Practical Reforms to “Right-Size” Government Unions

Rolling back the power of government unions in a state like California is almost impossible. Their power has been unchallenged for so long that they now virtually control the state Legislature, and their grip on local politicians extends to nearly every city, county, school district and special district.

Unions2But there have been reforms in some places, and they can serve as examples for municipalities throughout the state. Several Orange County cities have tried transparency ordinances of variable effectiveness. San Jose has restricted the use of binding arbitration. Voters in San Jose and San Diego have both passed pension reform measures. Cities scattered throughout California have grappled with unions over project labor agreements and prevailing wage laws. And in the courts, reformers have won the first round in the Vergara case, which challenges union work rules governing teacher dismissals, layoff preferences and tenure requirements.

Against the remorseless advance of the government union agenda, these and other measures are decidedly incremental. They are often overwhelmed by deceptive union measures that carry the reform label but are actually reactionary shams, designed to turn back the clock. Or they are challenged in court by an avalanche of suits and counter-suits designed to eviscerate reforms that voters overwhelmingly supported.

The game is rigged, but the nonpartisan hunger for quality public education and civic financial health is universal. Sooner or later, the will of the people will always prevail. Here then is a partial list of public sector union reforms that have been tried, or should be tried, in every city and county in California:

(1)  “Right-to-Work” for all government workers:

This would forbid government unions from getting a government employee fired simply because they didn’t want to join a union. Right-to-work is especially compelling in government organizations, where altruistic individuals who want to become public servants may not wish to financially support the political agenda of their union. Because government unions negotiate over work rules that determine how we manage our public institutions, virtually all union activity is inherently political. Right-to-work in government organizations therefore not only forces unions to be more accountable to their members, but is based on an employee’s constitutional right to free speech.

(2)  “Worker’s Choice” for all government workers:

This law takes right-to-work a step further, and should be implemented in tandem with right-to-work. One objection that unions make to right-to-work laws is that it allows those workers who did not join the union to become “free riders” who enjoy the alleged benefits of union representation but don’t pay any dues. “Worker’s Choice” allows workers under a collective bargaining agreement to opt-out and represent themselves individually in their wage and benefit negotiations with their employer. Something that professionals throughout the private sector do as a matter of course.

(3)  Union Recertification:

This would require government unions to regularly hold a “recertification” election, preferably once every year. The election would require secret ballots and participation by a quorum (usually a majority) of employees in the collective bargaining unit. Most government employees in California started working long after the unions took over. They should be able to decide if they want a union to continue to represent them. Recertification, like right-to-work and worker’s choice, is a practice that would ensure greater accountability by unions, because if they lose the annual election, they would be decertified and could not represent those workers until regaining their approval in an election to be held at least a year later.

(4)  Reduced Scope of Collective Bargaining:

This reform is recommended in order to provide elected officials the latitude to equitably balance the interests of taxpayers and government workers. It gives them the latitude to cope effectively with budget deficits caused by economic downturns that have already affected private sector workers. Limiting negotiations on compensation to current benefits, for example, would mean that elected officials retain the authority to modify pension benefit formulas. Not only budget issues but work rule issues could be restricted under this reform. For example, “last-in-first-out” layoff rules which favor seniority over merit could be scrapped.

(5)  Pension Reform:

The most likely way to implement effective pension reform – which, ironically, is the only way to rescue the defined benefit plan for government workers – is to revise the California constitution via a state ballot initiative. Such a reform, at the least, would give elected officials or voters the right to reduce pension benefit accruals earned by active employees for future work. It would require active employees to pay 50% of their normal contribution, calculated at a rate of return permissable under ERISA statutes, i.e., a truly “risk-free” rate of return. It would impose stricter curbs on spiking and double dipping that would be harder to circumvent in court. And it would provide tools to be implemented to ensure system solvency in a financial state of emergency, such as suspension of COLAs for retirees (retroactively if necessary), retroactive reduction in pension benefit annual accruals for active workers, raising of the pension-eligible retirement age, and a ceiling on benefits.

(6)  “Paycheck Protection”:

This would require unions to obtain permission, preferably annually, before deducting the political portion of their dues from worker paychecks. California’s government workers currently assert their right to not pay the political portion of their dues – notwithstanding the argument that ALL dues paid to a government union are used for essentially political purposes – via a cumbersome “opt-out” process. This reform would change that to an annual “opt-in” process, making it much easier for government workers to avoid having to support the political agenda of their unions.

(7)  “Dues Checkoff”:

Under this reform, government payroll departments would no longer be required (or allowed) to withhold union dues from government employee paychecks and turn that money automatically over to the union. Instead unions would be required to bill and collect dues without relying on payroll withholding, just like other membership organizations. This is particularly justified in the case of government unions, under the assumption that the government should not be acting as a collection agent for a private organization.

(8)  Clarification of “Public Employee”:

This is an interesting reform that can be interpreted in two ways. On one hand, by broadening the description to include government contractors, then in conjunction with other reforms, appropriate regulations restricting inappropriate union activity can be extended, for example, not only to home health care workers, but to construction contractors whose unions negotiate for project labor agreements and prevailing wage agreements. On the other hand, narrowing the description of what constitutes a public employee can counter the aggressive expansion of government unions in states such as California where there are virtually no checks on government union power. Either way, the principle governing the application of this reform would be that unions that operate in the public sector should be subject to more restrictions than those unions that operate in the private sector.

(9)  Transparency in Negotiations:

Lost on most voters is the fact that government unions epitomize the so-called abuses of the elite establishment. Powerful corporate and financial interests make deals with government unions in an Alliance of The Big. More regulations drive out innovative commercial competition at the same time as they expand unionized government. Transparency in negotiations, obviously, means that unions have to disclose their wage and benefit demands for public review. But it means much more than that. Disclosure of their financial and operating reports, their membership dues, their internal leadership election processes. And more than anything, a spotlight on how government unions collude with the most powerful and corrupt among the private sector elites they claim they are protecting us from.

(10)  Ban on Political Activity:

Public employee unions, if they should exist at all, should not be permitted to use their resources to conduct any sort of political lobbying or campaigning. There is an inherent conflict between the agenda of unionized government and the public interest. Government unions, by definition, want to increase their membership and want to increase the pay and benefits of their membership. That causes more government to trump good government. It causes more spending to trump efficient spending. At its root, it means that failure of government programs constitutes success for government unions, because their solution is inevitably to call for more government spending. Political activity by government union should be illegal.

Perhaps the most important point to be made in the context of these ten recommendations is that they are utterly nonpartisan. Unions in the public sector bear little relation to unions in the private sector, for reasons that are well documented: They don’t operate in agencies that have to make a profit, which limits how much private sector unions can ask for from their employers. They elect their own bosses through massive campaign spending, something unheard of in the private sector unions whose management is determined by shareholders. And they run the government, which allows them to make common cause with the most powerful and corrupt among the private sector elites. What part of this is partisan?

Californians of all political persuasions are going to eventually have to face the reality that government unions are the reason our schools are failing students and parents, and the reason we can’t balance our budgets and control our debt. These reforms are all ways to begin to reduce the power of government unions, which will be a giant step towards making California’s state and local governments truly accountable to the interests of all workers – not just government workers.

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Ed Ring is the president of the California Policy Center.

CA Pension Reform — A Rigged Game

public employee union pension“Certainly the game is rigged,” science fiction author Robert Heinlein once wrote. “Don’t let that stop you; if you don’t bet you can’t win.” The quip should be the new rallying cry of California’s indefatigable band of pension reformers, who continue to fight to rein in the state’s pension debt. It’s always been a tough battle — but the latest setback shows that the system is rigged at practically every level. Last month, California’s Public Employment Relations Board, the quasi-judicial body that oversees the implementation of the state’s collective-bargaining statutes, invalidated the results of a three-year-old referendum —Proposition B — that passed in November 2012 with 66 percent of the vote and would have reduced pension benefits for most new hires in San Diego and moved them to a 401(k)-style, defined-contribution system. Other reforms have also fallen by the wayside. In June 2012, heavily Democratic San Jose approved with nearly 70 percent of the vote a measure that would have trimmed benefits for current employees. A Santa Clara County judge in 2014 eviscerated the measure, invoking the so-called “California Rule,” a 70-year-old court interpretation of the state constitution that has made it impossible for overburdened cities to trim employee costs.

San Diego’s reform initiative was qualitatively different from San Jose’s. Its authors were careful to craft language that avoided running afoul of the California Rule by focusing on new hires and placing caps on pensionable pay. Prop. B was touted as a model for the rest of the state to follow, and the state needs one. The union-controlled Legislature remains hostile to reform, beyond the expedient passage in 2012 of a pension-reform bill that mainly served as a bait-and-switch to convince voters to hike taxes.

PERB is not an impartial agency. Before the 2012 city vote, PERB had tried to keep the proposition off the ballot altogether. Most of the board’s members have worked for one of two big unions — either the California Teachers Association or the Service Employees International Union. Its administrative law judges aren’t real judges but officials employed by the agency. Nearly two years ago, one of those biased adjudicators issued a lengthy ruling demanding that San Diego return to the 2012 status quo. The full board affirmed the ruling, maintaining that officials were required to bargain the terms of the initiative with the city’s unions before placing the measure on the ballot. But the city didn’t place the measure before voters — voters did it themselves, signing petitions to place it on the ballot. The board elided this vital distinction by pointing to the participation of San Diego’s former mayor, Jerry Sanders, and other officials in the initiative’s campaign. Never mind that Sanders said he was involved as a private citizen.

On Tuesday, the City Council voted unanimously to appeal the measure, even though a leading Democrat said he voted for the appeal simply to get legal clarity. “The people’s right to initiative is guaranteed by the California Constitution,” City Attorney Jan Goldsmith told the Union-Tribune. “This right cannot be bargained away in a back room, or stolen from the people by a government agency.” The appeal will send the matter to the courts.

Goldsmith, a strong backer of Prop. B, wrote in a July 2012 San Diego Union-Tribune column that the issue boiled down to constitutional rights. “[N]ever before has any initiative that qualified for the ballot through petition signatures been deemed a ‘sham’ citizen initiative,” he wrote. “Since 1911, the right to place citizen initiatives on the ballot through voter petitions has been a constitutional right in California reserved by the people to bypass politicians and special interests. This right is not conditioned upon the approval of those special interests and is not something to be bargained over.”

PERB isn’t the only agency to try to kill citizen initiatives. Recently, the union-friendly Agricultural Labor Relations Board invalidated an election by Fresno farm laborers who voted against representation by the United Farm Workers. For more than a year, the board refused even to count the ballots before deciding to destroy them. Former San Diego councilman Carl DeMaio, a leader in the city’s pension reform fight, and Chuck Reed, San Jose’s former mayor and a leader in that city’s pension reform efforts, have been working on a statewide initiative for either the November 2016 or 2018 ballots. They’ve faced lots of resistance from entrenched power, and they’re preparing to meet other legal obstacles from unions and their political backers. Yes, the game is rigged, but reformers soldier on. At least they understand that California’s fiscal future is at stake.

Pension reform initiative abandoned for 2016

Unions pension public sectorThe landmark effort to take public pension reform straight to the people of California has been withdrawn from ballot consideration.

“Beleaguered by fundraising doubts and attacks from organized labor, two former California officials said Monday they are backing off plans to place a measure on the November ballot intended to curb public pension benefits,” the Sacramento Bee reported. “Instead, former San Jose Mayor Chuck Reed and former San Diego Councilman Carl DeMaio said in a joint announcement, ‘We have decided to re-file at least one of our pension reform measures later this year for the November 2018 ballot.’”

Staying solvent

The news marked a sharp reversal for critics of the state’s pension spending, which has ballooned apace with California’s freshly flush balance sheet. The price tag for guaranteed health coverage alone has put Sacramento on notice of the size and scale of the problem. “The state has promised an estimated $72 billion in health care benefits for its current and future retirees, an amount that will increase to more than $300 billion over the next three decades, according to the governor’s Department of Finance,” according to the Associated Press.

Gov. Jerry Brown has sought to bring those costs under control in a way that won’t spur a revolt within his own party or hand too much power to Republican legislators. “Brown proposes prefunding benefits similar to the way the state pays for pensions — by paying into a trust fund that accrues investment returns over time, reducing the amount of money that taxpayers must contribute in the future,” the AP noted. “In negotiations with public employee unions, he’s asking state workers to pay into a fund through a deduction on their paychecks. The state would pay an equal amount.”

A firmer approach

The Reed/DeMaio proposals would have tackled unions in a much different way.  “Reed and DeMaio had filed two proposals for the November 2016 ballot, planning to choose one,” as the AP reported separately. “One would have put employees who first join a public pension system on or after January 2019, into 401(k)-style retirement savings plans that guarantee fixed contributions from employers instead of fixed returns. The second measure would have capped how much employers could pay for new hires’ retirement benefits to a certain percentage of their salary.”

Public opinion studies produced conflicting portraits of how much support for the initiatives Reed and DeMaio could count on. “Apparently the measure to force new employees into 401(k) style ballot initiatives did not poll well (even though a 2015 poll by Reason-Rupe showed majority support for such a shift),” as Reason observed. “The measure to cap the amount employers could contribute to pensions fared better in polls, but according to Reed, they weren’t able to raise enough money to collect signatures and prep for an expensive battle with California’s public unions.”

Finding funding

That difficulty struck at the heart of the year’s complex political landscape. “The stark reality is that within the state, there are no deep pockets to finance such a campaign,” Dan Walters noted at the Bee. “However large they may be, fast-growing pension and health care liabilities don’t discomfit any major interest groups, since their greatest impacts are on local governments, especially cities, rather than on state government.” That would have likely pushed the initiative’s supporters into a scramble for cash.

The necessity to look far and wide for money fostered its own kind of political optics problem. “Any reform campaign would be dependent on money from one or more wealthy individuals, probably from out of state, and it hasn’t materialized,” as Walters observed. “Conversely, any broad retiree benefit reform effort would draw implacable, high-dollar opposition from unions.” So even if the reform effort gained an adequate sponsor, Golden State unions would be able to portray their high-dollar spending as more of an in-state groundswell than their opposition — a potentially substantial advantage in a populist election season.

Originally posted on CalWatchdog.com

San Jose City Council Capitulates to Police Union Power

“He told the class to take advantage of the academy, and then find jobs elsewhere. The police union tries to get us to leave the department.”

–  Anonymous source to NBC Bay Area, television report “Another San Jose Police Recruit Says Union Tried to Get Cadets to ‘Find Jobs Elsewhere’,” Oct. 28, 2014 (excerpt begins at 1:38 in report).

San Jose Police DepartmentA precedent setting new development in San Jose last week provides abundant evidence of just how powerful local government unions really are in California. As reported Monday in San Jose Inside and elsewhere, an embattled City Council has tentatively approved a new contract with San Jose’s police union that awards them “a 5 percent ‘retention’ bonus and an 8 percent raise over the next 16 months. In addition, former officers who return to the force in the next year can claim a 5 percent signing bonus.”

More significantly, at the same time, the San Jose City Council has tentatively agreed to drop their appeal of a court ruling that overturned a key part of a San Jose pension reform, a re-examination of the so-called “California Rule.” As pension expert Ed Mendel reported in PublicCEO, “The ‘California rule’ is a series of state court decisions widely believed to mean that the pension offered on the date of hire becomes a vested right, protected by contract law, that can only be cut if offset by a new benefit of comparable value.”

In practical terms, this means that pension benefit formulas, according to the California Rule, cannot even be trimmed for future work performed by existing employees. San Jose’s pension reform Measure B, passed by 70 percent of voters in 2012, presented city employees with a choice – they could either contribute an additional 16 percent towards their pension benefits via payroll withholding, or they could accept lower pension benefit accruals from then on. Nothing they had earned to-date would have been taken away from them.

Despite legal opinions that claim the California Rule is not well established law, and despite that the California Rule is contrary to the law governing public sector pensions in most states, and contrary to all law governing private sector pensions everywhere, San Jose’s local elected officials have capitulated.

THE INHERENT HYPOCRISY OF THE ‘CALIFORNIA RULE’

It is difficult to overstate just how hypocritical the union’s position is on the issue of modifying pension benefit formulas. Because the problems with pensions began back in 1999, when Senate Bill 400 raised pension benefit accruals per year for the California Highway Patrol. Within a few years, most every agency in California followed suit. And these pension benefit enhancements were applied retroactively to the date of the employees’ hire.

That is, starting in 1999, agencies changed the pension benefit formula so that, for example, police and fire pension accruals were not just increasing from 2 percent to 3 percent per year from then on, but retroactively to the day each employee was hired. So someone who would have earned a pension equivalent to 2 percent of their final salary times the years they worked would now earn a pension equivalent to 3 percent of their salary times the years they worked, even if they were going to retire within the next year or two.

What San Jose Measure B tried to do was not roll back pension benefits from 3 percent per year to 2 percent per year for years already worked. It only tried to reduce the benefit accrual, prospectively, for years still to be worked. And even that was too much for these unions.

THE DEVASTATING COSTS OF SAN JOSE’S POLICE/FIRE RETIREMENT BENEFITS

If taxpayers could afford to pay these pension benefits, there might be a stronger argument to preserve them. But San Jose’s independent Police and Fire Department Retirement Plan, according to their most recent financial report, is not in great shape financially. Keeping it afloat requires staggering sums of money from taxpayers that are only going to increase each year. Here are highlights:

(1) The plan as of June 30, 2014 (most recent data available) was 77.5 percent funded (page 114). This means that instead of earning their officially projected annual return on investment of 7.125 percent per year, just to avoid becoming more underfunded, they will have to earn 9.2 percent per year. Just to stay even. That is their so-called “risk free” rate of return.

(2) The fund truly is “risk free” to participants, because the taxpayers pay most of the expense and cover the losses when the market fails. In FYE 6-30-2014, police and fire employees contributed $21.1 million into their retirement fund, and taxpayers (the city of San Jose) contributed $123.6 million (page 69), nearly six times as much. How many “six to one” matching contributions are out there for corporate 401(k) plans?

(3) The unfunded liability for the San Jose Police and Fire Retirement Plan was $806 million (page 114) as of June 30, 2013 (most recent actuarial data), equal to 436 percent of payroll. Or looking at this another way, the city’s pension contribution was $123.6 million, whereas their “covered payroll” was $184.6 million. That is, for every dollar San Jose pays to put police and firefighters on the street, they have to pay 67 cents to the pension fund.

(4) It’s not just pensions. The San Jose Police and Fire Retirement Plan includes city funded retirement health insurance benefits. How’s that fund doing? As of June 30, 2013 (most recent data), that plan was 11 percent funded, with an unfunded liability of $625.5 million (page 65).

(5) If you consolidate the financial data for San Jose’s Police and Fire Retirement Plan’s pension and healthcare (OPEB) plans, the most recent statements indicate they are 67 percent funded, with a total unfunded liability of $1.4 billion. If San Jose were to responsibly reduce their total unfunded liability for public safety retirement benefits, they would be paying far more than 67 cents for every dollar of payroll.

THE MISLEADING EMPHASIS ON AN EXODUS OF OFFICERS

Throughout this battle between fiscal realists and the police union in San Jose, the police have maintained that officers were leaving the city to work elsewhere or to retire. There’s no question that their ranks have thinned, perhaps alarmingly. According to SJ Inside, “the agency [currently has] 943 sworn officers out of a budgeted 1,109 positions.” And historically San Jose’s police department has had as many as 1,400 officers. But is the union thwarting efforts to fill the ranks?

Several news reports suggest that could be the case – starting with the local NBC television affiliate’s report quoted earlier. That anonymous source corroborated what another person stated publicly. According to the San Jose Mercury guest column entitled “San Jose police recruit: Union told class to quit right away for good of the department,” former police academy cadet Elyse Rivas writes:

“On the first day of the academy, our orientation included the opportunity to meet Jim Unland, the Police Officers Association’s president. In no uncertain terms, he blamed Measure B for the departure of hundreds of officers — and he told us that it would be better for the department and for us if we would just quit, right then and there. He said that our employment with the department did not help the POA’s cause in proving Measure B was killing the department’s recruitment capabilities. He urged us to find jobs elsewhere.”

Reached for comment earlier today regarding developments in San Jose, former Mayor Chuck Reed agreed with the substance of these allegations. Not only did he confirm reports of union representatives discouraging academy recruits from taking jobs with the department, but he also described other ways they thwarted recruitment:

“There were reports of recruiting events held in the San Jose police union offices where they invited police recruiters in from other cities to encourage active San Jose police officers to take these jobs in other cities.”

Reed also said, “When we were trying to hire officers, we wanted to bring in retired police officers in to do the background checks so we could keep our active officers on the beat – but the union urged retirees to refuse to accept the work.”

In any case, Reed pointed out that the city had determined to reduce the size of the police force back in 2010, well before voters approved Measure B, saying “the police department headcount went down from 1,400 to 1,100 before there was any pension reform.” Reed believes that an ideal headcount for the San Jose police department would not require returning to 1,400, and that getting to the budgeted 1,109 positions would be a good first step.

SO HOW MUCH DO SAN JOSE’S ‘UNDERPAID’ POLICE OFFICERS MAKE?

Getting timely and accurate information on public pay is difficult because financial reports from public entities take a long time to produce and often omit important data. The most recent payroll records publicly available for the city of San Jose are for 2013. According to a search on Transparent California of San Jose city employees with “Police” in their job title, in 2013 there were 260 of them who made over $250,000 in pay and benefits, and an astonishing 806 who made over $200,000 in pay and benefits. Here’s the link:  San Jose city employees, 2013, with “Police” in their job title.

Pension information for San Jose’s retired police officers is complicated by the fact that the data includes firefighters along with police officers. Moreover, the average full-career pension estimates are understated because a significant percentage of the current participants retired before pension benefits were enhanced in San Jose – a process of “continual enhancement” that continued up until 2008. Using 2014 data acquired by Transparent California, the estimated average full career pension for a San Jose police/fire retiree is $99,116 – with guaranteed 3 percent per year cost-of-living increases. The number for recent, post-2008, full-career retirees is undoubtedly much higher. Here is a 2014 roster of all of San Jose’s police/fire retirees – note that individual retirement health benefits (unfunded liability of $625 million) were not provided – certainly adding a value of at least another $10,000 per year.

Are San Jose’s police officers underpaid? The average veteran officer makes pay and benefits worth well over $200,000 per year. Add to that the likely 5 percent “retention bonus, and the 8 percent raise over the next 16 months per the tentative new agreement. You decide.

The personal attacks and confrontational tactics employed by the San Jose police officers union against their political opponents do not reflect well on the fine men and women who staff that department, who perform work of vital importance to society. Whether or not they intentionally urged officers to quit (or never join) the San Jose police force is almost irrelevant, despite abundant evidence that suggests they did. Because their real transgression against the people of San Jose, the taxpayers, the elected officials, and public safety itself, is to insist on levels of pay and benefits for their officers that are far more than the city can afford.

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Ed Ring is the executive director of the California Policy Center.

Ballot Title Won’t Deter Pension Reform

pensionCostly government pension deals are devastating our public services – and this simple initiative gives voters the ability to stop sweetheart and unsustainable pension deals that politicians concoct behind closed doors with government union bosses. That’s why the politicians and union bosses oppose this initiative – and why they continue to try to mislead the public on what the initiative does. Despite their attempts to mislead, we are very confident the voters will understand the plain English requirements of this measure and overwhelmingly pass it in November 2016.

The next step in the campaign will be to commission a legal review the ballot measure “Title and Summary” concocted by state politicians. Once that review is completed, we will kick-off their signature drive to qualify the measure. 

The “Plain English” Requirements of the Pension Reform Initiative: 

1) Require voter approval of any defined benefit pensions for new government employees

2) Require voter approval of any increase in pensions for existing government employees

3) Prohibit any taxpayer subsidy of government retirement benefits in excess of 50% of the cost – unless voters expressly approve a higher contribution

4) Prohibit politicians and government agencies from delaying, impeding, or challenging any voter-approved state and local ballot measures regarding government compensation and benefits.

Chuck Reed, a former Mayor of San Jose, is a Democrat. Carl DeMaio, a former Councilmember of San Diego, is a Republican

Originally published by Fox and Hounds Daily

Congress Allows Pension Cuts For Current Retirees

A provision in the recently passed spending bill will allow some underfunded multi-employer pension plans to cut benefits for current retirees.

“The move was the result of an alarm from the Pension Benefit Guaranty Corp. (PBGC) that multi-employer plans covering more than 1 million participants are substantially underfunded and, without legislative changes, will probably fail,” Washington Post business columnist Michelle Singletary wrote.

Under the law, “plans that estimate they won’t have enough money to pay 100 percent of benefits within 15 or 20 years can cut benefits,” but not for retirees who are 80 or older, or those who are on disability. Cuts would also be phased in gradually, so retirees between the ages of 75 and 79 would face smaller cuts than those under 75.

Some retirees may not even know their benefits on their chopping block because they may have overlooked letters informing them that their plan is underfunded. (RELATED: US Workers Living Longer is Bad News for their Pension Funds)

“Participants would have to be given the right to vote on cuts before the benefit reductions could be implemented,” claims the website Business Insurance, but “the U.S. Treasury Department could override the vote” if the plan in question is deemed “systemically important” to the health of the PBGC.

The changes were agreed upon “after numerous warnings that lawmakers needed to act to prevent the collapse of the PBGC insurance program,” which had seen a massive increase in its deficit, “to $42.4 billion in fiscal 2014 from $8.3 billion the prior year.” (RELATED: Democrat Ticked Off Unions in Major Pension Reform, Which Could Cost Her Governor’s Seat)

“Multi-employer plans are prevalent in industries like mining, manufacturing, and construction where workers often shift among employers,” The Wall Street Journal says, and while they allow workers to keep their pension benefits when changing jobs, they also require the support of multiple businesses.

“In 2006 Congress passed the Pension Protection Act to prop up insolvent multi-employer pensions,” requiring trustees to restore solvency to severely underfunded pensions by “raising employer contributions, cutting so-called adjustable benefits like early retirement subsidies,” or reducing future benefits.

The PBGC is viewed as a “federal backstop when plans become insolvent,” reducing the incentive to make those difficult choices, and increasing the likelihood that taxpayers would eventually have to bail out struggling pensions. (RELATED: Unions Try to Replace San Jose Mayor over Pension Reform)

Multi-employer aren’t paying the PBGC enough to keep up with expenses, leading the agency to warn that benefits could be eliminated entirely if it runs out of money.

Employers and unions have long opposed increased premiums, assuming politicians would not allow significant benefits cuts, but the recent changes leave that in doubt.

Follow Peter Fricke on Twitter

This article was originally published by the Daily Caller News Foundation.