Included in a recently passed congressional spending bill was a pension reform amendment that gives trustees of endangered multiemployer plans the power to make changes to benefits to avoid default and the draconian cuts that would accompany it.

The "Multiemployer Pension Reform Act" was supported by many plan trustees, businesses and labor unions.

Many of the act's provisions derive from recommendations contained in a report written by the National Coordinating Committee for Multiemployer Plans, an advocacy organization supported by unions, business associations and retirement experts.

"This law gives trustees the tools to save troubled plans from insolvency and avoid drastic cuts for retirees," said NCCMP Executive Director Randy DeFrehn.

Multiemployer pension plans cover workers at multiple jobsites and companies and are jointly managed by labor unions and management groups.

They are particularly common in the construction industry, where the average worker can work for dozens or even hundreds of employers over a career.

More than half a million IBEW members and retirees are covered by multiemployer retirement plans.

The 2008 recession wreaked havoc on private-sector pension plans. While most multiemployer plans have returned to full health, a significant minority of them remain on the verge of insolvency.

Insolvent plans become the responsibility of the Pension Benefit Guaranty Corporation, an independent government agency that guarantees private-sector workers' pensions. However, the PBGC is also running short on funds, and is likely unable to guarantee benefits should larger plans become insolvent.

Below are questions and answers about the Pension Reform Act and what it means for you and your retirement.

Q: Who is affected by the Multiemployer
Pension Reform Act?

The legislation only applies to multiemployer plans on the brink of insolvency. Less than 200 of the approximately 1,400 Taft-Hartley plans nationwide (all crafts and trades) are considered to be in financial danger. Healthy funds are expected to maintain existing benefit levels for retirees. Single-employer plans are not affected.

Q:Why did unions support this change?

Because it gives trustees the tools they need to rescue their plans from insolvency, avoiding dramatic cuts in benefits that that would result from a PBGC takeover.

In the past, trustees of defined multiemployer benefit plans were required by law to maintain existing benefits payments, regardless of the financial health of the plan. For funds in danger of insolvency, this leads to a takeover by the PBGC. The PBGC isn't required to maintain existing benefits, often slashing payments by more than half for beneficiaries of insolvent plans.

The PBGC's precarious financial position makes it unlikely it will provide even minimal benefits in case of the failure of major pension plans. DeFrehn points to a plan in Delaware that was recently taken over by the PBGC. "Before the takeover, one retiree was getting $4,000 a month," he said. "Now he's getting $800 a month."

Under the Multiemployer Pension Reform Act, trustees can avoid this worst-case scenario by making smaller cuts in benefits to avoid having to make much bigger ones down the road, preserving benefits for current and future retirees.

The act comes with numerous protections to prevent trustees from abusing their new powers:

• Only plans in immediate danger of insolvency that have exhausted all other measures can reduce benefit payments. Healthy plans (those in the yellow and green zones as defined by the Pension Protection Act) are still required to maintain existing benefits.
• Any benefit cuts must be negotiated between the pension plan labor and management trustees and are subject to the review of plan participants.
• Trustees can't make cuts beyond what is necessary to make the fund solvent.

Q: I'm an IBEW retiree. Does this affect my benefits?

Not likely. "The vast majority of IBEW/NECA multiemployer plans are healthy and are projected to remain so," said Larry Reidenbach, senior executive assistant to International Secretary-Treasurer Sam Chilia.

Participants in single-employer plans are not affected.

Those who want to learn more should contact their plan administrators or local union for the current status of their plan.