Following this fall's calamity in the money markets, as well as the loss of construction man-hours brought on by the declining economy, multi-employer pension plans that serve building trades unions aren't looking for a financial bailout - but they are looking for a change in federal rules to keep them out of a deeper funding hole.
In a Nov. 19 letter to leaders on the House Ways and Means Committee, which holds sway over union pension rules, the Multi-Employer Pension Plan Coalition wrote "to express our deep concerns over the worldwide financial crisis that has resulted in an unprecedented and precipitous drop in the plans' invested assets…."
Specifically, members of the coalition said they were looking for relief from the Pension Protection Act (PPA) of 2006, a law designed to improve the health of pension plans by imposing new accounting rules, changing funding requirements for plans, and establishing benchmarks for plans to show they are staying solvent.
Since the PPA was adopted, pension plan administrators had been counting on an improving stock market and increased man-hours over time to improve funding positions. Then came the crash on Wall Street - and there's no clear end in sight to higher unemployment and a stock market and economic outlook that are probably not ready to move in a happy direction.
The coalition asked Congress for relief for pension plan administrators that would relax funding rules. Failure to do so, the group said in its letter, "would jeopardize the financial viability of contributing employers, and/or require correspondingly deep cuts in the benefits for covered employees, to meet the ambitious funding requirements" of the Pension Protect Act.
John Tesija, a funds attorney for a dozen Michigan-based pension plans, said to simplify a very complex set of rules, assume that a pension fund was 70 percent funded last summer, and was attempting to reach the 80 percent funding level that would put it in a good "green zone" for the new federal pension funding rules. The Pension Protection Act shortened the period for funds to meet those higher funding goals to a ten- or 15-year time-frame.
"Now, this fall, the market creates a 20 or 30 percent loss, so now the fund is only at a 40 or 50 percent funding level," Tesija said. "And man-hours are down in all the trades. That's a tremendous hole for a fund to crawl out of in a shortened period of time."
If the pension funding time frames are not lengthened to 20 years or longer, as the coalition is requesting, the Pension Protection Act calls for increased funding contributions by employers and workers, or benefit cuts for retirees. "No one wants to see that," Tesija said.
The coalition represents some 10 million active and retired workers, and includes a diverse group of 50+ unions, employer associations, large employers, trade associations and other industry advocates seeking to preserve 1,530 multi-employer defined benefit plans. The group is no Johnny-come-lately: it was formed to promote the interests of multi-employer plans after the U.S. market contraction from 2000 to 2002.
AFL-CIO Building Trades Department President Mark Ayers said affiliate union leaders are encouraging Congress "to take action that would provide additional time for plans to meet the funding mandates (in the Pension Protect Act), and to gauge the market contraction and lessen its adverse impact on employment and benefit security in the short-run."
Even the U.S. Chamber of Commerce supports relaxing the pension funding law, signing on to a letter that said "unless the funding rules are modified, they will cause an increase in unemployment and slow economic recovery."
The coalition urged Congress to act before the end of the year. They wrote, ominously, "for many of the stakeholders, delaying action may push the ability to weather this economic storm beyond the point of no return."