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Dafey

These pension plans are at risk of going broke

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Dafey
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About 1.3 million Americans could have their retirement funds at risk if Congress can't come up with the money to pay the benefits people were promised.

That is because a number of multiemployer pension plans are on the brink of running out of money.

This week, Congress took a stab at solving the problem with the markup of the Rehabilitation for Multiemployer Pensions Act.

Though it garnered far less attention than the testimony of Federal Reserve Chairman Jerome Powell, who was on Capitol Hill talking about interest rates and the economy, it was no less important. Retirees' financial futures hang in the balance if nothing is done, according to lawmakers.

"These are American workers who planned for their retirement and now, after working for 30-plus years, they are facing financial uncertainty at a time when they are often unable to return to the workforce," said Rep. Richard Neal (D-Mass.), chairman of the House Ways and Means Committee, which held the hearing.

Certain provisions already exist to help keep multiemployer pension plans functioning. The Pension Benefit Guaranty Corporation, a federally chartered entity, will step in when a plan fails so that retirees' benefit payments — up to a maximum level defined by federal law — continue. Those guarantees typically range from 20% to 90% of plan benefits, according to the Society of Actuaries.

But it is estimated that the PBGC will use up its assets by the end of 2025.

Previously, the Kline-Miller Multiemployer Pension Act of 2014 established a process through which multiemployer pension plans could temporarily or permanently reduce benefits.

The new bill would let pensions borrow money to remain solvent so that they can continue to pay retirees for "decades to come," Neal said at the hearing. The program and loans would be funded by the sale of Treasury-issued bonds to financial institutions. The Treasury Department would lend the money from those bond sales to pension plans that need the funding.

The proposal is also known as the Butch Lewis Act, named for a trucker driver who worked for USF Holland for 40 years. Lewis was a participant in the Central States Pension Plan, which is now underfunded. When Lewis died of a stroke a few years ago, his wife took a 40% cut to her joint survivor benefit.

"Sadly, many workers and retirees have stories similar to Mrs. Lewis' story," Neal said.

While both sides of the aisle agreed that something is needed to be done to fix the problem, there was some dissension as to whether or not this bill is the best plan to tackle it.

The Butch Lewis Act aims to help the plans to recover over time by lending them money at low rates like the Treasury interest rate, letting them invest those funds and keep the difference if they get a higher return, according to Joshua Gotbaum, guest scholar for economic studies at Brookings Institution. Gotbaum previously served as director of the PBGC from 2010 to 2014.

Republicans, meanwhile, have proposed providing funding directly to the PBGC instead of lending money to the plans. The PBGC could then use that money to fund pension benefits for so-called orphans, or workers whose plans no longer exist.

Some opposing lawmakers called the proposal to lend money to pensions a bailout. Yet supporters of the legislation, like Hasan Solomon, national legislative director at the International Association of Machinist and Aerospace Workers, disagree.

"A bailout is what they did for Wall Street and big banks," Solomon said. "This is a loan for retirees who gave up raises, who gave up work rules, who have up benefits in order to keep their pensions."

One critic includes Rep. Kevin Brady (R-Texas), the lead Republican on the committee.

"Unfortunately, this bill today doesn't make these failing plans more stable, doesn't end underfunding or make them more solvent over time," Brady said.

Among Brady's complaints are that it wouldn't increase accountability for companies providing the pensions, or prevent the situation from getting worse, he said.

Brady noted that the plans were underfunded by $638 billion in 2015, up from $193 billion in 2007. Meanwhile, the PBGC had a $54 billion deficit in 2018, up from $739 million in 2006.

An amended version of the bill passed through committee by a vote of 26 to 18. Now, it will be considered by the full House, where it currently has 197 cosponsors.

The challenge will be getting it passed by House and Senate Republicans, Gotbaum said, who are more likely to back funding the PBGC. Any bipartisan agreement to address the problem wouldn't likely happen until this fall, he said.

Meanwhile, Rep. Bobby Scott (D-Va.) said in a statement that he is "hopeful" that the bill will be considered on the House floor in the coming weeks. "Retirees, workers, employers and taxpayers are counting on Congress to address the multiemployer pension crisis, and we must deliver a solution for them," Scott said.

https://www.msn.com/en-us/money/retirement/these-pension-plans-are-at-risk-of-going-broke/ar-AAEeWYK?ocid=spartandhp

 

 

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Dafey

Okay...I posted this in the open forum as a lot of our peeps, me included, are collecting from PBGC and other sources that may be affected by what is talked about in this article.

This is not a Political discussion but an informational article to help the members that may need it.

 

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Jawny

Can this topic return to the issues mentioned in the op?

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softail

I am concerned about my pension as well. I worked for a well respected, strong company and should have no worries. For me the concern is that letting the pension plan go underfunded and thus have the government Pension Benefit  Guarantee  Corporation take over would be in the company’s best interest, save them a lot of money.

With this in the back of my mind am a little hesitant to spend down my investments in the event that my pension could be reduced in the future if the company decides to use this loophole.

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Dafey

Hey @softail,

Always have a backup plan. The PBGC guaranteed my pension in 2005 after the company I worked for stole the pension money. They told me that it would pay as long as I live. We'll see. Even though it is backed by the government apparently that is not no guarantee.

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savarity

Many companies routinely underfund their pensions (for a variety of logical reasons) and the GAAP rules allow for them to record... whatever, in this regard (again, this is logical because income statements for investors shouldn't be skewed based on the, "vagaries of the market," on retirement investments which have nothing to do with the company's actual business), but when taken together, workers should consider the risks, before relying on company pension plans.

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Dafey
10 hours ago, savarity said:

Many companies routinely underfund their pensions (for a variety of logical reasons) and the GAAP rules allow for them to record... whatever, in this regard (again, this is logical because income statements for investors shouldn't be skewed based on the, "vagaries of the market," on retirement investments which have nothing to do with the company's actual business), but when taken together, workers should consider the risks, before relying on company pension plans.

Very true. The company I worked for would invest profits into the pension fund during the good years and use those funds during the lean years, avoiding paying taxes. Good deal for both parties as the funds earn while sitting there. However, access to the funds allowed them to keep skimming without accountability until a contract negotiations where the said if they pay back the pension fund the company would go belly up. We said, "okay"! I can find another job but I don't want to lose what is already in the pension.

So the pension was turned over to the PBGC Who pays about 60% of the original plan. 

Always have a backup plan!

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Tazman2010

Having retired from the State of California, and my pension coming from CAL Pers, the worry is that there is a claim the pension program is underfunded.  After all we are all expected to live 30 years after retirement and with that logic the pension program is underfunded and requires the agencies and counties using it to pony up more money every year.  However, for every retired employee that kicks off before 30 years, the pension plan is making money.  Worst case scenarios always get the fearmongers' panties all wadded up......Unless the pension plans put all of the funds in a stupid stock or real estate scheme, I do not believe the sky will be falling anytime soon. But that is just my view.

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