Karen Friedman has been traveling the country speaking at meetings of retired union members – and they are angry. What riles them is the prospect of deep cuts in promised pension benefits, and they are hoping for relief from President Donald Trump.
“Many of them were Trump voters,” said Friedman, executive vice president and policy director at the Pension Rights Center (PRC), a nonprofit advocacy group. “These are the folks the president campaigned for, and he made promises to protect the working class.”
The threatened benefit cuts, which could impact 1.5 million retirees and workers, stem from deep financial problems affecting some multiemployer pension plans – traditional defined benefit plans jointly funded by groups of employers – typically in industries like construction, trucking, mining and food retailing.
More than 10 million U.S. workers and retirees are covered by 1,400 of these plans – many of them in Trump-supporting Rust Belt states like Ohio and Michigan. But as many as 200 are severely underfunded – the result of stock market crashes in 2001 and 2008-2009, and industrial decline that led to consolidation and declining employment. The problems threaten individual workers’ pensions, but also could bring down the fail-safe backstop that insures the pensions of many millions more.
The U.S. Congress passed legislation in 2014 that aimed to head off an implosion of multiemployer plans. The Multiemployer Pension Reform Act of 2014 (MPRA) allows troubled plans to seek federal government permission to make deep cuts to the future pensions of workers – and even for current retirees – if they can show that cuts would prolong the life of the plan.
In theory, that would stave off plan failures – and help avert a complete draining of the multiemployer insurance reserves of the Pension Benefit Guaranty Corp (PBGC), the federally sponsored agency that backstops private-sector defined benefit pension plans.
That was the theory, anyway. In practice, MPRA pension reform plans have met with stiff political resistance and skepticism from decision makers in government.
PRC and others are working on legislative proposals and hope to convene a meeting soon of stakeholders to develop a consensus approach. Any new plan will still spread the pain, unfortunately. Proposals that have been floated include higher PBGC premiums for plan sponsors, offset by tax breaks; asking current retirees to make small membership-style payments into a fund to help bolster plans; others have suggested a targeted energy tax.