Congress Allows Cuts to Multiemployer Plan Benefits in $1.1 Trillion Spending Bill

More Than 1 Million Retirees May See Cuts in Multiemployer Plan Pension Benefits

More than a million American retirees covered by a multiemployer plan may become victims of pension benefit cuts, as part of the Congressional Multiemployer Pension Reform Act of 2014. The legislation was included in the $1.1 trillion spending bill passed by Congress in mid-December 2014 to prevent plans from becoming insolvent.

Multiemployer plans are defined benefit pension plans that are collectively maintained by multiple employers, typically within a common employment sector, and sometimes by labor unions.

The debate on cutting multiemployer plans largely stemmed from the Pension Benefit Guaranty Corporation’s (PBGC) FY 2013 Projections Report. The report indicates that multiemployer plans across the U.S. are “severely underfunded” and could run a $49.6 billion deficit by FY 2023.

Congressional leaders who pushed the provision claim that cuts are the “only available option” to save the failing plans. Some point out that the Multiemployer Pension Reform Act will finally push policy makers to identify and resolve shortfalls in other underfunded federal programs.

“There is a unique crisis facing millions of people with multiemployer pensions that are threatened by numerous plans’ imminent bankruptcy, and we worked together to design the best bipartisan solution available to protect the retirement benefits of this very specific group of workers,” Reps. John Kline (R-MN) and George Miller (D-CA) said in a statement.

Opponents of the Multiemployer Pension Reform Act fear that the cuts will set an example for other distressed federal retirement programs. Further increasing costs for plan sponsors to continue insuring pensions with the PBCG, up 117% percent, may drive even more healthy pension plans to consider de-risking spin offs.

That’s because the legislation increased multiemployer pension plan premiums paid by plan sponsors annually from $12 to $26 per participant, effective January 1, 2015.

A vocal opponent of the Multiemployer Reform Act of 2014 is the Pension Rights Center Executive Vice President. "This sets a precedent for cutting social security and senior employer plans,” said a concerned Karen Friedman.

Read the PBCG’s FY 2013 Projections Report here: http://www.pbgc.gov/documents/Projections-report-2013.pdf

Photo Credit: PBGC FY 2013 Projections Report

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