According to this recent report in SHRM, more than a million Americans currently have their retirement savings in union-managed multi-employer pension plans that are severely distressed and headed for default in the near future.
On Sept. 8, a plan was introduced in Congress to modernize the multi-employer pension system. The plan outlined the following:
Benefits under a composite plan would be calculated under a formula set by the plan’s trustees in order to provide annuities to employees as they retire.
Employers would contribute a fixed amount, and the trustees would be required to determine benefit levels based on actuarial calculations that provided assurances that the contributions would cover 120 percent of the promised defined benefit level. If the investments of the trustees performed better than expected, then the employees would be eligible for greater benefits.
Trustees would be required to take corrective actions in the current plan year if the plan is projected to be less than 120 percent funded in 15 years.
If the trustees’ actions are insufficient to reach a projected funded ratio of at least 120 percent, the trustees may reduce future benefit accruals below 1 percent and adjust benefits for retirees in pay status.
Critics of the composite plans, including the Pension Rights Center, which advocates on behalf of pension beneficiaries, promptly wrote a letter to House members urging them not to consider such legislation, claiming composite plans don’t provide the same level of protection as traditional multiemployer plans.