It's a basic tenet of federal pension law: Plans can't slash the benefits of people who have already retired. But the financial struggles of multiemployer pension plans are igniting a debate over that rule—and threatening to weaken fundamental protections for retirees.

Multiemployer pension plans, created by collective bargaining agreements between unions and two or more employers, cover more than ten million workers and retirees in construction, trucking, retail, health care, hospitality and other industries. In recent years, the plans have been beset by a host of problems, including market downturns, a decline in unionization and employers withdrawing from the plans.

Nearly 40% of plans are struggling financially. About 80% of large plans say they don't expect the multiemployer pension system to survive the next decade without major changes, according to a recent survey by Pyramis Global Advisors.

A commission of more than 40 labor and management groups earlier this year released proposals to shore up the plans—including allowing the plans to cut benefits of current retirees. The National Coordinating Committee for Multiemployer Plans, the advocacy group that organized the commission, is urging Congress to consider the changes as it addresses funding rules that are due to sunset at the end of 2014. "We believe this package of reforms will strengthen the plans and keep employers in the system," says Randy DeFrehn, the group's executive director.

Participant advocates see some of the proposals as a severe threat to retirees. Looking at U.S. pension law, "the fundamental pillar that it all rests on is when you've earned your pension benefit, it can't be taken away," says David Certner, legislative counsel at AARP.

Multiemployer plans' current problems spring partly from their unique structure. If one employer withdraws from a plan, especially during a bankruptcy, the remaining employers can be saddled with any unfunded benefits. Fearing that their own liabilities may climb higher, more employers may decide to leave the plan. If the plan ultimately runs out of money, the Pension Benefit Guaranty Corp. provides a financial backstop. But the maximum benefit guaranteed by the PBGC is just $12,870 a year. (Most workers with traditional pensions are in single-employer plans, which have a far higher PBGC guarantee and aren't affected by the proposals.)

Some employers say it makes sense to suspend benefits to rescue plans such as the Teamsters' Central States, Southeast and Southwest Areas pension plan. After one employer, Hostess Brands, went bankrupt in 2011, the remaining employers' share of unfunded liabilities rose by almost $600 million, according to June Congressional testimony by Michele Murphy, executive vice-president at grocery chain Supervalu, which contributes to the plan. With other employers falling by the wayside, "retirees from these failed companies would be much better off in the long run if pension benefits were reduced now instead of waiting until the plan becomes insolvent," Murphy testified.

Watch for Changes to Your Plan

Under current law, plans in "critical" status can cut early retirement and disability benefits for people who have not yet retired. But plans can't cut back the basic benefits participants have already accrued—until the plans are insolvent and the benefits drop to the PBGC guaranteed level. The commission's proposal would allow some plans projected to be insolvent within 15 to 20 years to cut accrued benefits, as long as they stay above 110% of the PBGC guaranteed amount.

Workers and retirees should watch for their plan's annual funding notice, which states the plan's funding percentage. Plans must also notify participants if they enter "critical" or "endangered" status. The critical-status notices typically list the benefits that may be reduced. "The people who should be most concerned are those in critical status" plans, says Karen Ferguson, director of the Pension Rights Center. But given the potential for further cuts, she says, all participants should "let their trustees and their unions and also their elected representatives in Congress know how important these benefits are to them."