Republicans: OMG! Can you believe Barack Hussein Obama is trying to prevent a war with Iran?!? What does he want next, peace in the Middle East? Universal healthcare? Voting rights, immigration reform, a higher minimum wage, marriage equality and equal pay for women?
Why does Obama hate America?
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.”
If ever you aren’t sure why elections matter, just take a look at our court system. Earlier this week, three judges – all appointed by Democrats – stood up for voting rights in North Carolina. Only days earlier, the most conservative members of the Supreme Court issued a stay to slash early voting in Ohio.
The three-judge panel on the Fourth Circuit Court of Appeals reviewed North Carolina’s new voting laws, and put a stop to two of the provisions that would have disenfranchised many voters in the upcoming election. While the democratic appointees declared “the right to vote is fundamental,” the right-wing justices on the Supreme Court allowed Ohio’s restrictive voting laws to stay in effect this November.
To make matters worse, our nation’s highest court didn’t even hear arguments in the Ohio case, or provide any justification for their ruling. The distinction is clear. Judges appointed by Democrats understand that voting is a fundamental right in our nation. Judges who were appointed by Republicans see no problem with limiting our ability to participate in the democratic process.
Elections matter for many reasons, but the effect they have on our judicial system may be the most important reason why we have to get out and vote this November.