Hundreds of thousands of retirees bracing for 50 percent cuts to their pension will be spared -- at least for a while longer.
It’s the first time the U.S. Treasury Department has ever considered a move that would allow current retiree benefits to be slashed. Fortunately for retirees, the treasury department rejected the proposal by central states pension fund, but the fund is still headed toward insolvency.
It was jaw dropping news for Joe Lesmaster and more than 273,000 other retirees.
“Effective July 1, 2016 your monthly benefit is proposed to be reduced from $2,000 to $1,010.66,” he read from a letter he received. “How can this happen?"
Lesmaster spent 17 years as a truck driver for UPS. He's counted on his pension since he retired a decade ago.
“What it would mean is, ‘Why don't you just cut off both arms and both legs,’ because how am I going to pay bills?" said Lesmaster.
Last fall, the teamsters' central states pension fund became the first in the nation to propose cuts to retiree benefits under a new law. The fund is reeling from the 2008 financial crisis along with a decline in membership.
Retirees, ranging from truck drivers to construction and service workers, are not happy since about ten million employees are covered by similar multi-employer plans with about one-third of those plans critically underfunded.
Roger Meiners is chair of UT Arlington's College of Business Economics department. He believes with pensions and social security underfunded, people still working should take saving for retirement seriously.
“The federal agency that serves as an insurance agency is currently deeply in the hole because of the promises they've made to bail out companies that go bankrupt,” the professor explained. “A lot of people don't think about saving for their old age until they're already in their old age. Too late then."
It's a fact all too clear to Lesmaster.
“We're not in our 20's that can go out and work for another company,” he said.
The treasury department’s administrator said on Friday that retirees’ voices were heard but says he rejected the draconian cuts because they wouldn’t stop the fund from collapsing anyway.
The central states pension fund is still set to go broke in 10 years without some sort of major turnaround.