The Central States Pension Fund faces insolvency by 2025, and only congressional action can save it, the fund’s executive director says.
Thomas Nyhan, who leads the $15.1 billion fund, told its 400,000 members during a conference call late Wednesday night to take up the issue.
“Without your voice, there will be no legislation, and the fund will become insolvent,” Nyhan said on the call, urging beneficiaries to tell lawmakers the impact the fund’s insolvency would have on their lives.
The Central States Pension Fund pays out $2.8 billion in pension benefits per year, but only collects $700 million in contributions and withdrawal liability payments. One of the reasons the fund is in such poor shape is because most of the companies that pay into the fund have either left or failed.
“Investment returns cannot possibly offset this imbalance,” the fund says on its website.
Legislative action is needed immediately to address the fund’s fiscal crisis, Nyhan said. Every day that passes without legislative relief will put the fund one step closer to insolvency and will, in short order, put the possibility of a rescue out of reach, he added.
In 2016, a proposal that suggested retiree benefits be cut was rejected by a US Treasury appointee.
During the call, Nyhan described changes to fund’s investment that will add to its longevity. Central States is de-risking a large chunk of its equities and other high-risk holdings. The sales are being reinvested in low-risk bonds and cash-like holdings, reports the Kansas City Star.
Nyhan said that his plan would start 2025 with the fund considered insolvent, adjusting benefits to space out payments for the year. By January 2026, Nyhan expects the fund to have a zero balance.
Another proposal Central States and other pension plans facing insolvency are supporting is the Butch Lewis Act, which helps shore up funding in multiemployer plans while protecting the pensions of retirees and active workers.