Central States Pension Fund to slash benefits for workers and retirees
One of the largest pension funds in the country says it needs to cut benefits for hundreds of thousands of current and future retirees. Figures vary on the total number of affected workers, between 270,000 and 400,000 people could be affected.
If the cuts aren’t made, the Central States Pension Fund could to run out of money in 10 years, said Thomas Nyhan, executive director of the fund.
Most of the fund’s participants are Teamsters, who are or were employed by hundreds of trucking-related companies with roots in the Midwest, South and East.
“On September 25, 2015, the Pension Fund filed an application with the U.S. Department of the Treasury seeking approval for a pension rescue plan under the Multiemployer Pension Reform Act of 2014 (MPRA) to ensure that our Fund will continue providing pension benefits for many years in the future. On October 1, 2015 all Fund participants were sent a U.S. postal mailing with detailed and individualized information about how our proposed pension rescue plan may impact their current or future benefits. You should consider the effect of the potential benefit suspension on any retirement decision or election that you make,” said a post to the homepage of the Central States Pension Fund website.
Letters were reportedly sent October 2, 2015, to more than 400,000 workers and retirees, explaining whether – and by how much – their retirement benefits would be cut. Under a law passed in 2014, multi-employer pension companies can apply for permission to cut benefits to avoid becoming insolvent. Central States is one of many multi-company pension funds, which cover more than 10 million workers, and several of the funds are facing financial difficulty.
“The plan is considered to be in critical and declining status because it has funding and liquidity problems, or both,” said a notice sent to Central States participants in early 2015.
In 1980, the fund had four active workers for each retiree. Now, it has flipped, with five retirees for every active worker. That means for each $1 the fund takes in, it pays $3 out in benefits.
“(T)he plan is projected to become insolvent in 2026” on its current trajectory, the statement said. Central States stopped paying lump sum benefits from the plan in 2008.
If the Central States recovery proposal is approved by the Treasury Department, retirees who receive disability protections, as well as retirees who are 80 years old or older would be spared from any cuts. Reductions would also be less severe for those who are older than 75, and widows/widowers receiving spousal benefits.
Some workers could see cuts as high as 60 percent, but the average would be just over 22 percent.
If approved, cuts could be in place as early as July 2016.
(CNN contributed information to this report)