New law lets some pension plans cut promised benefits

For some retirees, Congress has played the Grinch this holiday season.

Tucked into the federal spending bill were provisions that will allow certain struggling multi-employer pension plans to reduce benefits already being received by retirees.

The move was the result of an alarm from the Pension Benefit Guaranty Corp. that multi-employer plans covering more than 1 million participants are substantially underfunded and, without legislative changes, will probably fail. The deficit for PBGC’s multi-employer insurance program has jumped to $42.4 billion, up from $8.3 billion last year.

Multi-employer plans provide benefits to more than 10 million workers and retirees in industries such as building and construction, retail, manufacturing, trucking and transportation. The PBGC said it has enough assets to meet the needs of plans in trouble, but there are insufficient funds to cover benefits for plans expected to run out of money in coming years.

Those troubled multi-employer plans that estimate they won’t have enough money to pay 100 percent of benefits within 15 or 20 years can cut benefits, according to the Pension Rights Center. Retirees who are 80 or older or who receive a disability pension can’t have their benefits reduced. For retirees 75 to 79, the cuts will be smaller than those who are under 75.

“It’s heartbreaking,” said Karen Friedman, executive vice president for the Pension Rights Center. “We are getting calls and letters from people who are scared. They are the most vulnerable. They can’t go and get another job. They were told they would have a pension for the rest of their life.”

But there are many retirees who don’t even know they are affected, she said. The Department of Labor keeps a list of multi-employer plans that are in “critical” and “endangered” status, Friedman said.

You can find the list by going to dol.gov and searching for “2014 Critical Status Notices.”

“But just because a pension plan is on the list doesn’t mean there will be cuts to benefits,” Friedman said. “It’s going to take a while for all of this to get settled.”

The Pension Rights Center has a good summary of the pension provisions on its Web site at www. pensionrights.org. There also is a calculator to help you figure out how much your benefits could be cut.

More From The Washington Post: