New Fact Sheets Help Workers Understand Possible Benefit Cuts
WASHINGTON – As of April 1, workers in some traditional pension plans will start to receive notices telling them that they will not receive all of the benefits promised by their plan. The Pension Protection Act of 2006 requires certain “underfunded” pension plans to reduce their promised benefits and notify employees of the cutbacks. The first such notices are slated to go out today. To help workers understand who might receive such notices and what benefits might be cut, the Pension Rights Center has published two new fact sheets, “Benefit Cutbacks in Single-Employer Pension Plans” and “Benefit Cutbacks in Multiemployer Pension Plans.”*
Each fact sheet details the circumstances under which a private pension plan must make benefit cuts, what those cuts are, and when and how employees must be notified. The cuts are based on the type of plan, the type of benefits promised by the plan, and the level of underfunding. For example, employees in single-employer plans that are 60 percent funded or less will be told that they can earn no more pension benefits as of a certain date, and that at retirement they will only be able to receive their benefits as lifetime monthly payments, and not as a lump sum. In other cases, employees will be told that they will lose promised plant shut-down benefits. In multiemployer plans, notices will alert workers that not only future benefits, but also specific benefits they have already earned could be eliminated.
“Pensions play a critical role in ensuring retirement security for millions of Americans,” said Karen Ferguson, director of the Pension Rights Center. “It is important that workers in the affected underfunded pension plans understand the notices they will receive.”
*A worker belongs to a single-employer pension plan if the plan covers the employees of only one company. A worker belongs to a multiemployer pension plan if the plan is negotiated by a union and covers the employees of more than one company.