NEW YORK (CNNMoney) — More than a million current and
retired truck drivers, construction workers and other union employees could see
their pension benefits cut now that Congress has passed a controversial new
measure.
Aimed at saving some of the country’s largest pension
funds from the brink, the law will allow multiemployer pension plans that are
projected to become insolvent in the next 10 to 20 years to cut the benefits of
both current and future retirees.
By allowing the plans to cut benefits now, lawmakers say
it will help keep around 150 pension funds from running out of money.
But retirees aren’t exactly seeing it that way. Many gave
up years of pay increases and contributed thousands of dollars from their salaries
each year toward their promised pensions. As a result, many have little savings
outside of their pension benefits and Social Security checks and are not sure
how they’ll make ends meet if the cuts go through.
“It’s devastating,” said 63-year-old Dave Scheidt, who
retired five years ago after more than 30 years loading and unloading trucks.
“We never dreamed that our pension wouldn’t be there.”
In the worst case scenario, Scheidt could see his current
annual benefits of around $37,000 a year reduced to as little as $15,000. He
receives his checks from the Central States Southeast and Southwest Areas
Pension Fund, a plan that is now qualified to cut benefits under the law.
Central States lobbied heavily for the new
pension-cutting measure, which has led many of its retirees to speculate that
it will be one of the first plans to reduce benefits.
However, any cuts would ultimately require government
approval. Benefits also cannot be cut for those with disability pensions or
those who are 80 years and older, while cuts must be less severe for those
between 75 and 80.
Central States did not respond to a request for comment.
But on its website, it says that “given the complexity of the process, it is
likely that it would take up to a year before modifications, if any, take
effect” and that retirees would receive “advance written notice of any proposal
to modify benefits.”
The fund, which paid out $2.1 billion more than it
received in contributions in 2012 alone, is projected to be insolvent in the
next 10 to 15 years. So officials have argued that retirees will ultimately see
major cuts either way.
That’s because if a multiemployer plan goes insolvent, a
retiree is guaranteed less than $13,000 a year from the Pension Benefit
Guaranty Corp. In contrast, a retiree in a single employer plan that goes bust
is insured for up to $60,000.
In the meantime, the fund’s retirees and others are in
another waiting game, wondering when — and by how much — their checks could be
cut.
Scheidt, who has mobilized with other retired Teamsters
to oppose the cuts, said he’s heard from retirees across the country about the
new law. Some, he says, have broken down in tears.
“Many will lose homes and cars and trucks because of
this,” he said. “These guys are scared to death.”
Retired trucking industry worker Kirby Cabrera, 62, is
trying to stay positive. “I don’t want to preach doom and gloom,” he said. But
with 20 years of mortgage payments, he too is worried that he could face
foreclosure if his current roughly $36,000 annual pension is cut too deep.
He already faces thousands of dollars in medical bills
each year as he battles injuries from his years of working on the truck loading
docks. Two years ago, he had one knee replaced. In a few weeks, he’s going in
to have the other one replaced.
Plus, he’s worried that current Central State rules
limiting employment options for pensioners could hurt his ability to go back to
work and make up for any lost income.
For now though, Cabrera said he is trying to stay hopeful
that any cuts won’t be as deep as he is fearing,
“If they’re 30% or 40%, it’s going to destroy me…” he
said. “I wish I had a crystal ball, and I knew what I was going to do.”
Source: Fox
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