U.S. Treasury Approves Cuts to Pensions for First Time
Jan. 6, 2017 (EIRNS)—On Dec. 16, the U.S. Treasury approved the proposal of Cleveland-based Ironworkers #17 Pension Fund to cut the benefits of its 2,000 members by an average of 20%. This is the first time the Treasury has allowed a private pension plan to cut benefits of its members. The Local’s members and retirees will vote on it Jan. 20. If approved, cuts could start Feb. 1.
Five more pension plans are waiting for the Treasury Department’s decision to reduce pension benefits, Jonnelle Marte reports in the Jan. 5 Washington Post. The cuts proposed would affect tens of thousands of employees and retirees who earned pensions, such as bricklayers, furniture workers and autoworkers.
The cuts were proposed under a 2014 law that for the first time allows a struggling pension plan to cut benefits if it would help improve the solvency of the fund, says the Post. Ironworkers comprise only a small portion of the one million workers and retirees in "financially troubled" plans that are on course to run out of money within the next 20 years, according to the Pension Benefit Guaranty Corp.
The Post reports that a recent application by the Central States Pension Fund to cut benefits for 300,000 current and retired truckers was turned down, because the Treasury rejects reductions when the proposals for future pension investment growth are unrealistic, or when the cuts would not be sufficient to save the pension plans from insolvency. The Truckers plan did not satisfy the requirements, Treasury Special Master Kenneth Feinberg ruled, but the Ironworkers plan met both requirements—allowing the cuts.
Karen Ferguson, Director of the Pension Rights Center, a nonprofit that focuses on retirement issues, said the cuts should be rejected to give Congress and other authorities more time to come up with an alternative plan to protect pensions.
The precedent-setting vote of Local 17 may pass, the Post reports, because of the voting rules imposed: Only half of the local’s members can vote; the other half, exempt from the cuts because of their age or disability, cannot vote, but will be registered as voting in favor of the proposal!