For the first time under the Multiemployer Pension Reform Act, pension fund members have voted to cut their own pension benefits in order to maintain the solvency of the fund.
The Iron Workers Local 17 pension fund was the first to have its benefit cut proposal approved by the Treasury back in December; other pension funds have submitted proposals for benefit cuts, but they had been rejected by the Treasury.
Under the MPRA, plans are eligible to propose cuts if their funding is “critical and declining”. There are 70 such plans in the United States.
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Members of Iron Workers Local 17 in Cleveland have approved cuts to their pension benefits in an effort to keep their pension plan from going insolvent, and it’s the fund’s retirees who are going to take the hardest hit.
Of the nearly 2,000 plan participants, fewer than half submitted a vote. That’s significant because under the MPRA, not casting a vote is the same as voting to approve the pension cuts. Of the 936 members who did vote, two-thirds voted in favor of the cuts.
Benefit cuts, under the MPRA, are allowed only if the plan trustees determine that all reasonable measures to avoid insolvency have been and continue to be taken and that the suspension would allow the plan to avoid insolvency, assuming the suspension of benefits continues until it expires by its own terms or, if no such expiration is set, indefinitely. Cuts can be made to no more than 110 percent of the Pension Benefit Guaranty Corporation’s limits for multiemployer plans.