Congress Hashes Out $1 Trillion Spending Bill at Expense of Pensioners

Dec 10, 2014 05:58 PM EST

Congress may have a $1 trillion spending bill to keep the government funded before Thursday's deadline, but there is a controversial provision in the bill that could derail its passage and shut the government down.

House and Senate negotiators reached a deal on the $1 trillion spending package that would fund the government for the full fiscal year except for the Department of Homeland Security, which will be funded through early next year, according to Susan Davis of USA Today. However, Michael Fletcher of The Washington Post reported that there was a measure in the bill that would alter 40 years of federal law and could affect millions of workers.

"If passed, the change would apply to multi-employer pensions, where a group of businesses in the same industry join forces with unions to provide pension coverage for employees," Fletcher wrote. "The plans cover some 10 million U.S. workers."

Fletcher wrote that there are about 1,400 multi-employer plans, many of which remain in good fiscal health. However, as many as 200 multiemployer plans covering 1.5 million workers are in danger of running out of money in the next two decades, with some of those plans in such bad shape that they might reduce pensions for retirees.

"We have to do something to allow these plans to make the corrections and adjustments they need to keep these plans viable," said Rep. George Miller (D-Calif.).

According to Michael Hiltzik of the Los Angeles Times, the congressional proposal allows trustees of those plans to slash benefits sharply for retirees to give the plans a longer lease on life. Active workers and retirees would have to conduct a vote of approval first before that could be done.

Retirement security advocates such as AARP are outraged by the proposal. They argue that allowing cuts to plans paves the way to trims for other retirees later along with pitting workers against retirees.

"After a lifetime of hard work to earn their pensions, retirees don't deserve to receive a bad deal, in which they have had no say, cut behind closed doors and secluding the very people who would be impacted the most," said Joyce Rogers, a senior vice president for AARP.

However, some unions and retirement fund managers reluctantly supported the idea of cutting benefits, noting that it was the only way to save pensions in plans that could run out of money. Randy G. DeFrehene, executive director of the National Coordinating Committee for Multiemployer Plans, released a statement defending the agreement hashed out by Congress.

"This bipartisan agreement gives pension trustees the tools they need to maintain plan solvency, preserves benefits for the long haul, and protects the 10.5 million multiemployer participants," DeFrehne said. "With time running out on the retirement security of millions of Americans, moving this bipartisan proposal forward now is not only timely, but necessary."

Rep. John Kline (R-Minn.) argued that many of the affected pension plans are within a few years of insolvency.

"We could push now and get this done," Kline said, "or kick the can down the road and lose weeks and months. For some plans, their financial situation gets worse constantly."

Both Kline and Miller argued that there would be protections for retirees who are disabled or older than 75. However, the Los Angeles Times noted that both congressmen offered few specifics beyond a "sketchy fact sheet."

According to the Washington Post, retired Ohio trucker Whitlow Wyatt, 70, had a $3,300-a-month pension in 2000 after working more than 33 years as a long-haul driver. His pension could face reductions of 30 percent or more if Congress passes this provision.

"We thought our pension was secure," Whitlow said. "That was always the word. Now they are changing that."

The Los Angeles Times reported that the pressure for the last-minute provision apparently came from the trustees of some plans. Under ERISA, the 1974 law that governs private sector pensions, benefits already earned by a worker cannot be cut.