Central State Pension Fund executive director, Thomas Nyhan said in a statement that around 273,000 current and future retirees will be affected with its latest benefits cut. The country's largest pension fund is currently facing financial problem due to 2008 financial crisis and the latest economic uncertainty.
According to the fund director, the benefits cuts is necessary to ensure the fund will not run out of money as it could face the problem in just 10 years at current state according to CNN Money. The cut is expected to be around 23 percent and will need approval from the Treasury Department before can be carried out.
The Washington Post reported details regarding the cut stating that the proposal passed to the Treasury Department shows that the state fund is paying $3.46 for every dollar they take in. This is due to the reducing numbers of workers under the fund due to low employability. Currently for every five retirees the fund only has one active worker.
Besides the financial crisis, the fund also blames the 1980 move by the government to deregulate the trucking industry. The move saw the fund losing a huge amount of membership that it needs to keep the fund running.
However, the fund will try its best to provide the best solution for all of its members. This includes a plan to continue giving benefit to retiree age more than 80 years old and also for the disable members. Besides that, members who are older than 75 and widows will enjoy a lesser benefits cut compared to others.
Nyhan also told CNN that he is hoping that government would help the fund and provide a bailout. However, it is still unclear if it would be a reality.
Another pension fund, the Teamsters pension fund also announce that up to 400,000 of its member could face benefits cut according to CNBC. The fund had filed the proposal however it might take months before it could be approved as all members will seek legal act too as a way to protect their benefit.
Funds are allowed to cut benefit after a law passed in December 2014 by congress as a way for the government to curb spending. Under the new law, funds are allowed to cut benefit if they are running out of money. The law is putting more than 10 million of its member in different industries from manufacturing to trucking.
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