A pension bailout three years ago continues to reverberate
Aid for multiemployer pensions saved benefits for millions of retirees, but it continues to spark criticism.
Three years ago this month, Congress took the unprecedented step of spending taxpayer dollars to bail out private-sector pensions plans.
As part of a $1.9 trillion Covid stimulus bill, lawmakers approved an $86 billion package for multiemployer plans facing insolvency to apply for one-time federal grants that would keep them viable until at least 2051.
There are roughly 1,400 of these plans nationwide, covering 10.7 million active and retired workers. But a significant number of them had been headed toward insolvency in recent decades, the result of changes in some industries, inadequate funding and the decline in participants.
The federal aid resulted from organized pushback to earlier legislation - the Multiemployer Pension Reform Act of 2014. That law aimed to keep plans alive without taxpayer assistance — but it stirred controversy and criticism because it permitted plans to seek approval to make deep cuts in benefits for retirees.
The pension legislation - known as the Butch Lewis Act - underscored partisan disagreement that flares to this day about the best way to assure secure retirement for American workers — an issue that the presidential campaign is bringing into sharp focus. Verbal sparring over the future of Social Security began earlier this month between President Biden and former President Donald J. Trump, in a sign that reform of the program could be an important talking point during the elections this year.
On this third anniversary of the Butch Lewis Act, I examined its impact in my latest Retiring column for the New York Times.
Why you should clean up those old 401(k) accounts
Accumulating the savings you’ll need in retirement is tough enough. Don’t make it tougher by leaving behind a trail of abandoned 401(k) accounts when you change jobs.
If you have one of these orphan 401(k)s, you’re not alone. One study estimates about $1.65 trillion is sitting in abandoned accounts, representing the savings of 30 million workers.
The problem is most acute for people who leave behind small accounts. Employers are permitted to transfer orphan accounts that hold less than $7,000 into IRAs that may earn low returns in money market funds and charge high fees—and most do so to trim plan administration costs. Over time, these accounts can simply waste away.
Increased job switching has accelerated the issue. The current tight labor market makes it easy for people to shift jobs more frequently as employers compete for talent.
The antidote to diminishing returns on these retirement accounts is adopting good 401(k) hygiene. In my latest Morningstar column, I explore the best practices for keeping 401(k) accounts organized.
More on taxation of Social Security
After writing a couple stories about taxation of Social Security benefits recently, Ivanna Hampton of Morningstar wanted to chat about it. I joined her on a recent episode of Morningstar’s Investing Insights. We covered the basics in this brief discussion.
What I’m reading
A Mexican drug cartel targets seniors and their timeshares . . . Social Security benefits seem to be increasing - but maybe not . . . How to stay mentally sharp in your 80s and beyond . . . New criteria could diagnose Alzheimer’s with a simple blood test . . . How fraudsters break into Social Security online accounts and steal benefits . . . Staggering rise in catheter bills suggests Medicare scam . . . Money in college savings accounts can now go toward retirement . . . An optimistic attitude about aging can help keep senility at bay . . . Old and young, talking again . . . Home care aides fight to end grueling 24-hour shifts . . . Emergency 401(k) withdrawals are on the rise . . . Social Security chief vows to fix ‘cruel-hearted’ overpayment clawbacks . . . When Medicaid comes after the family home after it provides long-term care benefits . . . Could long COVID be the Senate’s bipartisan cause?