For millions of Americans, retirement just got a lot scarier.
A provision included in the $1.1 trillion spending bill that passed in the final days of the last Congress creates the possibility that certain current and future retirees could have their pension payments reduced by 60 percent — a prospect that experts say has been virtually unheard of until now.
“I think that this kind of takes an important step back from what has always been just a bedrock principle that you can’t cut back on benefits that have already been earned,” said Gregg Dooge, an attorney at Foley & Lardner in Milwaukee who has practiced pension law for 30 years.
The provision applies only to multiemployer union pension plans — those that cover more than one company’s workers — that face a high likelihood of running out of money within the next 20 years.
Multiemployer plans were developed as part of collective-bargaining agreements and typically apply to union workers in professions such as trucking, food retailing, construction and mining, among others. There are about 1,400 such pension plans, covering about 10 million people.
Known as the Multiemployer Pension Reform Act of 2014, the new law is the result of demographic and economic conditions that some say are similar to those that could eventually overtake Social Security: So many more people are collecting benefits than are paying into the system that it faces a potential collapse.
The federal agency in charge of carrying out the new law is the Pension Benefit Guaranty Corp., which regulates two types of plans: single-employer plans and multiemployer plans.
Single-employer plans are not affected by the change. They cover nearly 31 million workers and retirees in about 22,000 pension plans.
The change was a bipartisan provision aimed at keeping multiemployer pension funds from collapsing, something the Pension Benefit Guaranty Corp. says is likely within the next 10 years.
The new law says benefits cannot be reduced for retirees and beneficiaries who are 80 or older. Retirees between 75 and 79 would face smaller benefit cuts. Plan benefits that are based on disability cannot be reduced, according to the PBGC.
Everyone else in the plans faces the possibility of a benefit cut.
Still, the notion that someone could cut the benefits he already has earned makes retired Teamster trucker Bob Amsden more than angry.
“It’s sickening,” he said.
Amsden, 63, said he could always count on his pension, even when he lost jobs at trucking companies such as Consolidated Freightways, which went bankrupt and closed in 2002.
“The only thing that saved me during those 30 years is my pension kept going everywhere I went,” he said. “I lost vacation. I lost wages. Every time I started at a new job, they classified me as a new hire.” But he could always look forward to receiving the pension benefits he had earned.
Now, because he is in a multiemployer plan, that’s no longer a sure thing.
The bill that produced the pension law was jammed with provisions ranging from funding to avoid a government shutdown to immigration regulations. The voting on it transcended party lines.
The pension provision seemed to have been lost in the shrill debate coming from all sides of the legislation. Some in Congress all but said they were less than experts on the contents of the 1,600-page spending bill.
That doesn’t sit well with Amsden.
“It just spins your head,” he said. “How can any elderly person put their faith in any person they elect to government office?
“You wouldn’t believe how hard it was just to get somebody to listen,” he added. “The politicians give us a form letter response. They won’t talk to us in person.”
Amsden said he and the other retirees are not asking for a bailout. But that may be what happens indirectly, he said.
“So the benefits get cut, then what?” he said. “People will go on welfare, food stamps, public assistance. Who pays for that? The taxpayers.”
For more information about the pension change, go to pbgc.gov and click on “View Multiemployer FAQs.”