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Millions of people could be facing drastic cuts to their pensions. More than a hundred of the pension plans for truck drivers, coal miners, carpenters and others are facing insolvency. And time to save them is running out. A bipartisan congressional committee is up against a Friday deadline as it tries to find a fix.
M.L. Schultze from member station WCPN reports.
M.L. SCHULTZE, BYLINE: Every day, the Central States Pension Fund pays out nearly $2 million more than it takes in. Its assets have plunged nearly $4 billion over the last six years. The fund is headed for a collapse and wants to slash benefits for close to half a million people. That collapse could also bankrupt companies and stretch the federal safety net created to protect all pensions.
Jean-Pierre Aubry works at Boston College's Center for Retirement Research and says the Central States Fund is not alone.
JEAN-PIERRE AUBRY: We really want to make sure that benefits get paid, especially to the critical and declining plans. You know, you're talking about $60 billion to $70 billion that need to be paid somehow.
SCHULTZE: Somehow is what a bipartisan joint committee of the House and Senate has until Friday to figure out. Senator Sherrod Brown and Orrin Hatch co-chair the committee. At its first hearing, Brown maintained there's no overstating the problem.
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SHERROD BROWN: Generations of jobs and hard work will be laid to waste overnight if we fail this mission.
SCHULTZE: Brown acknowledges that traditional pensions, where retirees get guaranteed amounts for life, are increasingly rare for many Americans. And multiemployer plans negotiated by unions with groups of employers are rarer still. But he notes the workers paid for those pensions upfront.
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BROWN: To give up money - give up wages you'd like to have today to put them aside for the future with some guarantee that they'll be there. And in part because of Wall Street shenanigans, these pensions are threatened to be cut 40, 50, 60 percent or worse.
SCHULTZE: The threats to fiscal stability include fewer workers paying in, higher-risk investments and companies withdrawing, leaving tens of thousands of orphaned workers behind.
Another issue is government requirements for fund reserves turned out to be far too low. That's why Terry Schwinn got a letter two years ago saying Central States wanted to cut his pension in half - a pension built over 42 years driving trucks.
TERRY SCHWINN: I started driving when I got out of high school. I got diesel fuel in my blood and couldn't get it out.
SCHULTZE: Back then, there was no such thing as a 401(k), or even an IRA. Schwinn planned for retirement by paying into the pension fund from Day 1. Seven years ago, he started collecting his monthly checks after a bad fall forced him to retire.
If Central States Pension Fund does fail, taxpayers would be left holding the bag. That's because the Pension Benefit Guaranty Corporation would take over. And it, too, is running out of money and would slash Schwinn's check. His wife, Phyllis, says they live with that uncertainty.
PHYLLIS SCHWINN: If they take your income away from the senior citizens, then they're going to fall back on the government. What's the government going to do for these people to provide for them, to keep housing, medical expenses?
SCHULTZE: Senator Brown's proposed solution involves the Treasury Department selling bonds and making low-interest loans to plans that demonstrate a road to solvency.
Andrew Biggs of the American Enterprise Institute calls that a bailout, a term that retirees hate. He says the government should take over and, among other things, put retirees on a sliding scale with the neediest closest to collecting their full pensions.
ANDREW BIGGS: Nobody wants to see people lose their benefits, just like I don't like to see somebody's 401(k) drop in value. But it is another step to say the federal taxpayer has to be on the hook for hundreds of billions of dollars to pay these differences.
SCHULTZE: The special congressional committee needs at least five Republican and five Democratic votes to move onto a straight up or down vote in the House and Senate. And if it misses Friday's deadline, the pension crisis will likely get kicked over to the new Congress, as Central States and other multiemployer pension funds continue, every day, to pay out millions more than they take in.
For NPR News, I'm M.L. Schultze.
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