Beware the Cromnibus! Could it possibly devour your pension? It cannot gulp up your retirement fund at the moment, but it does include the possibility of others taking a healthy bite out of it.
The Cromnibus sounds a bit like some creature terrorizing a major city and consuming everything in its path, but it actually refers to the Continuing-Resolution Omnibus spending bill that was recently passed by Congress.
An omnibus bill wraps up all the necessary appropriation measures that authorize government spending into one large proposal, generally including a giant mess of controversial, unrelated provisions as part of a system of tradeoffs.
While there have been high profile arguments from both left and right on some of the provisions, one has received little publicity on the national level compared to its relative importance – especially for seniors with defined-benefit contribution plans.
The bipartisan Kline-Miller provision addresses an imminent crisis in multiemployer defined-benefit pension plans, covering approximately 1,400 plans and 10 million workers. These are plans operated jointly by unions and employees to cover multiple employers within the same industry (such as construction or trucking). Many of these plans are suffering from funding issues, with fewer active workers supporting more retirees.
Should a plan fail, the retirees’ benefits are covered through the Pension Benefit Guaranty Corporation (PBGC), the safety-net program funded by insurance premiums from the involved companies. Unfortunately, PBGC faces a projected deficit of $42.2 billion, and it was suggested in the last PBGC annual report that the organization has a 90% chance of bankruptcy by 2025. If the safety net becomes insolvent, how will retirees receive their benefits?
Kline-Miller suggests that it is better to ensure a lower-level benefit than run the risk of complete failure and/or taxpayer bailout. The provision gives trustees of multiemployer pension plans the ability to cut benefits to retirees – previously forbidden under federal law.
While employees can reject the benefit cut – and it seems likely most retirees would – the vote can be overridden if it is determined that insolvency of the plan would drain more than $1 billion from the PBGC.
This offers a compromise between protecting the PBGC and retiree benefits, but it also opens the door to future changes by breaching the threshold created by past law. In the eyes of many, federal protection of defined benefits that have already been earned is a sacred trust.
Labor leaders and retirees worry that this is just the first step. Karen Friedman of the Pension Rights Center believes Kline-Miller would “set a terrible precedent.” Could this blueprint to cut a private sector defined-benefit plan be applied more generally to public sector programs (for example, state pensions or Social Security)? All of these other programs would require separate legislation to be affected, but it is worth monitoring the news in future for any proposals similar to Kline-Miller that target the source of your retirement income.
At the moment, this legislation does not affect anybody’s pension, but it seems certain that at least some plans' benefits will eventually be cut. If you are one of the 10 million covered by multiemployer defined-benefit pension plans, it is worth researching the funding level and overall health of your pension plan.
If you are concerned by what you find, keep a close eye on the program and make your opinion known to your Congressional delegation. You should also consider a Plan B for your retirement budgeting and spending that assumes some lower level of benefits – and hope that you never have to use it.