Tag Archives: Corporations are people

Retirement, Union, UPS

Can They Grab Your Pension?

Clawbacks become more common as plans discover they overpaid recipients

by Carole Fleck, AARP Bulletin, March 2015
Millions Could See Cuts

Tucked into the massive budget bill passed by Congress in December was a provision permitting certain financially troubled multiemployer pension plans to cut existing benefits potentially to hundreds of thousands of retirees who are under age 80.

Shifting burden

That 11th-hour provision toppled 40 years of protections for retirees already receiving benefits and may alter the course of the U.S. retirement system, retirement advocates say. “Congress has placed the burden of rescuing underfunded multiemployer plans on the people who can least afford it — retirees and surviving spouses who rely on their pensions for food, medication and other necessities,” says Karen Friedman, executive vice president at the Pension Rights Center in Washington, which fought against the legislation along with AARP and other groups.

Multiemployer plans — there are about 1,400 in the U.S. — are group pensions that several companies within a single or related industry pay into, mostly to cover union workers. But shrinking union membership, market declines and other issues have put some 150 to 200 plans — covering about 1.5 million people — in peril.

Out of money

Those plans could run out of money within 20 years, according to the Pension Benefit Guaranty Corp., which insures private pensions up to certain limits when employer plans go bankrupt. Retirees won’t see immediate cuts to their pensions because it’s a complex process to modify benefits.

Vote on cuts

For example, plans with at least 10,000 workers and retirees must permit all participants to vote on cuts before they’re implemented. Even if a majority oppose it, the Treasury secretary could override the vote and uphold trustees’ decisions to reduce payouts, in order to prevent insolvency. Under the provision, retirees ages 75 to 79 likely will see smaller cuts than those 74 and under. Pensioners in single-employer plans won’t be affected.

Action, Corporate Greed, Political

Dream On Mr. Reich Until “Citizens United” Is Repealed, No Change

Robert Reich
The Republican congress that takes over this week will try to drive a generational wedge through the electorate. They’re cooking up arguments that the nation can’t afford to provide our children adequate health care and education if we’re going to meet the demands of the baby-boomer elderly for Medicare and Social Security (thereby trying to justify cuts in all these programs even as they cut taxes on the wealthy and corporations). This is utter nonsense, for the following reasons:
(1) Social Security’s pending shortfalls don’t begin for another 20 years, and they can be avoided entirely if the cap on income subject to Social Security payroll taxes (for 2015, $118,500) is lifted.
(2) Medicare’s costs are slowing, and they’d be even lower if the government allowed Medicare to use its bargaining power to negotiate lower prices from drug companies and other suppliers.
(3) The best way to assure there’s enough money for our childrens’ health care and education is to raise taxes on the wealthy, who have never been as rich. State and federal taxes on the wealthy now take a lower percentage of their income than at any time since the 1920s.
Don’t succumb to the Republican’s upcoming generational-divide tactics. The nation as a whole is wealthy enough to provide for both our children and our seniors in years to come, if the rich and corporations pay their fair shares.

Action, Corporate Greed, Political, Retirement

Your New Congress at Work for YOU!

What Retirees Need to Know about the New Federal Pension Rules
Mark Miller / Reuters
Dec. 18, 2014
     Only a small percentage of retirees are directly affected by the new rule.
But future legislation may lead to more pension cutbacks.
The last-minute deal to allow retiree pension benefit cuts as part of the federal spending bill for 2015 passed by Congress last week has set off shock waves in the U.S. retirement
Buried in the $1.1 trillion “Cromnibus” legislation signed this week by President Barack Obama was a provision that aims to head off a looming implosion of multiemployer pension plans—traditional defined benefit plans jointly funded by groups of employers. The pension reforms affect only retirees in struggling multiemployer pension plans, but any retiree living on a defined benefit pension could rightly wonder: Am I next
“Even people who aren’t impacted directly by this would have to ask themselves: If they’re doing that, what’s to stop them from doing it to me?” says Jeff Snyder, vice president of Cammack Retirement Group, a consulting and investment advisory firm that works with retirement plans.
The answer: plenty. Private sector pensions are governed by the Employee Retirement Income Security Act (ERISA), which prevents cuts for retirees in most cases. The new legislation doesn’t affect private sector workers in single-employer plans. Workers and retirees in public sector pension plans also are not affected by the law.
Here are answers to some of the key questions workers and retirees should be asking in the legislation’s wake.
Q: Cutting benefits for people who already are retired seems unfair. Why was this done?
A: Proponents argue it was better to preserve some pension benefit for workers in the most troubled plans rather than letting plans collapse. The multiemployer plans are backstopped by the Pension Benefit Guaranty Corp (PBGC), the federally sponsored agency that insures private sector pensions. The multiemployer fund was on track to run out of money within 10 years—a date that could be hastened if healthy companies withdraw from their plans. If the multiemployer backup system had been allowed to collapse, pensioners would have been left with no benefit.
Opponents, including AARP and the Pension Rights Center, argued that cutting benefits for current retirees was draconian and established a bad precedent.
Q: Who will be affected by the new law? If I have a traditional pension, should I worry?
A: Only pensioners in multiemployer plans are at risk, and even there, the risk is limited to retirees in “red zone” plans—those that are severely underfunded. Of the 10 million participants in multiemployer plans, perhaps 1 million will see some cuts. The new law also prohibits any cuts for beneficiaries over age 80, or who receive a disability pension.
Q: What will be the size of the cuts?
A: That is up to plan trustees. However, the maximum cuts permitted under the law are dramatic. Many retirees in these troubled plans were well-paid union workers who receive substantial pension benefits. For a retiree with 25 years of service and a $25,000 annual benefit, the maximum annual cut permitted under the law is $13,200, according to a cutback calculator at the Pension Rights Center’s website.
The cuts must be approved by a majority of all the active and retired workers in a plan (not just a majority of those who vote).
Q: How do I determine if I’m at risk?
A: Plan sponsors are required to send out an annual funding notice indicating the funding status of your program. Plans in the red zone must send workers a “critical status alert.” If you’re in doubt, Snyder suggests, “just call your retirement plan administrator,” Snyder says. “Simply ask, if you have cause for concern. Is your plan underfunded?”
The U.S. Department of Labor’s website maintains a list of plans on the critical list.
Q: How quickly would the cuts be made?
A: If a plan’s trustees decide to make cuts, a notice would be sent to workers. Snyder says implementation would take at least six months, and might require “a year or more.”
Q: Am I safe if I am in a single employer pension plan?
A: When the PBGC takes over a private sector single employer plan, about 85% of beneficiaries receive the full amount of their promised benefit. The maximum benefit paid by PBGC this year is $59,320.
Q: Does this law make it more likely that we’ll see efforts to cut other retiree benefits?
A: That will depend on the political climate in Washington, and in statehouses across the country. In a previous column I argued that the midterm elections results boost the odds of attacks on public sector pensions, Social Security and Medicare.
Sadly, the Cromnibus deal should serve as a warning that full pension benefits aren’t a sure thing anymore. So having a Plan B makes sense. “If you have a defined benefit pension, great,” Snyder says. “But you should still be putting money away to make sure you have something to rely on in the future.”