Tucked into the must-pass federal spending bill that President
Lobbyists for a coalition of unions and companies got
But critics say the new rules undermine a central tenet of the 1974 federal pension law, the Employee Retirement Income Security Act, or ERISA, which essentially says that employers cannot cut retirement benefits once they've been earned, unless the company has gone into bankruptcy.
"We are incensed by this legislation,'' said
An official with
"After a lifetime of hard work to earn their pensions, retirees don't deserve to receive a bad deal, in which they've had no say, cut behind closed doors and excluding the very people who would be impacted most,'' said
Supporters say the move was necessary to shore up another creation of the 1974 pension law — the
"It's not a moment to rejoice,'' said
The federal agency said its employer-funded insurance pool for the pension plans covered by the new law is now
10 million affected
The new rules could affect up to 10 million workers and retirees, but only those in "multi-employer'' pension plans run jointly by unions and groups of companies, typically in the same industry, such as trucking, mining or construction. Single-company plans are not affected.
Under the new law, if a multi-employer plan is projected to run out of money in 10 to 20 years and other criteria are met, the plan could cut benefits of current retirees under age 80 by 30 to 60 percent, according to experts.
The Pension Rights Center estimated that a retiree who gets a
Coming on top of recent benefit cuts for public employees and retirees in
"They are setting a very dangerous precedent,'' said Friedman. "Are corporations going to say 'Why is this only for multi-employer plans?'
" Is this going to give fuel to people who want to cut state and local plans? And what about
Supporters discount fear of wider repercussions.
By giving struggling pensions more flexibility to cut costs, the new law is intended to keep struggling multi-employer plans from failing and being taken over by the PBGC.
The law also doubles the premium that companies pay into the PBGC's multi-employer plan — to
Experts generally don't see the same alarming trends at the PBGC's much larger insurance fund backing traditional pension plans run by single employers. That fund is in better shape than the multi-employer fund, but also in the red.
That program, which insures pensions for almost 31 million people, swung from a
PBGC also charges employers much higher annual premiums in its single-employer insurance program: from
Multi-employer pensions — because they collect contributions from several companies — were once considered more secure than pensions sponsored by single companies. But like many pension plans, they have been weakened by losses from two stock market crashes since 2000, sometimes too-generous benefits, and aging workforces, which have left them with too few younger workers to support rising payments to more and more retirees.
But multi-employer pensions have also been hit by unique challenges. As many of the nation's industrial companies have gone out of business, or pulled out of the plans if they saw signs of trouble, fewer firms and workers remained to pay in contributions.
The biggest chunk of the PBGC multi-employer fund's deficit —
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