Benefit Cuts Possible Proposed ERISA Changes
Many employees in Franklin use a part of their income to pay for their pension and retirement plans. They have a good reason: to ensure that they will have a source of income after retiring from the workforce. However, their retirement income may become lower than what they are expecting after business and labor groups’ proposed changes to the Employee Retirement Income Security Act.
The change in ERISA would affect current pensioners who have paid for multiemployer pension plans, plans that are funded jointly by employers’ groups in different industries. In 2009, there were over 1,300 multiemployer pension plans. According to the Pension Benefit Guarantee Corporation, after the economy fell in 2008, approximately 2.4 million retired participants were endangered.
The PBGC backs up most private sector pension plans; however, it offers a lower level of protection for workers with multiemployer plans compared with those with single-employer plans. The agency has $1.8 billion in assets, which is far from the $7 billion worth of liabilities that it has for multiemployer insurance funds. This means that the agency’s funds will not be able to cover the insolvency of multiemployer plans.
The people who proposed the ERISA changes have valid reasons. First, the interest rates of the pensions do not reflect the needed income that was originally projected. On the other hand, other industries are left with retiring employees who are hard to replace. That means that there are fewer people to put capital into the pension plan while the retiring workforce accumulates funds in order to receive the pension income. If the plans are not able to accommodate the pension income for the pensioners, PBGC has to fund it, which is impossible.
ERISA is one of the retirement benefits that employees depend on to carry them through their golden years. The employee and the fiduciary of the plan need to ascertain that the plan will not waste the employees’ money. Resolving ERISA-related disputes, like mismanagement, are best handled by mediation. A third party, such as a legal professional, can help the settlement of such issues.