Now comes the question that looms over the entire process: will our notoriously paralyzed Congress be able to get its act together on this issue, and offer a path for struggling pension plans to help themselves get back on a firmer financial footing? So far this year, there is progress.
As part of the massive federal budget bill that was adopted Feb. 7, Congress set up the Joint Select Committee on the Solvency of Multi-employer Pension Plans, which calls for eight members from the House and eight from the Senate, split evenly between Republicans and Democrats. Its first meeting was March 14. Co-Chairman Orrin Hatch (R-Utah) warned that the biggest impediment to a solution to the multi-employer pension crisis was the potential for "partisan arguments and political posturing."
That might come later, but from the get-go, national labor representatives, their contractors, and the U.S. Chamber of Commerce have told Congress that they are basically on the same page when it comes to fixing the problem.
And defining the problem is not difficult. According to Benefits Pro, more than 1,400 multi-employer pension plans insured by the Pension Benefits Guaranty Corp. (PBGC) have aggregate funding of about 50 percent - an abysmal level. All told, the multi-employer plans have a $553 billion hole in unfunded liabilities. And the PBGC's fund for backstopping failed pension plans is woefully inadequate, it's facing a $65 billion shortfall and is likely to go insolvent by 2023.
There seems to be a general consensus that there is little appetite for a straight-up taxpayer bailout of the underfunded plans, although federal loans are being mentioned as a key part of the equation.
The Chamber of Commerce and the National Coordinating Committee for Multi-employer Plans (which includes substantial representation from building trades unions) coordinated with the first congressional meeting and issued a joint "Principles for Multiemployer Pension Reform." They called for the following:
• With some multiemployer pension plans in "imminent danger," adoption of "rescue legislation" should be done as soon as possible. "It is critical to have a program that restores the solvency of critical and declining status plans while protecting the U.S. economy as soon as possible," the joint statement said.
• Financial assistance through loans, which they called "a necessary part of multiemployer reform." Says the statement: "The loan program should optimize solvency of the plan and provide the taxpayer with confidence that the federal loan will be repaid."
•All parties should contribute to the resolution. Recognizing that employer contributions and their PBGC premiums have increased exponentially over the years,and workers have suffered reductions in accrual rates and the loss of ancillary benefits, Congress should consider options that continue to put “skin in the game for all,” the joint statement said.
• Potentially hiking PBGC premium increases, "should only be evaluated after the solvency restoration tools are implemented."
• Composite plan legislation is necessary to ensure continued viability of certain plans. "While the crisis focuses on plans in the critical and declining stages, there are healthy plans that also need tools to remain viable," the statement says. "Composite plans are a voluntary tool to help those plans." (Composite plans are a 401K-type plan designed to work side by side with a traditional pension plan, and a bill is before Congress to allow their existence).
While helping labor unions is rarely on the agenda of conservative lawmakers, even they and their friends in the Chamber of Commerce cannot look away from massive $2.2 trillion in economic activity that multiemployer plans contribute to the U.S. economy. The plans pay $158 billion in federal taxes and $82 billion to state and local
taxes, and pay $41 billion in pension payments every year.
“The multi-employer crisis is a threat to the overall economy. Insolvent multi-employer plans will leave current retirees without benefits and could bankrupt employers in the plans, which could leave workers without jobs,” said Aliya Wong, executive director of retirement policy for the U.S. Chamber. “As we lay out these principles to guide lawmakers’ reform efforts, we are eager to see them stepping up and demonstrating a commitment to tackling this issue, and we look forward to the solutions they will
develop over the course of the coming months.”
develop over the course of the coming months.”
A statement from North America's Building Trade Unions (NABTU) said it "stands behind" the principles of reform statement. “More than 10 million men and women participate in these plans," NABTU said. "If Congress fails to get the job done, the retirement savings of more than one million retirees – middle-class Americans who most certainly deserve retirement security – are on the line."
The National Coordinating Committee for Multi-employer Plans is an organization of national, regional and local multiemployer pension and health and welfare plans, International and Local Unions, national and local employer associations, individual employers, and multiemployer fund professionals.
“The committee is tasked with navigating the complicated issues affecting the looming insolvencies of multi-employer plans, including at least two that are systemically important, and the PBGC," said Michael D. Scott, executive director of NCCMP. "These issues are deeply interconnected with the U.S. economy and the revenues of the federal government. The committee will have to make very difficult decisions on legislative solutions to this crisis, recognizing that inaction is a decision that would itself have serious consequences. This is extremely urgent work because some of the largest plans in distress are hemorrhaging cash, which makes any delay in a solution more difficult and expensive.”