Retirees covered by financially troubled multiemployer pensions could soon see their benefits cut under a congressional spending deal to keep the government running.
Architects of the proposal said it was the best way to keep the pension plans viable and benefits flowing to retirees.
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"We have a plan here that first and foremost works for the members of the unions, the workers in these companies and it works for the companies," said Rep. George Miller, D-Calif., who worked the deal out with Rep. John Kline, R-Minn.
But it quickly drew fire from some labor unions and AARP, who denounced what they call backroom deal-making that will create hardships for older Americans.
A vote on the overall spending plan was expected before week's end.
Some questions and answers about multiemployer pension plans and the impact of the congressional move.
WHAT ARE MULTIEMPLOYER PENSION PLANS?
These plans are usually found in industries that have many small employers that would not ordinarily put together a pension plan on their own, according to a report from Boston College's Center for Retirement Research.
More than 10 million people are covered by the plans, which involve agreements between labor unions and a group of companies. Many plans cover those who work in construction, but they are also can be found in the transportation, retail and trade sectors.
All told, there are about 1,400 multiemployer pension plans.
HOW DID THINGS GET SO BAD?
About 150 to 200 of these plans covering 1.5 million people are in financial trouble and could become insolvent within a few years, according to estimates from the Pension Benefit Guaranty Corp. The agency was established by Congress to take over failed and failing pensions when they run out of money.
The plans were once thought to be secure, but a decline in unionization and financial crises like the Great Recession have left them with fewer workers to pay into them.
The PBGC says it's about $42.4 billion short of the money it would need to pay out pensions for plans that have failed or will fail. That's up from $8.3 billion in 2013.
The congressional proposal essentially shifts much of the risk from the government back onto the retirees and their funds.
Alicia H. Munnell, a Boston College professor and director of the school's Center for Retirement Research, says it was made out of desperation.
"They're at a point in time where it's impossible to cut benefits for new employees any further," she said. "It's sort of impossible to ask employers for any more money, so the question is what do you do?
"It's a place where there's no good options."
WHAT KIND OF CUTS ARE LOOMING?
This can vary widely, depending in large part on the financial condition of the plan and the wages paid in the industry.
"We have plans where a 10 percent cut will be enough to allow them to survive and thrive," said Randy DeFrehn, executive director of the National Coordinating Committee for Multiemployer Plans, an advocacy group that consulted with Congress on the legislation.
In other cases, cuts as high as 30 percent may be necessary.
Some cuts may eventually be restored. That depends on factors like the industry, the plan's location and how much trouble it was in when the cuts were made.
"It's a function of a lot of different things," DeFrehn said.
People will know whether their plans face a cut because they will have to vote on the cuts.
WHAT ABOUT OTHER PENSION PLANS?
Single-employer pension plans are much more common, covering about 31 million workers and retirees in around 22,300 plans.
The PBGC said in June that it was "highly unlikely" that its single employer program would run out of funds in the next decade.
The improving economy, better market returns and an $869 million jump in income from legislative changes led to the improvement.
"It's a well-functioning pension insurance program, it's adequately funded, it's in fine shape," Munnell said.
The PBGC does not guarantee government pensions, and those were targeted for cuts in the Detroit bankruptcy case. But Munnell said her research shows states are "absolutely committed" to paying benefits.
"In the end, the cuts to pensions in Detroit were relatively modest," she added.
WHAT'S THE REACTION?
Among unions, it's mixed.
The AFL-CIO's Building and Construction Trades Department has been generally supportive. But the Teamsters and Machinist unions blasted the provision.
"Today, we have seen the ugly side of political backroom dealings as thousands of retirees may have their pensions threatened by proposed legislation that reportedly contains massive benefit cuts," said Teamsters President James Hoffa.
Machinists International President Tom Buffenbarger said, "While there is a genuine retirement crisis in this country today, the solution must not be borne by retirees who worked hard and faithfully contributed to their pension plans and have no practical means to replace lost income."
The AARP, which says it represents millions of retirement-age Americans, also attacked the agreement as a "secret, last-minute, closed-door deal between a group of companies, unions and Washington politicians to cut the retirement benefits that have been promised to them."
Karen Friedman of the Pension Rights Center, a group that opposes the changes, called the move "outrageous. We think that Congress is sneaking through a provision that would torpedo the most sacred protections of the federal private pension law and will devastate retirees."
Murphy reported from Indianapolis.