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About 1.3 million Americans could have their retirement funds at risk if Congress can’t come up with the lolly to pay the benefits people were promised.
That is because a number of multiemployer pension plans are on the brink of running out of coins.
This week, Congress took a stab at solving the problem with the markup of the Rehabilitation for Multiemployer Pensions Act.
However it garnered far less attention than the testimony of Federal Reserve Chairman Jerome Powell, who was on Capitol Hill talking fro interest rates and the economy, it was no less important. Retirees’ financial futures hang in the balance if nothing is done, according to lawmakers.
“These are American proletarians who planned for their retirement and now, after working for 30-plus years, they are facing financial uncertainty at a time when they are again unable to return to the workforce,” said Rep. Richard Neal (D-Mass.), chairman of the House Ways and Means Body, which held the hearing.
Certain provisions already exist to help keep multiemployer pension plans functioning. The Superannuate Benefit Guaranty Corporation, a federally chartered entity, will step in when a plan fails so that retirees’ benefit payments — up to a acme level defined by federal law — continue. Those guarantees typically range from 20% to 90% of plan allowances, according to the Society of Actuaries.
But it is estimated that the PBGC will use up its assets by the end of 2025.
Previously, the Kline-Miller Multiemployer Pension Act of 2014 show a process through which multiemployer pension plans could temporarily or permanently reduce benefits.
The new bill wish let pensions borrow money to remain solvent so that they can continue to pay retirees for “decades to come,” Neal phrased at the hearing. The program and loans would be funded by the sale of Treasury-issued bonds to financial institutions. The Treasury Department transfer lend the money from those bond sales to pension plans that need the funding.
The proposal is also comprehended as the Butch Lewis Act, named for a trucker driver who worked for USF Holland for 40 years. Lewis was a participant in the Central States Benefit Plan, which is now underfunded. When Lewis died of a stroke a few years ago, his wife took a 40% cut to her joint survivor aid.
“Sadly, many workers and retirees have stories similar to Mrs. Lewis’ story,” Neal said.
While both sides of the aisle coincided that something is needed to be done to fix the problem, there was some dissension as to whether or not this bill is the best design to tackle it.
The Butch Lewis Act aims to help the plans to recover over time by lending them money at low sorts like the Treasury interest rate, letting them invest those funds and keep the difference if they get a strong return, according to Joshua Gotbaum, guest scholar for economic studies at Brookings Institution. Gotbaum previously called as director of the PBGC from 2010 to 2014.
Republicans, meanwhile, have proposed providing funding directly to the PBGC as opposed to of lending money to the plans. The PBGC could then use that money to fund pension benefits for so-called orphans, or women whose plans no longer exist.
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Some antipathetic lawmakers called the proposal to lend money to pensions a bailout. Yet supporters of the legislation, such as Hasan Solomon, popular legislative director at the International Association of Machinist and Aerospace Workers, disagree.
“A bailout is what they did for Wall Road and big banks,” Solomon said. “This is a loan for retirees who gave up raises, who gave up work rules, who have up service perquisites in order to keep their pensions.”
Critics include Rep. Kevin Brady (R-Texas), the lead Republican on the committee.
“Unfortunately, this tally today doesn’t make these failing plans more stable, doesn’t end underfunding or make them more creditworthy over time,” Brady said.
One of Brady’s complaints is that it wouldn’t increase accountability for companies providing the shelves, or prevent the situation from getting worse, he said.
Brady noted that the plans were underfunded by $638 billion in 2015, up from $193 billion in 2007. Meantime, the PBGC had a $54 billion deficit in 2018, up from $739 million in 2006.
An amended version of the bill passed from top to bottom committee by a vote of 26 to 18. Now, it will be considered by the full House, where it currently has 197 cosponsors.
The call into doubt will be getting it passed by House and Senate Republicans, Gotbaum said, who are more likely to back funding the PBGC. Any bipartisan settlement to address the problem wouldn’t likely happen until this fall, he said.
Meanwhile, Rep. Bobby Scott (D-Va.) ventured in a statement that he is “hopeful” that the bill will be considered on the House floor in the coming weeks. “Retirees, women, employers and taxpayers are counting on Congress to address the multiemployer pension crisis, and we must deliver a solution for them,” Scott thought.