Senators Hear Pleas for Changes to Multiemployer System

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March 1 — In an emotional plea to legislators, the widow of a Central States Pension Fund retiree during a Senate Financial Committee hearing called for a bipartisan solution to stop “harmful and unfair” benefit cuts, shore up underfunded plans and protect retirees.

Speaking March 1 on behalf of the “270,000 retired truck drivers, widows and spouses whose lives will unjustly be devastated” if the cuts sought by the Central States, Southeast and Southwest Areas Pension Fund are permitted, retiree beneficiary Rita Lewis, of West Chester, Ohio, also called for a “forensic audit” of the fund's financial circumstances to determine if any wrongdoing occurred.

Also during the hearing, Cecil E. Roberts Jr., international president of the United Mine Workers of America in Triangle, Va., urged the committee to help pass the Miners Protection Act. Roberts said this bill must be passed before thousands of retired coal miners lose their health and pension benefits and before the Pension Benefit Guaranty Corporation's multiemployer pension insurance program is overwhelmed as a consequence.

Two think-tank scholars also warned the committee about the possible dangers of new plan designs being proposed for multiemployer plans.

Committee Democrats Urge Action

In a letter sent to Committee Chairman Orrin G. Hatch (R-Utah) March 1, all 12 of the committee's Democrats asked the committee not to “act on any other related legislation” until the Senate passes the Miners Protection Act.

In its recently released budget blueprint, the Obama administration resubmitted that legislation as a proposal to shore up the underfunded UMWA 1974 Pension Plan.

The Democrats also said in the letter that the multiemployer pension system was in “crisis,” and called on their Republican committee-member colleagues to work with them to resolve the system's challenges by finding “alternative and balanced solutions.”

The Central States fund became the first multiemployer plan to file for a benefits suspension rescue under the Multiemployer Pension Reform Act, when it filed its application with the Treasury Sept. 25 . Central States fund officials said the filing was necessary to prevent future insolvency, but, consistent with Lewis's testimony at the hearing, many plan participants have given emotional testimony in hearings and comment letters of the financial pain it would cause them.

Subsequently, two other unions, the Iron Workers Local 17 Pension Fund in Cleveland and the Teamsters Local 469 Pension Plan in Hazlet, N.J., also filed for Treasury Department approval of benefit suspensions.

Hybrid Plan Warning

Former PBGC Director Joshua Gotbaum told the committee that, although no one likes the benefit cuts authorized under the MPRA, that law offers retirees in plans that are heading toward insolvency the best opportunity to receive benefits that are greater than what they would receive were they forced to rely on PBGC-benefit-level protections. He said a repeal of the MPRA, also known as the Kline-Miller Act, would likely cause the agency's multiemployer pension plan insurance system to crash.

Gotbaum, currently a guest scholar in economic studies at the Brookings Institution in Washington, urged the committee to help ensure that the PBGC has sufficient resources to do its job by permitting appropriate premium increases to plans and enacting new plan designs that encourage new employers in industries that participate in multiemployer plans to join the plans. However, he warned the senators to “pay attention to the details” of these new plan designs to ensure that the proposals “don't put legacy plans at risk.”

Referring to such new plan designs, Andrew G. Biggs, resident scholar at the American Enterprise Institute in Washington, told the committee that he was skeptical of hybrid plans, such as the one involving composite plans that may soon be introduced in Congress .

“The magic simply can't be done,” he said, as such plans rely heavily on volatile investment return from stocks. “Something will be volatile, either contributions or benefits,” he explained.

To contact the reporter on this story: David B. Brandolph in Washington at dbrandol@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

For More Information

The letter from Senate Finance Committee Democrats is at http://src.bna.com/cYG.