Suppose John Q. Hammer, the best hypothetical carpenter in Peoria for the last 40 years, wants to hang up his saw and retire. He's worked for 17 contractors in his career, since construction is a volatile business. Which one is going to pay him a pension?
None of them -- and all of them. Workers in industries like construction, trucking, and mining, where job-hopping is frequent, are often covered by union-negotiated multiemployer pension plans. Each company dumps its pension funds into a general pool, and employees dip out a share determined by their years in the business.
"Multis" were once thought to be as financially solid as New York's Rockefeller Center. But in the last few years multiemployer plans covering hatmakers and milk drivers have crumbled, throwing retirees onto the rolls of the federally backed Pension Benefit Guaranty Corporation (PBGC).
To prevent future multi failures, President Carter last month signed the Multiemployer Pension Plan Amendment Act -- a controversial bill that attempts to walk a thin line between underprotecting employees and overregulating employers.
It attempts to reinforce the funds by:
* Penalizing companies that pull out and run for cover. stiff "withdrawal liabilities," based on an employer's share of the money promised to workers, will be levied against any corporation that abandons a multi in an attempt to stick their partners with the check. The trucking, construction, and entertainment industries, where companies rise and fall with breathtaking speed, receive special exemptions.
* Increasing the amount of money employers pay the Pension Benefit Guaranty Corporation for insurance. For each employee promised a pension, a multi will have to hand $1.40 a year over to the government -- almost triple the current 50 cents. The act also provides for further premium hikes in four years.
* Allowing tottering multis to cut benefits while struggling to shore up their financial foundations. Any plan whose assets fall below a minimum level will be able to roll back pension increases that haven't been in effect for five years.
* Shrinking insurance pledged by the federal government if the fund collapses. Under the act, the first $5 of monthly basic benefit earned per year of a worker's service is fully guaranteed. The next $15 monthly basic benefits per year of service is only 75 percent covered.At most, this insurance is about half that promised to employees covered by single-employer plans. Workers already retired or within three years of retirement will have their entire check guaranteed.
Under these last two provisions, John Q. Hammer could conceivably shuffle through the morning mail and find inflation-boosted bills and a smaller pension check. IT's a remote possibility, but its very existence troubles citizen lobbyists like Sean Cassidy, research director of the Washington-based Pension Rights Center.
"People were promised those benefits whey they were hired," he says. "And it's the first time Congress has ever legislated a reduction in anyone's benefits. We see that basically as unbelievable."
Other observers think these objections are unjustified. "Sure, the insurance guarantees used to be higher," says Earl Palay, president of the Martin E. Segal management consulting firm, "but they were discretionary. If PBGC didn't want to pay, they didn't have to. now guarantees are lower, but they're nondiscretionary."
Mr. Palay says further there's little chance a multi will mire itself in financial difficulties and find it necessary to cut benefits.
"The vast majority of these plans are sound and well-run," he says. "Certain areas experience difficulty, but they're few and far between. And without these plans people in these industries might not have pensions at all."
But Mr. Cassidy feels Congress should have provided for full pension insurance coverage, thereby allowing retirees covered by multi plans to sleep easy, knowing their pensions will never be cut.
"Business people ar so obsessed with cost they lose sight of the purpose of it [the Pension Benefit Guarantee Corporation]," he says.
Currently 2,000 multiemployer pension plans exist in the United States, covering some 8 million workers. Some observers think the amendment act will make employers skittish about joining in new multis, but others feel the future growth of the plans is something that can't be predicted.
"Employers are going to be a little more careful about joining multis," says one analyst, "but this doesn't mean they're going to cease to exist."
Others point out that multis now almost completely blanket industries that need them -- those with mobil work forces. This will result in a natural flattening of the growth rate for such plans.
In the future, multis might be organized as "defined contribution" savings plans, with John Q.'s post-ripsaw days secured by an individual account held in his name.