Members of the Iron Workers Local 17 Pension Fund will vote this month whether to cut the average pension benefit by roughly 20 percent. If the cuts are voted down, fund officials say they could run out of money in less than 10 years.
The Iron Workers pension fund last month was the first fund whose proposal for pension cuts was given the go-ahead by the Treasury Department.
Now, the cuts go to a vote among members.
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The cuts proposed by his pension plan, a small Cleveland-based fund with about 2,000 members, were approved by the Treasury Department on Dec. 16. It is the first time the agency has given the green light for a private pension plan to cut benefits for its members.
The leaders of the Iron Workers Local 17 Pension Fund say the cuts are necessary to keep the fund afloat. If no changes are made, the fund is expected to run out of money by 2024. At that point, the pension plan would need to rely on a federal insurance program that is supposed to back up struggling pension plans.
By then, however, there may be no backup plan in place. The multi-employer pension fund for the Pension Benefit Guaranty Corporation, which is meant to back up plans like the Iron Workers fund or the Central States fund, is also running out of money. The program is on track to become insolvent by 2025, if not sooner.
Some retirement advocates worry that the Iron Workers fund cuts will usher in more cuts to private plans:
Critics of the pension law worry that the cuts may open the door for other troubled pension plans to shrink retirees’ benefits. At least five other pension plans are currently waiting for the Treasury Department to review their applications to scale back benefits. The proposals could affect tens of thousands of employees and retirees who earned pensions as bricklayers, furniture workers and autoworkers.
“This could just open the flood gates for approval for all of them,” said Karen Ferguson, director of the Pension Rights Center, a nonprofit that focuses on retirement issues.