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HomeMarketRetirees celebrate $36 billion pension bailout

Retirees celebrate $36 billion pension bailout

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Retirees who spent nearly a decade fighting for their promised pension benefits celebrated a major win Thursday as President Joe Biden announced a $36 billion rescue for their troubled retirement plan. 

The bailout of the Central States, Southeast and Southwest Areas Pension Fund, an underfunded multiemployer defined-benefit plan, is the largest amount ever awarded by the federal government to support pension security and will prevent deep cuts to the benefits of more than 350,000 workers and retirees, according to the White House. 

Without the financial assistance to shore up the pension plan, benefits would be slashed, and “some folks would stand to lose $10,000 each and every year of their retirement,” Biden said Thursday at a White House event announcing the award. “The money they earned.”  

The announcement means that “finally, the retirees can plan the rest of their lives,” said Dana Vargo, 70, of Massillon, Ohio, who helped lead the years-long grassroots effort to avert the benefit cuts. Vargo’s husband Don, a retired trucker, was facing a more than 50% reduction in his Central States pension benefit. Now, “we don’t have to continue to come to Washington to beg for what my husband worked for,” Vargo said.  

Last year’s American Rescue Plan Act authorized the taxpayer-funded financial assistance program for wobbly multiemployer pension plans. These plans are negotiated between unions and two or more employers and cover roughly 11 million participants in trucking, construction, manufacturing and other industries. After many of these plans were shaken by declining unionization, withdrawals of participating employers and investment losses, a 2014 law opened the door for plans to cut the benefits of current retirees. 

The American Rescue Plan provision, named after Central States retiree and Teamsters leader Estil “Butch” Lewis, allows certain underfunded multiemployer plans to apply for financial assistance and restore benefits previously cut. Before Thursday’s announcement, the Pension Benefit Guaranty Corp., the federal agency overseeing the program, had already approved nearly $9 billion in assistance to plans covering 193,000 people. The program, which is ultimately expected to distribute between $74 billion and $91 billion to over 200 plans covering more than 3 million people, has drawn fire from some congressional Republicans, who say it leaves taxpayers on the hook for mismanagement of the plans. 

The plight of Central States, one of the largest and most underfunded multiemployer plans, threatened to drain the PBGC’s multiemployer reserves, which provide a backstop to ensure certain minimum payments to participants in failed plans. The PBGC’s multiemployer insurance program, which prior to the American Rescue Plan was expected to go broke in 2026, is now likely to remain solvent for more than 40 years, according to the agency. The financial assistance awarded to Central States is not just “a huge victory” for workers and retirees, “but also great for the economy and great for the PBGC,” said Karen Friedman, executive director of the nonprofit consumer group Pension Rights Center. 

The economic benefits are clear in the northwest Ohio town of Bryan, headquarters of Spangler Candy Co, a Central States participating employer, said Spangler president Bill Martin. The company has roughly 700 workers and retirees in the pension plan–nearly 10% of the town’s population–who were facing benefit cuts of 60% or more, Martin said, and Spangler feared for years that it could be on the hook for massive payments if the plan failed completely. Now, workers “can have a dignified retirement and take care of their families,” he said, while the company, freed from the uncertainty over the pension plan’s fate, has added almost 100 people to its Bryan operations over the past year.   

Central States retirees’ relentless lobbying efforts over much of the past decade played a critical role in ultimately winning passage of the broader multiemployer pension rescue plan, people involved in the legislation say. Some made dozens of trips to Washington, staged protests, testified before Congress, and met with lawmakers, elevating their cause by wearing their union gear around Capitol Hill. 

Jack Palush, 73, a Central States retiree in North Royalton, Ohio, made 32 trips to Washington, he says, fighting to preserve the pension benefit he’d earned after 37 years as a truck driver. In 2015, six years into his retirement, he had learned that his benefit could be cut by more than half and feared he’d have to go back to work to survive. 

“We all became lobbyists,” Palush said. “We didn’t have any money. We had to rely on the information we were getting from congressional staffers,” and learn the ins and outs of Congress along the way, he said. Anticipating the backlash surrounding a taxpayer-funded bailout, he said, “we had to let these people know that there’s two things retirees do with their money: We spend it, and we pay taxes.” 

Credit: marketwatch.com

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