Ailing Pensions Receive Stimulus Bailout
For many Americans, there are three primary sources of income in retirement: Social Security, pensions, and personal savings (i.e., 401Ks, IRAs, etc.). Very few, though, receive payment from all three of these options in their golden years.
The National Institute on Retirement Security reported last year that only 6.8% of Americans who are 60 years old or older would receive money from all three.[1] Most retirees—more than 40%—rely heavily on Social Security to fund their retirement.
Today, more than 10 million Americans think employer-union pension plans will fund their retirement, but there are currently only about 1,400 pension plans in the U.S. These plans are comprised mainly of blue-collar workers—construction, sanitation, healthcare, manufacturing, and agriculture workers, as well as miners, police officers, secretaries, truckers, teachers, and the like—who expect monthly checks from their pensions plans in their retirement years.
Unfortunately, many of these pension funds have struggled since the 2008 financial crisis, and the COVID-19 pandemic only exacerbated the situation. Approximately 185 union pension plans were in trouble at the start of the year. As a result, millions of Americans faced severe cuts to their pensions, and about 1.5 million Americans have pension plans at risk of running out of money. Some even projected that the well could be dry as early as 2028.
One of the biggest unions in the U.S. is the International Brotherhood of Teamsters, with about 1.4 million members. Many Teamsters, retired or still employed, are in ailing pension plans. For example, the Central States Pension Fund includes about 400,000 Teamsters, and it was projected to run out of money in the next four years.[2]
Well, many of these Americans can breathe a little easier now.
President Biden recently signed the American Rescue Plan. Most folks have focused on the next round of stimulus checks and the extension of unemployment benefits. But the reality is that the latest $1.9 trillion stimulus package also included funding for these ailing pension plans. Approximately $86 billion is dedicated to bailing out multi-employer pension funds.
More than 50 Teamster pension plans, including the Central States Pension Fund, will receive support to ensure that all plan participants receive 100% of their pension benefits for the next 30 years.
Overall, more than 100 pension plans will receive financial assistance in the form of grants. In other words, these pensions will receive the necessary funds to ensure that they don’t run out of money, and they will not need to repay the bailout funds. Also, any benefits that were suspended or cut due to lack of funds will be reinstated.[3]
If part of your retirement comes from a pension plan, and you’re curious if it’s included in the recent stimulus package or if it’s at risk, feel free to reach out to us at Nicollet Investment Management. We’d be happy to discuss your retirement options and financial goals.
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[1] https://www.cnbc.com/2020/01/17/heres-where-most-americans-are-really-getting-their-retirement-income.html
[2] https://www.dispatch.com/story/business/2021/03/10/congress-rescues-troubled-multiemployer-pension-plans/4633000001/
[3] https://www.cnbc.com/2021/03/08/covid-relief-bill-gives-86-billion-bailout-to-failing-union-pension-plans.html