The financial security of many older Americans could be at risk under a proposed law that was the focus of a hearing this week on Capitol Hill.
Under the proposed plan, millions of retirees could see cuts to the benefits they've earned through a lifetime of hard work.
At issue is a proposal by multi-employer pension plans (plans in which many employers contribute to a common fund to cover their mobile workforce) devised to save the plans from insolvency. That proposal urges Congress to change the pension laws to allow severely underfunded plans to significantly cut the benefits of people already retired and relying on their pensions. In testimony at the hearing, AARP strongly objected to the plan to cut the benefits of current retirees.
There has long been a consensus that any proposed changes to retirement income plans - whether public or private - should only be for future retirees, and those in and near retirement should not have any reductions in benefits. The rationale is that retirees are already living on a fixed income and cannot return to the workforce, while near-retirees have relied upon promises made and are too close to retirement to make career or retirement-preparation changes.
Unfortunately, retiree benefit promises are increasingly on the chopping block in Washington D.C., in states across the country and in the private sector.
- State and local government pension plans under attack: The City of Detroit has filed for bankruptcy and is asking to be relieved of its pension obligations to retired firefighters, police officers, and other city workers in order to pay bond holders. Detroit's request is not unprecedented. Recently, the city of Central Falls, Rhode Island, cut pensions for active workers by up to 55 percent in its bankruptcy proceeding. On the state level, Rhode Island effectively ended cost-of-living adjustments (COLAs) for retirees in 2011, cutting benefits for current retirees by as much as 40 percent over the long-term.
- Private sector threats: Private sector companies like Hostess Brands underfunded their pension plans, then declared bankruptcy and dumped their pension obligations on the doorstep of the Pension Benefit Guaranty Corporation (which insures pensions, often in a lesser amount than earned). Hostess will emerge from bankruptcy pension-free, and many of the pensioners will get less than they were promised.
- Harmful budget deal: The White House and many in Congress have proposed as part of a budget deal an immediate cut in COLAs for Social Security, veterans' benefits, and other programs that would make retirees poorer as they grow older. Seniors deserve better than having their benefits used as a bargaining chip in a budget debate.
With the average senior living on $20,000 per year, AARP is fighting for responsible solutions to keep the retirement promises older Americans have worked for and count on.
Photo: Tracy O via Flickr
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