Very few workers today will get pensions. Most company defined-benefit pension plans were changed long ago into 401(k) plans, where your eventual checks will depend on the amount you contributed and the performance of the investments you chose.
But for millions of union workers, part of the attraction of paying union dues over a lifetime of work was the promise of a lifetime pension. Many of those pensions are so-called multiemployer plans, which cover workers for unrelated employers in the same industry.
Now, as a result of years of mismanagement, bad investments or bad assumptions on returns, some funds are running out of money to keep their pension promises to union workers.
Pension defaults or cuts now appear likely because of a new law passed late at night as part of the 2014 omnibus spending bill designed to keep the government from shutting down. The Kline-Miller Multiemployer Pension Reform Act (MPRA) allows union pension plans to appeal to the Treasury Department to cut pension benefits -- even for current retirees -- if the plan trustees can demonstrate the cuts are a solution to extreme hardship.
And now it has happened. The Treasury Department has just granted approval for the Ironworkers Local 17 pension fund in Cleveland to cut retiree benefits as much as 50 percent! That will happen early in the New Year, pending a required vote that will pit current workers, who hope to see at least some benefits from their plan, against retirees who will get the immediate cuts.
Currently there is a list of 67 multiemployer plans -- covering nearly 1 million workers -- that have filed with the government to be classified as "critical and declining." That puts them in line to ask for the same kind of relief just granted to the Ironworkers pension plan. Four union pension plans have already applied to cut benefits, but the government ruled the cuts weren't deep enough to ensure the plans' survival.
One of those rejected was the Central States Pension Fund, covering more than 400,000 union members, which is projected to be insolvent within 10 years.
Could this happen to your pension?
If you work for a large corporation, your pension is insured by the federal Pension Benefit Guarantee Corporation. Your pension is insured up to a maximum payout at age 65 of roughly $5,000 per month, which covers most pension promises.
For retirees covered by multiemployer plans, however, the PBGC maximum guarantee is just over $1,000 per month. But the PBGC's multiemployer insurance program has announced it is running dangerously low and has said it is likely to run out of money to cover current beneficiaries by 2025. If more large multiemployer plans fail in the future, that date could move closer.
Workers covered by state and municipal pension plans have no federal guarantee program. But states cannot file for bankruptcy since they have the "sovereign power" to tax.
The few cities that have filed for bankruptcy in recent years -- Stockton, Calif., Detroit and others -- have adjusted some retiree benefits, such as health care. Or they have created new levels of participation for current workers. But none, so far, has actually cut benefits of current retirees.
Check the status of your pension.
The Pension Rights Center (www.PensionRights.org) worked to defeat the legislation that allowed the multiemployer plan cuts. It advises plan participants to read the annual funding notice that all pension plans must send to anyone entitled to a benefit.
Or go to www.FreeERISA.com, enter the name of your pension plan, and subtract the plan liabilities field from the current value of plan assets. This will give you the plan's funding status.
Millions of baby boomers who put in long years or work to earn those promised pensions now face an uneasy retirement. And that's The Savage Truth.