NEW YORK (CNNMoney) — More than a million current and retired truck drivers, construction workers and other union employees could see their pension benefits cut now that Congress has passed a controversial new measure.
Aimed at saving some of the country’s largest pension funds from the brink, the law will allow multiemployer pension plans that are projected to become insolvent in the next 10 to 20 years to cut the benefits of both current and future retirees.
By allowing the plans to cut benefits now, lawmakers say it will help keep around 150 pension funds from running out of money.
But retirees aren’t exactly seeing it that way. Many gave up years of pay increases and contributed thousands of dollars from their salaries each year toward their promised pensions. As a result, many have little savings outside of their pension benefits and Social Security checks and are not sure how they’ll make ends meet if the cuts go through.
“It’s devastating,” said 63-year-old Dave Scheidt, who retired five years ago after more than 30 years loading and unloading trucks. “We never dreamed that our pension wouldn’t be there.”
In the worst case scenario, Scheidt could see his current annual benefits of around $37,000 a year reduced to as little as $15,000. He receives his checks from the Central States Southeast and Southwest Areas Pension Fund, a plan that is now qualified to cut benefits under the law.
Central States lobbied heavily for the new pension-cutting measure, which has led many of its retirees to speculate that it will be one of the first plans to reduce benefits.
However, any cuts would ultimately require government approval. Benefits also cannot be cut for those with disability pensions or those who are 80 years and older, while cuts must be less severe for those between 75 and 80.
Central States did not respond to a request for comment. But on its website, it says that “given the complexity of the process, it is likely that it would take up to a year before modifications, if any, take effect” and that retirees would receive “advance written notice of any proposal to modify benefits.”
The fund, which paid out $2.1 billion more than it received in contributions in 2012 alone, is projected to be insolvent in the next 10 to 15 years. So officials have argued that retirees will ultimately see major cuts either way.
That’s because if a multiemployer plan goes insolvent, a retiree is guaranteed less than $13,000 a year from the Pension Benefit Guaranty Corp. In contrast, a retiree in a single employer plan that goes bust is insured for up to $60,000.
In the meantime, the fund’s retirees and others are in another waiting game, wondering when — and by how much — their checks could be cut.
Scheidt, who has mobilized with other retired Teamsters to oppose the cuts, said he’s heard from retirees across the country about the new law. Some, he says, have broken down in tears.
“Many will lose homes and cars and trucks because of this,” he said. “These guys are scared to death.”
Retired trucking industry worker Kirby Cabrera, 62, is trying to stay positive. “I don’t want to preach doom and gloom,” he said. But with 20 years of mortgage payments, he too is worried that he could face foreclosure if his current roughly $36,000 annual pension is cut too deep.
He already faces thousands of dollars in medical bills each year as he battles injuries from his years of working on the truck loading docks. Two years ago, he had one knee replaced. In a few weeks, he’s going in to have the other one replaced.
Plus, he’s worried that current Central State rules limiting employment options for pensioners could hurt his ability to go back to work and make up for any lost income.
For now though, Cabrera said he is trying to stay hopeful that any cuts won’t be as deep as he is fearing,
“If they’re 30% or 40%, it’s going to destroy me…” he said. “I wish I had a crystal ball, and I knew what I was going to do.”