The U.S. Senate is stepping into the political fray over pensions — a looming crisis across the country — as hundreds of thousands of retirees brace for benefit cuts.
On Friday, the U.S. Treasury Department is expected to rule on a “rescue plan” application it received last September by the Central States Pension Fund (CSPF) that would cut benefits for 270,000 retirees in the U.S. to maintain its solvency.
In response, this week Senate Democrats announced legislation that would cut salaries and block raises and bonuses for executives who oversee pension funds that are cut.
The Pension Fund Integrity Act is being championed by Democrats Debbie Stabenow and Gary Peters of Michigan, Sherrod Brown of Ohio, Amy Klobuchar of Minnesota and Claire McCaskill of Missouri.
The 61-year-old CSPF manages $2.8 billion in annual benefit payments to 400,000 participants across the country, but was hit hard by the 2008 recession.
In 2014, Congress passed a pension reform act intended to keep the fund solvent – by allowing the pension cuts if they are approved by the Treasury department.
Statutorily, Treasury officials must announce their decision within 225 days of receiving the application, or by May 7 (Saturday). If approved, the cuts would start quickly, on July 1.
Retirees in 37 states face cuts of up to 70 percent.
“People are on pins and needles right now,” Karen Friedman, executive vice president and policy director for the Pension Rights Center in Washington D.C., told AMI Newswire.
“Nobody knows which way Treasury is going to rule. Hopefully we’ll know in the next day or two, but they haven’t given us any idea. Retirees obviously hope they reject the Central States application, and you can imagine they’re very nervous and upset," she said.
Stabenow said her legislation was triggered by the discovery that one top executive of the Central States fund received a $700,000 salary in 2014.
“A pension is a promise that’s earned, and workers should be able to count on them when they retire,” she said in a statement. “It’s completely unacceptable for top executives at Central States to have earned hundreds of thousands of dollars a year, while at the same time, pension benefits for retirees who worked hard their entire lives are being slashed.”
If Treasury officials approve the Central States fund cut, Stabenow’s bill would cut “excessive” pay for executives who oversee plans in the fund that have been slashed, with the amount of the pay cut determined by calculating the percentage of retirees’ benefit reductions.
It would also freeze those executives’ pay by blocking raises or bonuses, and would prohibit plans in the CSPF from hiring lobbyists on Capitol Hill.
The legislation represents one of a handful of bills in a growing attempt to address the pension crisis. The Illinois-based Central States fund represents 24,000 retirees in Michigan alone, for example, many of whom have started to speak out at public forums, particularly in Detroit.
In April, the threat was enough to send about 3,000 retirees by bus from several states to stage a rally at the Capitol in Washington.
Friedman said the Central States fund is indeed projected to become insolvent, but not for several years. She said if the cuts are rejected by the Treasury Department, Congress should work toward a bipartisan fix through legislation, with potential ideas including higher premiums, tax credits and voluntary assessments by retirees that could kick in more money to the Central States fund.
“We don’t see a ‘yes’ or ‘no’ being the end of this,” she said. “We recognize that everybody is going to have to come together at a table and find a solution to this. From our perspective, there needs to be a legislative solution. But there’s no question, whichever way the decision comes down, this is still going to be a big issue.”