The Central States Pension Fund, which pays pension benefits to workers and retirees from over 1,500 companies, is saying that it will need to slash benefits for 273,000 current and future retirees. According to executive director Thomas Nyhan, if the cuts are not made, it’s likely the fund will run out of money within the next 10 years. Before a law passed last year, these kinds of cuts would have been illegal, but now, multi-employer pension funds can reduce benefits if they’re at risk of running out of money.
While the cuts are not uniform, and older retirees and widows will be spared much of the pain, the reductions will average about 23 percent, and may begin as soon as summer of 2016.
Although there are several reasons for the overwhelming financial pressure on the fund, the stunning change in worker-to-retiree ratio over the last three-plus decades is surely a big component of the troubles; in 1980, for each retiree, the fund had four active workers – now, there are five retirees for each active worker.
An additional, ominous sign is that the Pension Benefit Guaranty Corporation, which is the insurer of these funds, is also at risk of going under.
There has been some effort made in recent years by Democrats to pass legislation that would allow taxpayer money to be used to bail out pension funds, but that ended up going nowhere, and it is generally believed that the public climate is particularly bad right now for trying to garner support on behalf of such a bailout.