The $1.1 trillion spending bill signed into law by President Barack Obama on Monday contains a provision allowing trustees of multiemployer pension plans to cut benefits in order to remain solvent.
But those reductions will take a heavy toll on retired women who can least afford it — retirees and surviving spouses who rely on their pensions to purchase necessities like food and medicine, advocates say.
Last month, the Pension Benefit Guaranty Corp (PBGC) said that 200 multiemployer pension plans, covering 1 million participants, are at risk of failing in the next 10 years.
The PBGC fund covering these plans has financial problems of its own. The agency estimates its fiscal year 2014 deficit
at $42.2 billion, up fivefold from last year’s $8.3 billion.
So in the waning days of the 113th Congress, Republican Rep. John Kline of Minnesota, chairman of the House Education and Workforce Committee, and the panel’s top Democrat, outgoing Rep. George Miller of California, led the bipartisan effort to reach an agreement aimed at shoring up the multiemployer plans.
The omnibus bill supported by President Obama and the Republican leadership in both houses of Congress contains these changes, which are drawing fire from advocates who say they will take a devastating toll on poor retirees — especially women.
"We are furious that without debate Congress has placed the burden of rescuing underfunded plans on the people who can least afford it — retirees and surviving spouses who rely on their pensions for food, medication, and other necessities," said Karen Friedman, executive vice president of the Pension Rights Center.
The changes allow trustees to cut benefits for retirees who are under 75, while persons aged 75 to 79 would receive partial protection.
Retirees over 80, as well as the disabled, would not face the reductions.
Although the changes "seem to have been necessary to save the multiemployer pension plan system, women are especially vulnerable to these cuts for several reasons," George Washington University Economics professor Joann Weiner wrote in an op-ed in The Washington Post
Because women on average live about five years longer than men, they need retirement benefits for a longer period of time.
Although benefits can’t be reduced for people who are now more than 80 years old, "any reduced benefit imposed now is likely to extend through a woman’s life," Weiner wrote.
Also, because women work approximately 12 fewer years than men, they will have had less time "to offset shortfalls in their work-based pension by increasing their contributions to a private retirement plan."
And because women earn less than men, their contributions to a defined contribution plan are lower, as are any employer matching contributions.
While Congress "had to do something" about the dire condition of the pension plans, "that issue shouldn’t mask the fact that the benefits promised in these plans help women overcome the 'gender pension gap' that can put women’s retirement at financial risk," Weiner concluded.
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