In news out of Washington we hear another sad story about how the Pension Plans of the past, the time trusted institution of our fathers and grandfathers, are not working. This type of news is the perfect  example of why our clients need to think outside the box and plan for their own retirement.

The Washington Post – December 10, 2014

 A bipartisan group of congressional leaders reached a deal Tuesday evening that would for the first time allow the benefits of current retirees to be severely cut, part of an effort to save some of the nation’s most distressed pension plans. The measure, attached to a massive $1.01 trillion spending bill, would alter 40 years of federal law and could affect millions of workers, many of them partof a shrinking corps of middle-income employees in businesses such as trucking, construction and supermarkets.

“We have to do something to allow these plans to make the corrections and adjustments they need to keep these plans viable,” said Rep. George Miller (D-Calif.), who along with Rep. John Kline (R-Minn.) led efforts to hammer out a deal.

The idea is reluctantly supported by some unions and retirement fund managers who see it as the only way to salvage pensions in plans that are in imminent danger of running out of money. But it also has stirred strong opposition from retirees who could face deep pension cuts and from advocates eager to keep retiree pensions sacrosanct, even in cases when funds are in a deep financial hole. The advocates argue that allowing cuts to plans would open the door to trims for other retirees later.

“We thought our pension was secure,” said Whitlow Wyatt, a retired trucker who lives in Washington Court House, a small city in central Ohio. “That was always the word. Now they are changing that.”

Wyatt, 70, retired with a $3,300-a-month pension in 2000 after working more than 33 years as a long-haul driver. He could face pension reductions of 30 percent or more if Congress permits trustees of the hard-pressed pension fund to slash benefits. The deal is aimed at helping plans such as the Teamsters’ Central States fund. The pensions earned by truckers in the fund are among the best enjoyed by working-class people anywhere: After 30 years on the road, many of its participants are entitled to upward of $3,000 a month for the rest of their lives. But now the fund, rocked by steep membership declines, an aging workforce and downturns in the stock market, is in dire financial straits, putting the retirement benefits of 400,000 participants in jeopardy. The deal reached would apply to multi-employer pensions, where a group of businesses in the same industry join forces with unions to provide pension coverage for employees. The plans cover some 10 million U.S. workers.

“The longer we wait to take action, the more severe the impact on retirees and workers in the plans in the worst financial shape will become,” business leaders wrote. “The longer we wait, the heavier the burden will become on employers struggling to fund and extend these pension plans.”

That is the situation confronting the Central States plan, which was notorious in the 1960s and ’70s for being used as a slush fund for organized crime. Since then it has operated under federal court supervision and with the help of professional fund managers. Yet that has not been enough to overcome demographic and other trends that have weakened its finances.

Some see cutting benefits preemptively as the only way to keep troubled plans such as Central States afloat. Under the agreement reached by congressional negotiators, retirees over age 75 as well as those who are disabled would be shielded from any reductions. Also, any benefit cuts would be subject to a vote of plan participants. Nonetheless, many retirees feel betrayed. “I never dreamed they would pull the rug out from under us,” said Greg Smith, 66, a retired shipping clerk who retired in 2011 with a $3,000-a-month pension after 42 years on the job. “I actually retired because I was worried about them cutting pensions. I thought I would be grandfathered in with protections. But I guess not.”