The Treasury Department has rejected a restructuring plan for the Central States Pension Fund that would have cut benefits for thousands of retired Teamsters.
While beneficiaries were relieved, the financial problems facing the fund remain. The ruling is also a reminder of the severe difficulties facing a number of other “multiemployer” pension funds — and their federal safety net program, run by the Pension Benefit Guaranty Corporation (PBGC).
The decision Friday came from Kenneth Feinberg, appointed by Treasury to determine whether the Central States proposal met requirements set by a controversial 2014 law that allows benefit cuts in badly underfunded pension plans.
Central States proposed cutting some benefit checks by more than half. Feinberg, however, said the cuts were not distributed equitably and found other problems as well.
Central States is so large that its failure could jeopardize PBGC’s entire multiemployer program, which in any case is under strain.
The PBGC says the program had a “net deficit” of $42.4 billion at the end of Fiscal 2014, with assets of $1.8 billion and liabilities of $44.2 billion in connection with multiemployer plans that are either insolvent or projected to become so.
The agency warned in March that the multiemployer program’s current assets “are only a small fraction of the amount needed to cover guaranteed benefits for more than one million people in plans expected to run out of money in the next decade.”
Washington should enact reforms soon. As with other fiscal challenges, procrastination will only make matters worse.
External links:
Treasury Rejects Plan to Cut Pension Benefits for Teamsters (N.Y. Times)
Multiemployer Program Will Require Significant Additional Premiums (PBGC)
Multiemployer Pension Reform Act of 2014 FAQs (PBGC)
