New York Estate Planning & Elder Law Blog
A recent report by The Washington Post suggests Congress is considering legislation to help bail out billions of dollars worth of failing pensions and retirement accounts across the country in a move to try and solve a retirement crisis that threatens more than 1 million Americans. Claiming to have obtained a draft of the plan, The Washington Post reports the legislation would direct the Treasury Department to spend up to $3 billion annually to subsidize payments for retirees from certain underfunded pensions.
Additionally, the plan would require benefit cuts, higher premiums and new fees levied against companies and union members in an attempt to make the pensions as financially solvent as possible. The plan will cap contributions from taxpayers and ultimately ask for important concessions from all of the parties involved in the situation.
Due to issues such as mismanagement, inaccurate economic projections and in some cases corporate bankruptcies, many substantial pension funds are at risk of essentially going bankrupt and threatening the safety net many retirees were counting on. The problem is compounded by the fact that the multiemployer pensions which require workers from multiple companies pay into the same retirement benefit program, creating ripple effects when one becomes insolvent.
A special congressional committee, lead by Sens. Orrin G. Hatch (R-Utah) and Sherrod Brown (D-Ohio), has been tasked with addressing the pension crisis and creating a report to be submitted to both houses of Congress. “The hard-working men and women who are counting on this committee deserve a solution, and Chairman Hatch and I continue to negotiate with other members of the committee to reach a bipartisan agreement,” Brown said in a statement released to the press regarding the effort.
The potential to use taxpayer money to bail out failing pension plans would be a stark policy reversal for many lawmakers, who for years have resisted the idea of using public funds to keep troubled pensions afloat. However, the serious condition of many multiemployer pensions has forced lawmakers from both parties to reconsider the use of public funds to provide the retirement benefits for the waves of Baby Boomer expected to retire soon.
Many experts studying the issue have identified the issues of multiemployer pensions and expressed their outlook that given the circumstances, taxpayer assistance has alway seen an inevitably. Unfortunately, many of the companies that set up pensions for future retirees have gone out of business, leading to underfunding and setting up the situation these individuals find themselves in now.