One of the nation’s largest multi-employer pension funds said that it is out of ideas for ways to save itself from an impending failure, the Washington Post reported today. After the Treasury Department rejected its Hail Mary proposal, which would have substantially cut benefits for some retirees, the Central States Pension Fund has little choice but to turn to a federal insurance program that is supposed to offer a lifeline to troubled pension funds. But there’s one major problem — that program is expected to run out of money, too. The Pension Benefit Guaranty Corp., which insures private pensions, is dealing with long-standing financial woes with the fund that protects multi-employer pension plans. The program, which some experts say wasn’t really intended to be used, was set up more than four decades ago to serve as a backstop for private-sector pension plans. But it has been relied on more than expected by large plans on unsteady financial footing. The fund’s deterioration could pose a threat to the 10 million people in multi-employer plans who could soon be left without a safety net for their pensions. Although most of those workers and retirees are in plans that are financially healthy, about 1.5 million people — including the Central States members — are in plans that are projected to run out of cash over the next 20 years. In the past few weeks, lawmakers, Central States officials and consumer advocates have called for a legislative solution that would shore up fragile pensions and the struggling insurance fund. Previous efforts to bolster the insurance program have failed, or so far fallen short. For instance, a 2014 law that made it possible for multi-employer pension plans to cut benefits for retirees was meant to alleviate the burden on the PBGC. But now that the Treasury Department has rejected the Central States proposal, which was the first test under the law, the insurance agency is back where it started. Read more.
The Central State Pension Fund and the overall crisis in private and public pensions was the topic of discussion on the April “Eye on Bankruptcy” program. Click here to watch.
