The pension checks of an estimated 750,000 American retirees could be reduced if a pension reform proposal gaining traction on Capitol Hill becomes law.
The reform package, drawn up by an employer-worker coalition created by the National Coordinating Committee for Multiemployer Plans, would allow troubled multiemployer pension plans to cut benefits currently being paid to people already retired.
Slashing existing payouts isn't legal under current pension law, except for narrow exceptions with severely stressed plans, according to the Pension Benefit Guaranty Corp., the federal agency that backstops the country's pension plans. The traditional approach to the underfunding problem has been increasing the money employers put into plans, and shrinking future benefits, it said.
About 150 to 200 of the country's roughly 1,400 multiemployer pension plans are projected to become insolvent within the next 10 to 20 years, according to the Pension Benefit Guaranty Corp. (PBGC). Those deeply underfunded plans cover about 1.5 million of the 10 million people in multiemployer pension plans.
The PBGC backs up an additional 23,000 single-employer pension plans, but it is the multiemployer plans that have the most dire problem. The PBGC has not endorsed any reform proposals.
Supporters say the prospect of insolvency for some of largest multiemployer plans requires sharp new measures. Randy DeFrehn, executive director of the National Coordinating Committee for Multiemployer Plans, said if plans can act early, they can preserve overall benefits at a higher level for all participants.
"A haircut today is better than a beheading later. That's really what we're looking at," DeFrehn said.
There's a bill in the works, DeFrehn said, and the sponsor will likely be from the House Committee on Education and the Workforce. He estimates that the proposed cuts would typically range from 5 to 35 percent, and would only be allowed for plans in dire straits.
