Retired ironworkers could face pension cuts next month
By Jonnelle Marte
January 4 at 7:00 AM - The Washington Post
Larry Burruel is starting the new year with a grim reality: His monthly
pension check could be cut in half at the end of the month.
Burruel, 68, is among the hundreds of retired ironworkers who received the
tough news a few weeks before the holidays. The cuts
proposed by his pension plan, a small
Cleveland-based fund with about 2,000 members, were approved by the
Treasury Department on Dec. 16. It is the first time the agency has
given the green light for a private pension plan to cut benefits for
its members.
The proposal, which will reduce benefits by 20 percent on average, must now
be voted on by the retirees and workers in the Iron Workers Local 17 Pension
fund. If approved, retirees could see smaller pension payments as soon as Feb.
1.
The cuts were proposed under a 2014 law that for the first time made it
possible for struggling pension plans to cut benefits if it would help improve
the solvency of the fund. The ironworkers make up a sliver of the
roughly 1 million workers and retirees in financially troubled plans that are on
pace to run out of money within the next two decades, according to the Pension
Benefit Guaranty Corporation, which insures private pensions.
But critics of the pension law worry that the cuts may open the door for
other troubled pension plans to shrink retirees’ benefits. At least five other
pension plans are waiting for the Treasury Department to review
their
applications to scale back benefits. The proposals could affect tens of
thousands of employees and retirees who earned pensions as bricklayers,
furniture workers and autoworkers.
“This could just open the flood gates for approval for all of them,” said
Karen Ferguson, director of the Pension Rights Center, a nonprofit that focuses
on retirement issues.
Until now, the agency had denied all other applications to cut retirement
benefits submitted under the law. That includes a plan that would have
affected nearly 300,000 current and retired truckers in the Central
States Pension Fund, one of the largest pension plans in the country, which
is on pace to run out of money within 10 years. Kenneth Feinberg, the special
master appointed by Treasury to review the proposals, has rejected applications
when he found the projections for future investment growth were unrealistic or
when the cuts would not be sufficient enough to help the pension plans avoid
insolvency.
The ironworkers fund, however, met the necessary requirements in
its final application, which officials withdrew and resubmitted over
the summer. In the revised application, pension leaders used more modest
projections for expected investment returns.
Members of the plan have to submit their votes by Jan. 20. A “no” vote from
the majority of the plan members cannot be overridden by the Treasury
Department.
“The good news here is the final decision rests with the workers,” Sen.
Sherrod Brown (D-Ohio) said in a statement.
But some pension advocates worry that not enough participants will cast a
vote, since roughly half of the members are exempt from the cuts because of
their age or a disability. Under the law, anyone who does not vote will be
registered as voting in favor of the proposal.
The leaders of the Iron Workers Local 17 Pension Fund say the cuts are
necessary to keep the fund afloat. If no changes are made, the fund is expected
to run out of money by 2024. At that point, the pension plan would need to rely
on a federal insurance program that is supposed to back up struggling pension
plans.
By then, however, there may be no backup plan in place. The
multi-employer pension fund for the Pension Benefit Guaranty Corporation, which
is meant to back up plans like the Iron Workers fund or the Central States
fund, is also running out of money. The program is on track to become insolvent
by 2025, if not sooner.
Burruel, who spent about three decades welding metal and manning construction
sites for bridges and buildings in the Cleveland area, says it will be difficult
for him to make up the lost income if his pension is cut. The reduced
checks will make it difficult for him and his wife to afford treatments they
need for heart conditions and other health issues, he says.
“I cannot go back to work,” Burruel said, adding that he can’t be on his feet
for long because of knee and hip injuries. “There’s no way I’m going to be able
to make up that income.”