Despite the pension fund being in reasonably good health, the Machinists’ union pension trustees announced a plan to cut benefits that has ‘panicked’ members.
In late April, the International Association of Machinists’ (IAM) National Pension Plan sent a letter to its plan participants that has shocked and ‘panicked’ many of the plan’s participants.
The letter (and accompanying video below) notified participants that the fund’s Board of Trustees, despite being in relatively strong financial health, had voluntarily declared the fund to be in the “red zone” and was recommending changes that apply to 300,000 union members across the U.S.
By voluntarily electing to put itself into the “red zone” allows the pension fund, if approved, to cut participants’ benefits.
“The rehabilitation plan will eliminate all early retirement subsidies moving forward and also force employers to chip in an additional 6 percent of wages to the fund,” reports the Washington Free Beacon.
According to a fact sheet (in full below) distributed by the pension fund, “the first change required by regulations upon voluntarily electing Red Zone status are the elimination of the lump sum death benefit, social security option, partial lump sum, small pension benefit, and return to employment lump sum as of April 26, 2019.”
While the cuts do not affect any current retirees, if approved, they will affect all future retirees.
The Multiemployer Pension Reform Act of 2014 (MPRA), which was signed into law by President Obama “gives the trustees of certain underfunded multiemployer plans that meet the definition of being in ‘critical and declining’ status almost unprecedented authority to cut retiree pension benefits,” according to the Pension Rights Center.
In a letter to members, Ohio’s IAM Local Lodge 1943 President Neil Douglas said the lodge had “no prior knowledge that these changes to our pension plan were even being considered.”
“We were completely appalled and shocked to say the least,” wrote Douglas.
In Bath, Maine, IAM members who work at Bath Iron Works are unsure whether they can still retire after 30 years, reports the Times Record.
Based on the notices beneficiaries got in the mail, there are already many people rushing to retire, stated Jay Wadleigh, business representative for IAM District 4, but he cautioned that “they should wait and see how the changes play out.”
IAM Pension Fund Red Zone FAQ on Scribd