwhile, I am betting that said CEOs of these private corporations earned millions in stock options, etc.
I vacillate between anger and great sadness for our country; a sense of betrayal. I still believe there is honor in public life, in community, in democracy. It really is time to unequivocally fix this mess.
The passing of the budget has become an ever expanding scam pulled off on the American people. They have used faulty Excel spread sheet calculations to force austerity down the throats of the masses cruelly cutting spending on all but the elite.
Then comes the real government spending relating to: Corporate Welfare, the dark budgets that fund what we do not know about, the Congressional-Military-Industrial Complex, and maybe we could finally find out where some other money has went like the $2.3 trillion, which on September 10, 2001 Rumsfeld announced could not be accounted for in the Pentagon budget.
When they finally do investigate mass fraud and corruption like they did related to Iraq War Reconstruction spending the relating findings were sealed until 2033, because by then the thieves being protected will be either dead, or so senile that they will not know anyone is talking about them.
This article points out just some of the horrific add-ons to the budget that many were not aware of when the politicians passing it actually shed tears of pretend joy, because they wanted all to think they felt so proud that they did their basic job in passing a budget, and they only proved that they were very bad actors.
The clandestinely way they used this budget to further inequality and the handing over of increased money and power to the elite was a very low point in our Republic’s history. It is just one example of why the masses are calling for a political revolution lead by Sanders at one end and Trump on the other.
the people of America who support Donald and Bernie have contempt for the thieves who aided and abetted; the theft of homes by wallstreet, the hostage taking of Americans by criminal repubs led by mitch mcconnell, the illegal invasion of iraq, the falsification of wmd, the murder of unarmed citizens by police, the robbing of good jobs of hard working americans, the robbing of the future work and earnings of students, the theft of productivity, the taking of voting rights, the poisoning of water supplies, the dilapidation of infrastructure….
America is being robbed by the largest criminal enterprise on the planet – the american congress.
Most of them need to go to prison along with their paymasters.
This same problem happened 2016 years ago and they nailed that protester to a cross.
It seems that you are not the only one that thinks this way. My wife and I went to the Democracy Awakening Protest gathering in DC this weekend on its next to last day. Thousands were there and many inspirational speeches were given. Over a thousand protesters have been arrested during the peaceful movement many of them senior citizens.
We joined a peaceful march and while walking around the Capital on a beautiful spring day I thought about our Republic, and how very much it is worth saving. What I also thought about was the diversity of people we were marching with, and what truly nice people they were. They were very warm and obviously concerned about the current state of our democracy. Included were 143 organizations that were mostly focused on getting money out of politics.
What I felt that day was different than anything I have ever felt as there was a very special heart felt connection among the people gathered there, and it seemed to be part of an aura reflecting “We know what is wrong and we know what is right, and we are most definitely going to see that things are set right”.
Fellow Citizen, thank you for sharing this. Nice to put on a smile during the day.
What I think you experienced is called “community.” Stated simply, the great “war” in this world is the egotistical individuals failing to take it all, ‘versus’ community and those living together in shared life. (What I am offering here is the simple on the far side of complexity.)
Thanks again.
egotistical individuals “flailing” to take it all…
I could not have said it better myself.
Excellent article. Thanks for giving us a perspective the silly MSM doesn’t offer.
See, here is how it works. You don’t like having to fund retirement, whether it be a pension fund or Social Security. So, you simply do not adequately fund it. Eventually, it becomes abundantly clear to everyone that the fund is going to run out of money. Increasing the funding won’t do, because that would go against the original principle of stinginess, and so the only choice is to decrease benefits.
This will soon happen to Social Security as well. Fixing it would be relatively painless: increasing withholding by a percentage point or two, and removing the cap. But that again would be against the principles of those who want to put the entire burden of retirement on the backs of the working poor and middle class.
To the credit of the politicians, this shell game has been effective for at least a generation now. Most of the population is either asleep, too stupid to notice, or buys the reactionaries’ argument that it is a pyramid scheme. Don’t try explaining actuarial calculations to these folks!
According to the plutocrats, we’re due for another financial bubble to PoP! Can you say school loans &/or car loans?! Nothing like finishing off what little is left of the middle class, eh?
Great points, and with Social Security it is just not about “not adequately funding it” as much as it is “about them stealing it”.
“The Social Security Amendments of 1983 laid the foundation for 30-years of federal embezzlement of Social Security money in order to use the money to pay for wars, tax cuts and other government programs. The payroll tax hike of 1983 generated a total of $2.7 trillion in surplus Social Security revenue. This surplus revenue was supposed to be saved and invested in marketable U.S. Treasury bonds that would be held in the trust fund until the baby boomers began to retire in about 2010. But not one dime of that money went to Social Security.” – Taken from FedSmith.com, Ronald Reagan and The Great Social Security Heist By Allen W. Smith, Ph.D. • October 11, 2013
Those “people” in government aren’t really people, they are aliens from John Carpenter’s 1988 movie “They Live”.
These monsters must be smashed before they destroy whatever of anything left of value to humans.
And in this case as many the Americans being robbed are seniors who have little chance of getting another job or making up the difference in any way. Not that it is okay to cut anyone’s income to this group of people are vulnerable. COL increases for Social Security have all but disappeared in the last three years. As their expenses and health care costs go up they make less. This is not an accident. It is planned punishment for living too long and having too little. But the banks who stole our money got away with it. And poverty grows and grows but none of our ‘leaders’ connects these events because the old have no power or extra money.
Robbing Americans is wallstreet’s favorite pastime and also fulltime job. If wallstreet isn’t robbing people by diverting the taxes they pay from infrastructure to wars that build nothing and get sons and daughters killed then they are busy finding ways to not pay Americans at all or they are busy actually stealing pensions – like mitt’s proposal to workers to get them to pledge their pensions, or like airlines implementing their own version of austerity simply grab the pension money for themselves or wipe out their nogotiated contractual obligations.
Yep, robbing Americans is wallstreet’s favorite thing. Taking their homes using fradulent documents they had to concoct after robbing investors by offerring fraudulent ratings.
Yep, robbing Americans is wallstreet’s plan for America. Robbing american jobs for their overseas slave laborers. Robbing american jobs using H1B visas because wallstreet doesn’t want the American govt to propmote education – unless wallstreet can rob students of their future by packaging them like homes.
Yep, if that isn’t organized crime chargeable by the RICO statutes, then i am living in palestine and all this abuse is perfectly legal.
The Feds extremely low rates play a large part in this drama and are in effect a wealth transfer scheme that shifts wealth to the more wealthy, all in the guise of helping the economy.