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Are Retiree Benefit Cuts Ahead?

Central States Pension Plan, a multi-employer plan covering over 400,000 participants, has requested permission from the Treasury Department to cut benefits for 272,000 of its participants. Many of those, including 113,000 retirees, have been notified that their benefits could be cut by an average of 22% but some may experience cuts of as much as 40-70%. The proposed cuts stem from the Multiemployer Pension Reform Act of 2014 (MEPRA), which allows multiemployer plans in critical status (commonly referred to as plans in the “red zone” and generally less than 65% funded) to reduce some benefits, including benefits for participants in pay status, if it helps the plan remain financially solvent. In case of Central States, the Plan currently pays out $3.46 for every $1.00 of contributions and is expected to run out of money in ten years if no other action is taken. The Treasury Department is due to issue a ruling on the proposed cuts by May 7th, before the issue is put to a vote by plan participants. However, given the size of the Plan, the Treasury will still have the final say on benefit cuts even if participants vote against it.