By DON McINTOSH, Associate Editor
Severely underfunded union pension plans will be allowed to reduce current retiree benefits in order to avoid future insolvency, under a last-minute amendment attached to the $1.1 trillion federal government appropriations bill known as the “CRomnibus.”
The amendment was sponsored by an unlikely duo: anti-union House Education and Workforce Committee chair John Kline (R-Minn.), and pro-union former committee chair George Miller (D-Calif.), who was serving out his final days of office after 20 years. The 161-page amendment came under the unwieldy name of Amendment 1 to H Res 776 (which itself governed consideration of HR 83). The proposal had support from a number of unions, and opposition from others. It was drawn up by committee staff based for the most part on “Solutions, Not Bailouts” — a proposal introduced last year by the National Coordinating Committee for Multiemployer Plans (NCCMP), a group representing union benefit plans.
[pullquote]Right now, if we do nothing, those very same retirees that you’re worried about have a very high likelihood of losing all of their benefits, or going to the PBGC and getting a maximum benefit of $12,000 a year.” — Congressman George Miller[/pullquote]Amendment 1 covers multi-employer pension plans — plans that unions jointly sponsor with employer groups, overseen 50-50 by trustees appointed by the union and employers. Employers contribute under the terms of collective bargaining agreements, and the funds are invested so that the plans have enough to pay guaranteed monthly benefits when employees retire. All told, about 10 million people are in multi-employer plans, which are common in unionized construction, trucking, grocery, and service industries. They’re much easier for small employers to join up, and they’re much more stable than single-employer pensions, which fail when the single company fails. But today, many multi-employer plans are in crisis, thanks to stock market downturns and declining employment in union industries. Like single employer pension plans, multi-employer pensions are insured through the Pension Benefit Guaranty Corporation, but PBGC pays out only a fraction of promised benefits when a plan runs out of money, and PBGC is itself in danger of insolvency.
Amendment 1 would shore up PBGC finances by doubling the per-participant premium paid by multi-employer pension plans to $26 per person per year.
It would also allow severely underfunded plans (those expected to run out of money in 20 years or less) to reduce benefits for existing retirees — if that would prevent the plan from becoming insolvent. Plan trustees would not be allowed to cut benefits for disabled retirees or retirees 80 years or older. And the cuts for retirees ages 75 to 79 would be less than younger retirees. Benefits could not be cut to a level below 110 percent of PBGC’s minimum benefit, but that could still be a pretty hefty cut. And the consequences could be widespread: Up to 3 million people are in plans that are regarded as severely underfunded.
One part of Amendment 1 came at Miller’s insistence, and was not part of the Solutions Not Bailouts proposal: In plans with more than 10,000 participants (retirees and active workers), participants would have a chance to vote to reject the proposed cuts. But the cuts would only be rejected if more than 50 percent of participants voted against them, not 50 percent of those voting. Even then, the U.S. Treasury Department can override the vote and go forward with the cuts if it concludes that impending plan insolvency poses “systemic” risk to PBGC.
The legislation was supported by the Building Trades of North America, as well as Associated General Contractors; United Association of Plumbers and Pipefitters; International Union of Operating Engineers; International Union of Painters and Allied Trades; United Brotherhood of Carpenters; Service Employees International Union; and United Food and Commercial Workers, as well as Kroger Corporation.
“This is a tool for trustees of plans that can be made solvent long-term,” said Randy DeFrehn, executive director of NCCMP, the multi-employer trade group that originated the proposal. DeFrehn said a bailout, or other fixes, might have been preferable, but when the Democrats were in charge of the House, his group was unable to get anywhere with proposals for the government to step in to guarantee the PBGC. “I think the Republicans did this because they don’t want … PBGC to go bankrupt and have to write a $40 or $100 billion check in the future.”
On the other hand, the proposal was opposed by the Teamsters, Machinists, Boilermakers, United Steelworkers, Laborers International Union, AARP, and the non-profit Pension Rights Center — mostly because of the principle that it’s wrong to cut promised benefits after a worker retires.
Normally, legislative proposals go through committee hearings, and are subject to amendments and votes. In this case, the pension legislation took the form of Amendment 1 in the House Rules Committee to H Res 776, a bill governing consideration of HR 83, a massive bill to fund the entire federal government. HR 83 was known as the “CRomnibus” because it combined a “Continuing Resolution” (an agreement to maintain current funding levels when Congress can’t agree on the correct new level) and an “omnibus” appropriations bill (appropriations for 11 separate parts of government, all voted on as one bill.)
The closest Amendment 1 got to a Congressional debate was a Dec. 10 hearing in the House Rules Committee, at which Democrat Alcee Hastings of Florida confronted Miller, citing the AARP and quoting Machinists President Tom Buffenbarger. Hastings said it would be the first time in 40 years since the passage of the legislation known as ERISA that Congress would allow plans to cut pension benefits to those already retired.
Miller responded vigorously: “Right now, if we do nothing, those very same retirees that you’re worried about have a very high likelihood of losing all of their benefits, or going to the PBGC and getting a maximum benefit of $12,000 a year,” Miller said. “They have one pool of money. Can they make it go for a longer period of time for a greater number of people, or do they just have to go with the dictate that they all go to a minimum benefit. And if enough of them go to the minimum benefit, the ambulance that’s carrying them runs off the road — the PBGC goes bankrupt, and they get nothing.”
“It’s been great listening to this debate over the soul of the Democratic Party,” scoffed Oklahoma Republican Tom Cole.
All told, the pension debate took up less than seven minutes. [It’s available here on YouTube from minute 39:50 to 46:30]
Soon after the exchange, HR 776, attaching pension reform to the appropriations bill, passed 9-4 in House Rules. Then HR 83, the CRomnibus, passed the House 219-206 on Dec. 11, with 162 Republicans and 57 Democrats voting for it, and 67 Republicans and 139 Democrats voting against. Next, the Senate approved HR 83 by 56-40 on Dec. 13, with 32 Democrats and 24 Republicans voting for it, and 22 Demcrats and 18 Republican voting against it.
DeFrehn said the work of rescuing union pension plans isn’t done.
“We’ve put a tourniquet on a gigantic gaping wound, and now what we need to do is provide a path forward so we can have a secure retirement system.”
PENSION CUTS: This is not the only laws being pasted that are destroying the free enter prize….I worked hard at UPS for 30 years to earn our pension…Now that the cuts are laws it will cause loss of home,cut money to help children and grandchildren college….I’m a county fellow and have very little education…..I,m 67 on disability i enjoyed my customs at UPS as a package car delivery person……”WE THE PEOPLE” not only need and deserve our pensions AMERICA can not continue to cut the middle class and continue to have AMERICA as a free nation….Need help to keep PENSIONS…….Would anyone that past this law be willing to take cuts of any kind….DID NOT THINK SO…..
Sincerely,
Wayne Turner
Retired UPS Teamster Local 71
Wayne,
Curious. Are you on central states pension? I’m thinking no, bc ups payed the teamsters off to get out. Good for u if you are not getting cut. But u have a good point. Work for a company for 30 under a promise, them they don’t make good, and leave you in poverty. Good job republican congress!
The same people who voted for the legislation are taking campaign contributions from the companies who say they can’t afford to contribute more to the pension plans. that’s called government for the greedy, by the people.
cut congress’s pension first.
Bottom line:if the AFL-CIO cuts my pension after 32 years of putting part of my wage package towards my pension{retired now,collecting my pension} do i have any recourse or am i screwed completely.??I am 68 years old.Please answer in plain ,easy to understand language.Does the government guarantee union pensions{a certain per cent} like company pensions????
Hi Jim. I appreciate your asking for an answer in easy-to-understand language; I agree this stuff is pretty darned complicated. So first of all, the AFL-CIO won’t be cutting anyone’s pensions; the AFL-CIO is just the coordinating coalition of unions that most unions are affiliated with, and it didn’t take a side in this debate, because unions were not in agreement about whether this was a good idea. Your union itself won’t be cutting any pensions either. If anyone makes cuts, it would be the trustees of your multi-employer pension plan. Half those trustees are appointed by the union, and half by the participating employers.
What the new law does is it allows trustees of severely underfunded multi-employer pension plans to reduce (but not eliminate) current retiree benefits — if that can prevent the plan from running out of money. [The new law doesn’t affect single-employer pension plans, which unions also sometimes negotiate with a single company.]
Yes, to answer your question, the government-sponsored Pension Guaranty Benefit Corporation (PBGC) DOES guarantee union multi-employer pensions. Unfortunately it does so at a less generous benefit level than the guarantee it provides the single-employer company pensions. If you’re in a severely underfunded multiemployer pension plan, and the trustees DO decide to make cuts:
1) they have to notify you first
2) they can’t cut beyond what is necessary for the fund to recover financially
3) they can’t reduce benefits at all for those 80 and over or disabled
4) they can’t reduce benefits below 110 percent of the level guaranteed by the PBGC.
The non-profit Pension Rights Center has an online calculator that can show you what the worst possible cut would be under the new law: http://www.pensionrights.org/multiemployer-retiree-cutback-calculator
I hope that’s helpful.
Does this affect multiple employer pensions paid separately as well? This is congress taking away the trust we put in them to make all those years of hard work and sacrifice everyday to make our country work for us and them counting on the promise that we and our families would be cared for when we wore out and could no longer work just stabbing us in the back with the same hand that was held out to put them in their jobs. Maybe they should give up their retirement as well….
This country is now a dictatorship.People don’t have the right to fight this in court.The great leadership from the President on down don’t care about people just there self.As we have our hard earned pension cut they get richer.We give money to countries that HATE US and take my pension money.The President needs to give back the money he waste on these high priced vacations and use it for PEOPLE.
Hey guys! Let’s not forget sen Tom Harkin dem. Iowa the same fine fellow that helped screw the Alli’s Chalmers employees out of their pensions! Republicans were not alone in this! Perhaps you should review history a little. Who started a witch hunt on Jimmy Hoffa senior? A republican? Kennedy. Who passed surface Trans act? Carter. Who signed NAFTA into law? Clinton. Who signed pension rescue into law? Your pres Obama. Get your facts straight before you point fingers! Why won’t they sign Keystone pipe leg. into law?creating a slew of new jobs? Maybe because Warren Buffet was one of his campaign contributers? Oh,and he holds a lot of railroad stock? Gee! Let me think. What we really need is a do over! Get rid of all politicians and start electing people who will do the job without having to grease their palms!
The law was passed in a December before the Republicans took over.
Hi Linda. Half right. Actually, in December 2014, when the law passed, Republicans were in charge of the House and Democrats were in charge of the Senate.
All bail outs gov gave out in the last 8 years you could have given everybody in the USA a million and had money left over
My husband put in 30 years in the Teamsters. He received his letter saying his pension will be cut 50%!! This is a life changing amount. This government does not seem to think about or care about the men and women who have worked hard for this country. 30 years of working and sacrificing to be able to retire, then have what he earned taken away by clueless politicians. What happened to those in Congress, Senate and the President working for the people, seems they are trying to force all of us into poverty.
30 years of work does not provide enough savings, no matter who is doing the saving — yourself or a pension fund, to draw for another 40 years at a hefty clip. The only way that works is if half is income was withheld and invested in a fortunate way that produced enough returns to not only pay for his retirement, but for that of others that retired early for medical reasons plus the many other ways people draw out of retirement funds.
This law is worse than the Wall Street Speculators who caused are pensions to plummet in the first place. To think Congress has our best interests at heart is laughable in the very least. Seems to me if this country can afford to bail out big banks then the least they could do would be to bail out insolvent pension plans. 7 mins debating….and the unions aligning themselves with likes of ABC SHAME ON YOU
Read the whole article Linda, them Dems in the Senate passed it by 32/22 and they did hold the majority. They are selling out American middle class as fast as s anybody. Google salami tactics, as pertains to communist Hungary, Poland and Germany, read all three links PLEASE! THEN TRY TO CONVICE YOURSELF that is not the Demoratic playbook of the last 50 years. The Nazis came to power with the backing of the Unions and then immediately sold them out and arrested all Labour leaders 10,000 or so and sent them to camp with the Jews. They have been/are playing the long game and we the people have given them way too much power. This horrible billowing was coming authored by a California DEMOCRAT and a union advocate in his last days on the job. I am not even worried about myself, its my children and grandchildren I fear for the most.
Its time for a revolution in this country
We need to get construction jobs going again! When we’re building new schools, hospitals etc. everybody benefits. How do we do it when are federal government is broke? Scary! The U.S is falling apart and it seems our government doesn’t care.