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One of the nations largest pension funds could soon cut

benets for retirees

By Jonnelle Marte April 20 at 7:04 AM

Morethanaquarterofamilliontruckers,retireesandtheirfamiliescouldsoonseetheirpensionbenefits
severelycuteventhoughtheirpensionfundisstillyearsawayfromrunningoutofmoney.

Withinthenextfewweeks,theTreasuryDepartmentisexpectedtoannounceacrucialdecisiononwhetheritwill
approvereductionstooneofthecountryslargestmultiemployerpensionplans.

ThepotentialcutsarepossibleunderlegislationpassedbyCongressin2014thatforthefirsttimeallowed
financiallydistressedmultiemployerplanstoreducebenefitsforretireesifitwouldimprovethesolvencyofthe
fund.Thelawweakenedfederalprotectionsthatformorethan40yearsshieldedoneofthelastremainingpillars
thatworkerscouldrelyonforfinancialsecurityinretirement.

Formanyworkers,thepromiseofaguaranteedincomestreamforlifeabenefitnownearlyextinctforyounger
generationswasattimesstrongenoughtoconvincethemtosacrificepayraisesorotherjobopportunities.But
afterdecadesofchallengesthatleftmanypensionfundsintoughfinancialstraits,somepeoplearelearningin
retirementthatthepromisesmadetothemmayhavetobebroken.

TheCentralStatesPensionFund,whichhandlestheretirementbenefitsforcurrentandformerTeamsterunion
truckdriversacrossvariousstatesincludingTexas,Michigan,Wisconsin,Missouri,NewYorkandMinnesota,
wasthefirstplantoapplyforreductionsunderthenewlaw.

Consumeradvocateswatchingthecasesaythemovecouldencouragedozensofotherpensionplansacrossthe
countrythatarefacingfinancialstrugglestomakesimilarcuts.

Thisisgoingtobeanationalcrisisforhundredsofthousands,andeventuallymillions,ofretireesandtheir
families,saidKarenFriedman,executivevicepresidentofthePensionRightsCenter.

Likemanyotherpensionplans,theCentralStatesPensionFundsufferedheavyinvestmentlossesduringthe
financialcrisisthatcutintothepoolofmoneyavailabletopayoutbenefits.Whilethestockmarkethasrecovered
sincethen,theimprovementswerenotenoughtomakeupfortheshortfallthatgrewasthenumberof
companiescontributingtotheplandeclinedandthenumberofpeopleretiringandcollectingbenefitsincreased,
saidThomasNyhan,executivedirectoroftheCentralStatesPensionFund.

Thatimbalanceleftthefundpayingout$3.46inpensionbenefitsforevery$1itreceivedfromemployers.The
shortfallhasresultedinthefundpayingout$2billionmoreinbenefitsthanitreceivesinemployer
contributionseachyear.

Ifnothingisdone,thefundcouldbecomeinsolventby2025,saidNyhan.Andbecauseofitssize,theplancould
overwhelmthePensionBenefitGuarantyCorporation,theinsuranceagencymeanttoshoreupprivatepension
funds,ifitwentunder,Nyhansaid.

TheCentralStatesPensionFundpaysout$2.8billionayearinbenefits,whichwouldbereducediftheplan
becameinsolvent.Bycomparison,thePBGCfundthatbacksmultiemployerplanshasroughly$2billionin
assetsandisalsoprojectedtobeinsolventby2025.

Thiswasaveryharddecision,agutwrenchingdecision,Nyhansaid,addingthathefearednottakinganyaction
couldleaveretireeswithnopensionatall.Itsnotaquestionofiftherearegoingtobecuts.Thequestionis
whereandwhen.

IfTreasuryapprovesthefundsproposal,thenretireescouldseetheirpaychecksshrinkbyJuly1.Themove
wouldgivethefundatleasta50percentchanceoflastingforanother30yearsasopposedtorunningoutofcash
in10yearsifnochangesaremade,Nyhansaid.AdecisionisexpectedbyMay7.

Butopponentssaytheremaybesomenegativeconsequencesifthecutsareapproved.

Itsgoingtoopenthefloodgatesforothercuts,saidFriedmanofthePensionRightsCenter.

Outofthe10millionworkersandretireescoveredbymultiemployerpensionplans,roughly1millionpeopleare
inplansthatcouldrunoutofmoneyoverthenexttwodecades,accordingtoestimatesfromthePBGC.Already,
threeotherpensionplansthatpaybenefitstotruckdriversandironworkershaveappliedtotheTreasurytohave
theirpensionbenefitsreduced.

TheproposalintroducedinSeptemberbyCentralStateswouldcutbenefitsforcurrentworkersandretireesby
23percentonaverage,thoughexactamountswouldvarybasedonpeoplesage,healthstatusandwherethey
worked.

Formanyretirees,thelossesmaybemuchsteeper.

AvaMiller,64,andherhusband,EdNorthrup,68,couldseetheircombinedmonthlypensionincomecutto
about$3,000fromthenearly$7,000theyreceivenow,accordingtoalettertheyreceivedfromCentralStatesin
October.

Ifthecutsgothrough,Miller,whoworkedasadispatcherinFlint,Mich.,saidtheywillneedtodipintotheir
savingstohelpcovertheir$1,300mortgagepayment,heatingbillsandtripstovisither84yearoldmother.
Northrup,aretiredcarhauler,hasstartedapplyingfortruckdrivingjobsthatcouldsupplementtheirpotentially
smallerpensionpayments.

Whatmakesthecutsmorepainful,Millersaid,isthatshetookpaycutssothatthecompanycouldcontinue
makingcontributionstothepension.

IdideverythingIwassupposedto,Millersaid,addingthatsheandherhusbandmadeextrapaymentsontheir
carloantocutdownontheirmonthlybillsaftertheyreceivedlettersinOctoberinformingthemofthepotential
cuts.

Criticsofthecutssaythefundstillhastimetocomeupwithanalternativesolution.Someretireesandother
supportershaveralliedbehindabillintroducedbyDemocraticpresidentialcandidateBernieSanders(Vt.)that
wouldrepealthemeasureallowingthecuts,callinginsteadforthegovernmenttoprovideassistancetotroubled
pensionfunds.

Nyhansayshealsosupportsthatproposalandwouldwelcomethemoney,butfeelsthechancesthatitwillpass
politicallyareslim.

Ifthecutsareapproved,theproposalwouldbeputtoavotebyall407,000participantsoftheplan,including
currentworkersandretireeswhoareexemptfromthecutsbecauseoftheirageoradisability.Butevenifa
majorityofthemembersvoteagainsttheproposal,thepensionfundissolargethattheTreasuryDepartment
maystillberequiredtoimplementthecutsinordertoprotectthepensionguarantyprogram.

Lastweek,hundredsofretirees,workersandfamilymembersfromMichigan,Wisconsin,Texasandotherstates
gatheredonthelawninfrontoftheCapitoltorallyagainstthecuts.Theywavedsignsandperiodicallybrokeinto
chantsofNocuts.

Asteadystreamoflawmakers,includingSens.ElizabethWarren(DMass.),ChuckGrassley(RIowa)and
TammyBaldwin(DWis.),walkedontoastagetospeakagainstthelegislationandtopushforanalternative
solution.

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RoyWroblewski,64,aretiredtruckdriverfromDetroit,stoodnearthestagepumpinghisfistandholdingupa
signthatsaidnocuts.

Wroblewski,whohauledcarsforabout30yearsbeforeretiringat58,saidhehadjustbeguntofeelstable
financiallytwoyearsbeforewhenhebegancollectingSocialSecuritybenefits.Ifhispensionpaymentsarecutin
halftoabout$1,300,hesayshellhavetogobacktowork.Butaftertwokneesurgeries,truckdrivingisnolonger
anoption.

Likeotherretireesattherally,hesaidhisunionoftenprioritizedpreservingthepensionoverotherbenefitslike
payraises.Wealwayssaidthemoneywasgoodenoughbutwewanttohave[ourpensions],Wroblewskisaid.
Nowwerebacktofightingagain.

Readmore:

Someretireesaremakingaterriblemistakewiththeirpensions

LaborDepartmentrulesetsnewstandardsforretirementadvice

Thetinychangethatcanleaveyoumuchbetteroffinretirement

WhatyouneedtoknowaboutthelucrativeSocialSecuritystrategythatsgoingaway

Jonnelle Marte is a reporter covering personal nance. She was previously a writer for
MarketWatch and the Wall Street Journal.

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