WASHINGTON - The year-end clock is ticking for the so-called "Do-Nothing Congress," and building trades pension plan stakeholders are among those pressing for federal lawmakers to follow a labor-management plan to help more multi-employer pension plans stay solvent.
A long list of labor-management stakeholders have endorsed a plan called Solutions Not Bailouts, which would require an act of Congress to give financially troubled multi-employer pension plans more time and accounting flexibility to avoid insolvency and government intervention into their plans. Such unwanted intervention would eventually take place in the absence of action by Congress, resulting in more workers seeing severe pension benefit reductions.
The Pension Benefit Guarantee Corp. was established decades ago to backstop financially weak multi-employer plans, but today it doesn't nearly have the resources necessary to cover shortfalls. The PBGC released its annual report on Nov. 17, and in it said the situation for multi-employer plans has grown so dire that anticipated deficits of weak pension funds has grown five times greater than previous estimates.
"The PBGC annual report underscores the urgency for Congress to act in the near term on Solutions Not Bailouts to provide retirement security for millions and economic security for businesses involved in multi-employer pensions," said the Partnership for Multi-Employer Retirement Security, a labor-management group. "This proposal gives pension plans and stakeholders the tools necessary to modernize, thrive and for the small, but significant minority of multi-employer plans facing insolvency, to address structural problems and, hopefully, recover. The PBGC report, showing the deficit and insufficient resources in the multi-employer fund, underscores that time is of the essence and that fast action by Congress could mean the difference between insolvency and solvency for many of these at-risk plans."
What's the hurry? Provisions of the 2006 Pension Protection Act lapse at the end of 2014. Due to expire are sections of the law that would help multi-employer plans newly categorized as “severely distressed." In addition, bipartisan efforts among federal lawmakers to usher through passage of Solutions Not Bailouts go out the window with the seating of a new Congress on Jan. 1.
One of the key proponents backing reform is House Education and the Workforce Committee Chairman John Kline (R-Minn.), who said, “The multi-employer pension system is a ticking time bomb that will inflict a lot of pain on workers, employers, taxpayers and retirees if Congress fails to act. For months, we have tried to reach consensus on a package of reforms that would give trustees new tools to avoid insolvency and protect retirees. The time to enact responsible reforms is now, before the bomb goes off.”
Senate Finance Committee Chairman Ron Wyden (D-Ore.) and the panel’s top Republican, Orrin Hatch (Utah), pledged “to do everything feasible” to make sure retirees receive pension benefits to which they are entitled.
The Engineering News Record reported that one potentially easy, but temporary fix would be to give a one-year extension for multi-employer pension-fund rules. An aide to Hatch said "negotiations are ongoing" to do this.
The construction industry accounts for about 55 percent of the 10.4 million multi-employer plan participants in the U.S. There are 1.5 million workers in plans that are failing. Multi-employer pensions include about 1,400 plans in construction, trucking and other industries.
Solutions Not Bailouts is hardly a pain-free solution for multi-employer plan retirees. The proposal includes allowing trustees of troubled plans to take corrective steps, such as suspending some benefits; raising plans’ retirement age closer to that of Social Security's; and allowing large plans to combine with small plans but without taking on the small plans’ unfunded liabilities.
But the suffering really starts if the PBGC has to step in. Earlier this year it had $818 billion in liabilities and $397 billion in assets. The maximum benefit for retirees under the PBGC option is capped this year at $12,870 for a worker retiring at age 65. The PBGC estimates that multi-employer workers with 30 years or more of service would lose an average of $4,000 in annual benefits.