President Macron of France Fighting to Raise Retirement Age Ahead of Election

Pension reform has always been a hot-button topic in France. In 2019, President Emmanuel Macron’s proposal to raise the retirement age and create a universal state-run pension system led to the longest worker strike in the history of modern France.

And now, just ahead of the French presidential election taking place this month, Macron has made pension reform one of the top issues of his campaign.

“He put it on the top of his platform,” says Michael Zemmour, a research fellow at Sciences Po in France who specializes in political and welfare economics. “This is more about confrontation about social rights and entitlements than [a] pure economic problem.”

Macron’s proposal is to raise the retirement age to 65 from 62. Marine Le Pen, Macron’s right-wing rival, wants to lower the retirement age to 60. France currently has the third highest level of pension spending in the entire OECD as a percentage of GDP.

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

Hervé Boulhol, a senior economist at the OECD, says ballooning pension costs are a problem. Nevertheless, he thinks that continuing an arbitrary retirement age, which both politicians are proposing, isn’t the smartest way to go about things.

“One thing we keep saying is that it makes sense to at least link retirement age to life expectancy,” says Boulhol.

France has a pay-as-you-go system, which means that the pension funds are not invested before being paid out to beneficiaries. However, the pensions can still struggle with funding if there are too few young people paying in to support a growing older population.

French citizens will be going to the polls for the first round of elections this Sunday, April 10. If no single candidate wins the majority of the vote, which is likely to happen, then there will be a runoff election between the top two candidates. This second election will take place on April 24.

Air France–KLM Completes De-Risking of Pension Plans

The CIO Who Left a $1.9 Million Job
at CDPQ to Help Run France

Tags: Emmanuel Macron, France, Marine Le Pen, pay-as-you-go, Pension Reform, Retirement Age

The Pension Benefit Guaranty Corporation has agreed to provide more than $680 million to bail out three insolvent multiemployer pension plans that cover over 5,500 participants.

The Teamsters Local 641 Pension Plan of Union, New Jersey, which covers 3,610 participants in the transportation industry, will receive $503.9 million including interest under the Special Financial Assistance Program established by the American Rescue Plan.

The plan became insolvent in March of 2021, at which time the fund began receiving financial assistance from the PBGC. It was required by law to reduce its participants’ benefits to the PBGC guarantee levels, which was approximately 55% below the benefits payable under the terms of the pension.

The federal funds will restore all benefit reductions caused by the plan’s insolvency, and will allow the plan to make payments to retirees to cover prior benefit reductions. The approval also means the PBGC’s Multiemployer Insurance Program will be repaid $13 million, which is the amount of financial assistance the agency has provided since March of 2021 to cover the plan’s outstanding loans, plus interest.

For more stories like this, sign up for the CIO Alert newsletter. 

The PBGC also approved an SFA application from the San Francisco Lithographers Pension Plan, which covers 1,572 participants in the printing industry, and agreed to provide the plan with $133 million.

The plan, which became insolvent in June 2021, had to cut benefits for its participants to approximately 20% below the benefits payable under the terms of the plan. However, the plan will now be able to make payments to retirees to cover prior benefit reductions. As a result, the Multiemployer Insurance Program will be repaid the $5.4 million in financial assistance it has provided the plan since it ran out of money last year.

And the Laborers’ Local 186 Pension Plan of Massena, New York, which covers 379 participants in the construction industry, is set to receive $46.6 million from the PBGC under the SFA.

The plan has been insolvent since July 2021, at which time it had to cut its participants’ benefits to approximately 35% below what they would have received from their plan had it not run out of money. The plan has received nearly $1 million in financial assistance from the PBGC since it became insolvent, which will be repaid to the agency’s Multiemployer Insurance Program.

According to the PBGC, the SFA program is expected to provide funding to more than 250 severely underfunded multiemployer pension plans covering over 3 million workers, retirees, and their beneficiaries. Under the program, plans are required to demonstrate eligibility and calculate the amount of assistance needed pursuant to ARP and PBGC’s regulations.

Plans may use SFA funds only to pay plan benefits and administrative expenses, and they are not obligated to repay the PBGC. Plans receiving funds are also subject to certain terms, conditions and reporting requirements, including an annual statement documenting compliance with the terms and conditions. PBGC is also authorized to conduct periodic audits of multiemployer plans that receive financial aid under the program.

The most recent phase of the program began April 1, at which time multiemployer plans that fall under Priority Group 3 became eligible to apply for SFA funding. The group includes plans with more than 350,000 participants that are in critical and declining status.