Central States Benefit Cut Decision Inches Closer

Sometime in the next few weeks, the U.S. Treasury Department will make a crucial decision: whether to approve benefit cuts to the Central States Pension Fund, one of the largest pension funds in the country, that represents hundreds of thousands of truckers across the country.

The decision is important because it could set a precedent for other troubled multiemployer plans to take similar action.

From the Washington Post:

The potential cuts are possible under legislation passed by Congress in 2014 that for the first time allowed financially distressed multi-employer plans to reduce benefits for retirees if it would improve the solvency of the fund.

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Consumer advocates watching the case say the move could encourage dozens of other pension plans across the country that are facing financial struggles to make similar cuts.

If Treasury approves the fund’s proposal, then retirees could see their paychecks shrink by July 1. The move would give the fund at least a 50 percent chance of lasting for another 30 years as opposed to running out of cash in 10 years if no changes are made, Nyhan said. A decision is expected by May 7.

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Out of the 10 million workers and retirees covered by multi-employer pension plans, roughly 1 million people are in plans that could run out of money over the next two decades, according to estimates from the PBGC. Already, three other pension plans that pay benefits to truck drivers and ironworkers have applied to the Treasury to have their pension benefits reduced.

The proposal introduced in September by Central States would cut benefits for current workers and retirees by 23 percent on average, though exact amounts would vary based on people’s age, health status and where they worked.

If the cuts are approved, they would still be put to a vote among the plan’s 400,000 participants. But even if they vote down the plan, the Treasury has the authority to enact the cuts anyway to keep the PBGC solvent.