For Carol Podesta-Smallen, the pain of a broken promise grows worse with time.

The Garfield, N.J., retiree framed her first pension check, along with a picture of herself and her husband. “That was our retirement,” she says, referring to the monthly benefit she earned after 26 years as a clerical worker.

The pension’s promise — that those steady monthly checks would continue for the rest of her life — allowed Podesta-Smallen to buy a house and gave her the financial security to leave her second career as a teaching assistant to care for her sick mother in 2015.

But that promise was broken. At the start of 2019, her $2,600 monthly benefit was slashed by about 60%, says Podesta-Smallen, now 67. She had lost her husband years earlier and was “in a panic,” she told MarketWatch. “I was alone, no family. I’m sitting in a house I couldn’t afford.” She was forced to sell the house in the middle of the pandemic, she says, and moved into a government-subsidized rental. She has racked up medical debt, she says, as well as IOUs to friends, and she’s wondering how she’ll pay for the $40,000 dental surgery she needs when she can’t even afford to take her shih tzu to the vet.

A law passed in Congress earlier this year promised to reverse some of that damage by offering taxpayer-funded financial assistance to certain troubled pension plans like Podesta-Smallen’s, allowing them to restore benefits to retirees who suffered cuts. But the implementation of the rescue plan has been met with a barrage of criticism from plan trustees, participants and members of Congress who say it’s too tight-fisted with the financial assistance and could leave some plans in a worse financial position than they are in now.

Having already lost more than $50,000 in benefits, Podesta-Smallen wonders if she’s about to be burned a second time. She’s afraid she could die before her benefits are restored. “I’ll be robbed twice in one lifetime,” she says.

Podesta-Smallen’s plan is one of about 1,400 “multiemployer” pension plans, which are created through agreements between a union and two or more employers and cover more than 10 million participants. Many of these plans have been hard hit by shrinking unionization and employer withdrawals, and some in recent years have received Treasury Department approval to slash retiree benefits. Some retirees’ benefits were cut 80% or more.

When the American Rescue Plan was signed into law in March, many of these struggling plans and retirees with sharply reduced benefits thought their troubles were over. The law is expected to provide about $94 billion to eligible multiemployer plans through a financial assistance program designed to stabilize the plans for decades to come and reinstate previously reduced benefits.  

The sense of relief was short-lived, plan trustees and participants say. The Pension Benefit Guaranty Corp., the federal agency charged with protecting the retirement incomes of participants in private-sector defined-benefit pension plans, in early July released regulations detailing the formula for calculating the financial assistance for troubled plans.

In interviews and more than 100 comment letters to the PBGC, plan trustees, consultants, participants and lawmakers say that the rule’s stringent approach to calculating financial assistance means that many plans receiving the assistance won’t make it through the next 30 years as Congress intended, and some won’t even get enough money to cover the benefits they must restore as a condition of getting the cash.

The PBGC says the financial assistance program will forestall the insolvency of more than 100 plans that would have otherwise gone broke in the next 15 years and improve the financial health of the PBGC’s multiemployer insurance program, which as of late last year was headed for insolvency in fiscal 2026. “The PBGC’s regulation implements the program just as Congress designed it,” Labor Secretary Marty Walsh said in a July statement.

Some members of Congress disagree. “It is imperative that the rule be revised to meet the clear congressional intent and to care for all beneficiaries through 2051,” Senate Majority Leader Chuck Schumer, a New York Democrat; Sen. Sherrod Brown of Ohio; and five other Democratic senators wrote to the PBGC in mid-August.  

The PBGC is reviewing the comments submitted and may still make revisions to the rule. While the controversy plays out, President Joe Biden has tapped a lawyer with extensive experience representing multiemployer pension plans to lead the Labor Department’s Employee Benefits Security Administration, which oversees retirement plans. The White House in late July announced the nomination of Lisa Gomez, a partner with Cohen, Weiss and Simon LLP, whose appointment awaits Senate confirmation. Gomez didn’t respond to a request for comment.  

‘The actuarial equivalent of a guillotine’

Retired truck drivers, musicians and bricklayers, meanwhile, are left to parse the arcane regulatory language and wonder whether their long fight for pension security might be far from over.

When the PBGC rule first appeared in July, “I read the regulations and started to scratch my head,” says Steve Nathan, a Nashville, Tenn., studio musician and multiemployer plan participant who has worked for years to draw attention to issues with these plans. “Something didn’t sound quite right.”

Through conversations with pension experts, the pianist, 70, soon discovered the heart of the problem: The PBGC’s rule says that the amount of financial assistance available to a plan is equal to the plan’s projected benefit payments and other obligations over the next 30 years, minus total plan resources, including current assets, contributions over the next 30 years (even those contributions intended to pay benefits beyond 2051), and earnings on those amounts.

Given that definition, plans accepting the financial assistance will likely be flat broke by 2051 — and in some cases significantly earlier, pension experts say. Although Congress aimed to help plans pay benefits through 2051, the PBGC rule “turned the 2051 date into the actuarial equivalent of a guillotine,” the Pension Rights Center, a nonprofit consumer watchdog, wrote in a letter to the PBGC.

Nathan says he’s having difficult conversations with younger musicians who will be asked to continue supporting a pension plan that may go broke before it pays them any benefits. “I am not a lawyer, accountant or actuary, just a humble piano player,” Nathan wrote in an August letter to the PBGC. “My goal … is simply to shine a light on what is glaringly wrong with the PBGC’s implementation of this legislation.”

After a successful career recording with artists from Lionel Richie to Faith Hill, Nathan emphasizes that he’s not a hard-luck case. “I always saw this as less about hardship and more about justice,” he says of his pension advocacy.

For retirees like Bob McGonigal, the stakes are higher. McGonigal, 67, of Clearwater, Fla., drove a forklift for 27 years before retiring in 2014 with a monthly pension benefit of about $2,600. By 2017, McGonigal’s plan, the Road Carriers Local 707 Pension Fund, was insolvent, and 42% of the plan’s retirees and beneficiaries saw their promised benefits cut by more than half, according to the PBGC. McGonigal’s monthly check was slashed to about one-third of his original benefit, he says.

McGonigal told MarketWatch he gave up extras like dining out and consolidated his credit cards, but as a diabetic he still had to find a way to pay for insulin and other medications. He has scraped by with the help of some free samples from doctors and affordable housing he found through friends, he says, but he’s anxiously waiting to hear about the restoration of his benefits. “Seeing is believing,” he says.

The Road Carriers Local 707 fund has already applied for the financial assistance available under the American Rescue Plan, and the PBGC has 120 days to process the application, according to a message the plan sent to participants in August. But in a comment letter to the PBGC, the fund said that it won’t receive enough financial assistance to pay all benefits due through 2051, with no reduction in accrued benefits, as mandated by the law.

An interest rate of about 5.5% will be used to determine the amount of financial assistance available to the fund, but that pot of money — which will account for almost all of the fund’s assets — must be invested in investment-grade bonds that return substantially less, according to the letter. That gap “will render the 707 Fund insolvent approximately a decade prior to 2051,” the plan trustees wrote.  

Concerns about the PBGC rule are so acute that some troubled plans say they’re considering forgoing financial assistance — a move that could leave some retirees stuck with sharp benefit reductions. With the Treasury Department’s approval, the Bricklayers and Allied Craftsmen Local 7 pension fund cut benefits last fall, says Timothy P. Piatt, a North Canton, Ohio, lawyer who represents the plan.

Ever since the American Rescue Plan passed, Piatt has been fielding calls from participants asking when their benefits will be restored, he says. But that depends in part “on whether we want to apply for the [financial assistance], given that it could really tie our hands” with the investment restrictions and other issues, he says. The PBGC rule puts plans in a painful position, he says. “We made a promise to these workers, and they sacrificed,” he says. “I teach my kids to keep promises.”

The Detroit Carpenters Pension Plan, which has a pending application to cut benefits, is “in an undefined no-man’s land” amid the regulatory debate, says John Tesija, a lawyer representing the fund. The plan could drop the benefit-reduction application and apply for the American Rescue Plan assistance instead — but, under the PBGC’s prioritization rules, it likely wouldn’t receive that assistance until 2024, when the plan will be in an even deeper financial hole. While he suspects the plan will opt for the financial assistance, he says, “we reserve final judgment.”  

While she waits for news on her pension, Podesta-Smallen is gathering paperwork to recertify her eligibility for rent assistance. “It kills me to have to do this,” she says, because if she could just get her promised pension benefit, she could pay her full rent. She’d like to attend her 50-year high-school reunion in October, but she’s worried about the cost. “That’s another $170,” she says.  

Her plan, the Teamsters Local 805 fund, plans to apply for the financial assistance at its earliest opportunity, which will likely be in January 2022, says Mike Smith, one of the fund’s trustees. That means the plan may be able to restore retirees’ benefits by the middle of next year, he says.

The rescue plan’s implementation may not be perfect, “but, in the meantime, people are dying, people are losing their homes and not able to eat like they should be eating,” Smith says. “You don’t know how long you’ll be on this Earth, and I want these participants to have their money.”

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