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Aug. 30, 2021, 10:45 a.m. EDT

‘I’ll be robbed twice in one lifetime’: Retirees fearing financial disaster wait for pension rescue

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By Eleanor Laise

For Carol Podesta-Smallen, the pain of a broken promise grows worse with time.

The Garfield, N.J., retiree framed her first pension check, along with a picture of herself and her husband. “That was our retirement,” she says, referring to the monthly benefit she earned after 26 years as a clerical worker.

The pension’s promise — that those steady monthly checks would continue for the rest of her life — allowed Podesta-Smallen to buy a house and gave her the financial security to leave her second career as a teaching assistant to care for her sick mother in 2015.

But that promise was broken. At the start of 2019, her $2,600 monthly benefit was slashed by about 60%, says Podesta-Smallen, now 67. She had lost her husband years earlier and was “in a panic,” she told MarketWatch. “I was alone, no family. I’m sitting in a house I couldn’t afford.” She was forced to sell the house in the middle of the pandemic, she says, and moved into a government-subsidized rental. She has racked up medical debt, she says, as well as IOUs to friends, and she’s wondering how she’ll pay for the $40,000 dental surgery she needs when she can’t even afford to take her shih tzu to the vet.

A law passed in Congress earlier this year promised to reverse some of that damage by offering taxpayer-funded financial assistance to certain troubled pension plans like Podesta-Smallen’s, allowing them to restore benefits to retirees who suffered cuts. But the implementation of the rescue plan has been met with a barrage of criticism from plan trustees, participants and members of Congress who say it’s too tight-fisted with the financial assistance and could leave some plans in a worse financial position than they are in now.

Also read: Federal government’s rescue plan for multiemployer pensions falls flat, critics say

Having already lost more than $50,000 in benefits, Podesta-Smallen wonders if she’s about to be burned a second time. She’s afraid she could die before her benefits are restored. “I’ll be robbed twice in one lifetime,” she says.

Podesta-Smallen’s plan is one of about 1,400 “multiemployer” pension plans, which are created through agreements between a union and two or more employers and cover more than 10 million participants. Many of these plans have been hard hit by shrinking unionization and employer withdrawals, and some in recent years have received Treasury Department approval to slash retiree benefits . Some retirees’ benefits were cut 80% or more.

When the American Rescue Plan was signed into law in March, many of these struggling plans and retirees with sharply reduced benefits thought their troubles were over. The law is expected to provide about $94 billion to eligible multiemployer plans through a financial assistance program designed to stabilize the plans for decades to come and reinstate previously reduced benefits.  

The sense of relief was short-lived, plan trustees and participants say. The Pension Benefit Guaranty Corp., the federal agency charged with protecting the retirement incomes of participants in private-sector defined-benefit pension plans, in early July released regulations detailing the formula for calculating the financial assistance for troubled plans.

In interviews and more than 100 comment letters to the PBGC, plan trustees, consultants, participants and lawmakers say that the rule’s stringent approach to calculating financial assistance means that many plans receiving the assistance won’t make it through the next 30 years as Congress intended, and some won’t even get enough money to cover the benefits they must restore as a condition of getting the cash.

The PBGC says the financial assistance program will forestall the insolvency of more than 100 plans that would have otherwise gone broke in the next 15 years and improve the financial health of the PBGC’s multiemployer insurance program, which as of late last year was headed for insolvency in fiscal 2026. “The PBGC’s regulation implements the program just as Congress designed it,” Labor Secretary Marty Walsh said in a July statement.

Some members of Congress disagree. “It is imperative that the rule be revised to meet the clear congressional intent and to care for all beneficiaries through 2051,” Senate Majority Leader Chuck Schumer, a New York Democrat; Sen. Sherrod Brown of Ohio; and five other Democratic senators wrote to the PBGC in mid-August.  

The PBGC is reviewing the comments submitted and may still make revisions to the rule. While the controversy plays out, President Joe Biden has tapped a lawyer with extensive experience representing multiemployer pension plans to lead the Labor Department’s Employee Benefits Security Administration, which oversees retirement plans. The White House in late July announced the nomination of Lisa Gomez, a partner with Cohen, Weiss and Simon LLP, whose appointment awaits Senate confirmation. Gomez didn’t respond to a request for comment.  

‘The actuarial equivalent of a guillotine’

Retired truck drivers, musicians and bricklayers, meanwhile, are left to parse the arcane regulatory language and wonder whether their long fight for pension security might be far from over.

When the PBGC rule first appeared in July, “I read the regulations and started to scratch my head,” says Steve Nathan, a Nashville, Tenn., studio musician and multiemployer plan participant who has worked for years to draw attention to issues with these plans. “Something didn’t sound quite right.”

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