Women Especially Vulnerable to Congress’ Pension Cuts

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Last week, Congress passed a bill that contained the Multiemployer Pension Reform Act of 2014, which allows trustees in multi-employer plans to cut benefits in order to remain solvent.

The cuts, if they happen, will affect workers across the United States. But women might be the hardest hit if the cuts come to fruition.

Explained by the Washington Post:

First, they tend to live about five years longer than men, so they will need retirement benefits for more years. Benefits can’t be cut for those who are now over 80, but any reduced benefit imposed now is likely to extend through a woman’s life.

Second, women work about 12 fewer years than men, so they will have had less time to offset shortfalls in their work-based pension by increasing their contributions to a private retirement plan.

Third, they earn about 23 percent less than men so that not only are their own contributions to a defined contribution plan lower, but so too are any employer matching contributions. Social Security benefits, which are also earnings-based, will be lower than otherwise.

Finally, women often delay saving for retirement. Only 45 percent of the 62 million salaried women working in the United States contribute to a retirement plan, according to the Employee Benefits Security Administration at the Department of Labor.

And there’s another, bigger reason women could be hurt by these cuts in particular. Multiemployer plans often calculate benefits based on years of service instead of salary.

That benefits women who make less money for doing the same job as men. But cuts could negate that benefit. From the Washington Post:

As explained by the PBGC, the amount an employer contributes is set by a collective bargaining agreement that specifies a formula, say $13 per hour worked by each employee covered by the agreement. This means that women aren’t penalized for a lifetime of low earnings.

Thus, a woman who worked for 30 years would receive the same pension as a man with the same work experience, even though she likely earned far less than the man did. She may still be penalized because she works fewer years than a man does, but she won’t be penalized for making less or for living longer than he does.

Other retirement plans, such as single-employer pension plans and 401(k)’s and some defined benefit plans, base benefits on earnings, and thus don’t provide gender pension parity. All else being equal, women can have a larger pension benefit under many multi-employer benefit plans than under other retirement plans.

This means that the changes to multi-employer pension plans could be problematic for a woman working in an industry that relies on a defined pension plan.

Many women work in the industries with a high concentration of multi-employer plans. For example, women account for more than half of food preparation workers, cashiers and personal care providers, according to the Current Population Survey. The retail trade and services industries combined account for one-third of all participants in multi-employer plans.

Plans in these industries aren’t generally listed as in critical condition. But all that could change with another financial crisis, economic slowdown or corporate bankruptcies.

The Multiemployer Pension Reform Act of 2014 mandates that trustees of multi-employer plans can cut pension benefits for retirees under the age of 75.


Photo by TaxRebate.org.uk

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