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Federal lawmakers are once again trying to come up with a way to protect the pensions of more than one million unionized workers.
This time it’s Senator Sherrod Brown (D-Ohio) and Rep. Richard Neal (D-Mass.) throwing out a proposal for fixing what’s known as multiemployer pensions. The pair introduced legislation in both houses Nov. 16 that they say will keep the multiemployer system afloat.
Their bills came the same day the Pension Benefit Guaranty Corporation--the federal agency that serves as a backstop for pension plans--released a report saying the agency is running a $65.1 billion deficit for its multiemployer pension program. The agency said it’s likely to be insolvent by 2025.
The legislation by Brown and Neal, called the Butch Lewis Act, is one of at least five proposals being batted around to try and fix the multiemployer pension system. More than 100 pension funds covering workers in unionized industries face insolvency in the coming years.
A law from 2014, the Multiemployer Pension Reform Act, was intended to fix the troubled pension system, but it hasn’t quite done the job. Lawmakers, as well as major employers such as United Parcel Service, have thrown out proposals for fixing the pension system. Almost all of the proposals call for some sort of loan program for the plans.
Here’s a look at the five proposals:
The Butch Lewis Act would create the Pension Rehabilitation Administration, a new federal office within the Treasury Department that would sell bonds to financial institutions to raise money to fund loans to financially troubled plans. The idea comes, in part, from a proposal from the International Brotherhood of Teamsters.
Those loans would be for 30 years and carry low interest rates of about 3 percent. Plans would use the loans to pay benefits and to make long-term low-risk investments. Plans would be required to make only interest payments for the first 29 years. In the final year, they would repay the entire principal and the remaining interest owed.
The legislation would require Congress to provide funds to the PBGC to be used for financial assistance to plans than can’t borrow enough to meet their retiree obligations.
Bottom Line: The bills are seen as a first step toward further negotiations, but any proposal that may be viewed as putting government money at risk may be a long-shot in the current Congress.
UPS has a proposal that would provide up to three successive low interest long-term federal government loans to troubled pension plans to cover their cash flow shortage for 5 years each.
Plan participants would see benefit cuts of up to 20 percent across the board. Plans would be obligated to begin interest-only repayments after 5 years. Loan repayments would be ensured through the creation of a risk reserve pool funded by employers, participants, and unions.
UPS has a significant interest in solving the pension crisis. It could be on the hook for up to $4 billion in plan contributions if the the 400,000-member Central States, Southeast and Southwest Areas Pension Fund becomes insolvent. That fund is projected to be insolvent by late 2024.
Bottom Line: The proposal has been viewed by some as conceptually good, but there are concerns that its use of overly generous assumed interest rates for repaying loans pose a risk that plans would face future insolvency. In addition, despite being circulated for months, it has yet to find a backer in Congress.
The National Coordinating Committee on Multiemployer Plans, a group made up of employers and unions, has circulated a proposal that would have the U.S. Treasury provide long-term, low-interest loans to plans that couldn’t clear the MPRA’s hurdles and are at substantial risk of insolvency. The NCCMP lobbied for passage of the MPRA.
In general, the loan program would lend funds to qualifying “critical and declining” status plans at 1 percent interest for 30 years. The loans would be interest only for the first 15 years, and then require a level payment of principal and interest for the remaining 15 years. To be eligible for a loan, plans would need to show they can achieve solvency and repay their loans.
The proposal would also require the loan account to be returned to the government in the event of an insolvency or a mass withdrawal of employers.
Bottom Line: The NCCMP was able to push Congress to pass the MPRA three years ago, so it may have the best shot among the other proposals to gather interest in Congress. Its odds still appear to be long.
The proposal from the American Families for Pension Security, based in Kingston, N.Y., would also have the U.S. Treasury issue low interest loans to plans in critical and declining status.
The group wants to create a federally chartered special-purpose credit union for the more than 10 million members of multiemployer plans and their families. The credit union would use its profits from loans and credit card operations to build a reserve pool to help plans repay and secure the loans.
The group, founded by Mark Greene, a New York State Teamsters Pension Plan member, and Mike Dardzinski, a Rochester, N.Y., lawyer whose father is a retiree-member of the plan, intends to create within 15 years a credit union with $10 billion in assets and 650,000 members.
Bottom Line: The group has been in discussions with lawmakers in an attempt to link its credit union creation idea to other proposals involving plan loans.
There’s one piece of legislation that’s been lingering for quite some time, and it doesn’t include the loan proposals being tossed around by others.
Bernie Sanders (I-Vt) in the Senate ( S. 1076) and Marcy Kaptur (D-Ohio) ( H.R. 2412) in the House have a bill known as the Keep Our Pensions Promises Act. KOPPA would repeal provisions of the MPRA that allow for the reduction of retiree benefits and create a legacy fund for troubled plans and the PBGC.
The legacy fund would be offset by modifying two types of tax shelters--one for investors in art works and real estate and the other for very large estates.
Bottom Line: Neither the Senate nor House version has gained much traction and has no support from Republicans.
To contact the reporter on this story: David B. Brandolph in Washington at email@example.com
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Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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