Pension plan cuts benefits for retirees, could be harbinger of trend for other pension funds

A pension fund in Cleveland became the first plan to approve benefit cuts for current retirees - before the plan has run out of money. The move, some critics say, could open the door for other troubled pension plans to follow suit.

Roughly half the 2,000 participants in the plan will see their pension benefits cut next week. The cuts are part of an effort to keep the fund from going under.

Under the plan, benefits will be cut by 20 percent on average. But some workers in the Iron Workers Local 17 Pension fund could face more dramatic changes.

The reductions were made possible under a 2014 law that, for the first time, allowed financially troubled pensions to shrink payments to retirees if it would improve the health of the fund. Before the law, troubled pension plans only could cut benefits for current workers.

Reductions for retirees were only possible after a fund had become insolvent.

The iron workers make up a small portion of the roughly 1 million workers and retirees in pension plans that are on track to exhaust funds within the next two decades, according to the Pension Benefit Guaranty Corp., which insures private pensions.

The Central States Pension Fund, one of the largest multi-employer pension plans in the country, became the first pension fund to apply to cut benefits under the law with a proposal that would have affected nearly 300,000 current and retired truckers.

That application was rejected by the Treasury Department, which said the changes would not be enough to save the financially struggling fund.