The Obama administration is in denial about the necessity of cutting pension benefits under the Multiemployer Pension Reform Act of 2014 to try to put distressed multiemployer plans on sounder financial footings and make them more sustainable. It must face reality and order the Treasury Department to stop blocking action.
So far the department, required under the act to approve proposed reductions, has rejected proposals by the Teamsters Central States, Southeast & Southwest Areas Pension Plan and the Road Carriers Local 707 Pension Fund.
Ten plans total have applied for cuts, including the New York State Teamsters Conference Pension and Retirement Fund, Syracuse, whose Aug. 31 application is too new to be listed on the Treasury's website.
The Road Carriers 707 application stated that the plan projects it will become insolvent in February — only about five months away — absent suspension of benefits.
As desperate as the plan's financial situation appears to be, the Treasury denied the application. Kenneth R. Feinberg, Treasury special master who made the determination for both unions, said in his denial of the Local 707 application that the proposed benefit cuts “are not reasonably estimated to allow the plan to avoid insolvency.” Yet Mr. Feinberg offered no guidance to enable plan trustees to resubmit a proposal that would pass muster to help preserve the plan, or at least put off reckoning to be able to distribute its depleting funds in a manner fair for all participants.
No one wants to see anyone's promised pension reduced. But the applications show the plans have no choice.
The Obama administration appears to want to hold out until the end of its term to avoid approving any application, undermining the MPRA and passing the hot potatoes to the next administration. The Obama administration could do more to improve funded levels, for example by encouraging the Federal Reserve Board to abandon its easy monetary policy and raise interest rates. Such a move would immediately improve the funded status of plans.
But denials of proposed cuts won't do anything to improve the funded status of the financially desperate plans. After the denials, the plans remain in the same financial distress. Delaying action loses valuable time to try to rehabilitate them and further depletes assets, leading to the likelihood of greater benefit reductions and a less fair distribution of remaining pension plan assets among participants.