Legislation to help struggling multiemployer pension funds is to remain in the COVID-19 relief measure headed for a Senate vote this week.
The package also calls for some funding relief for single-employer plans, through extended amortization periods and pension interest rate smoothing changes.
The pandemic relief package was approved by the House along party lines Feb. 27. Its pension provisions were at risk of being stripped until the Senate parliamentarian ruled late Monday that they fit the rules for a budget reconciliation process that allows Democrats to prevail under a simple majority.
The Teamsters are applauding the House Ways & Means Committee’s inclusion of a multiemployer pension reform measure in a broader stimulus package introduced by the panel yesterday.
In unveiling language included in the Butch Lewis Emergency Pension Plan Relief Act of 2021, the House panel took the first step towards ensuring that millions of retirees and active workers who have played by the rules will receive the pension benefits they earned through years of hard work.
“The financial distress many of these plans are facing is beyond the control of retirees and workers,” Teamsters General President Jim Hoffa said. “While multiemployer pension plans have been buffeted by economic turbulence over the decades, the situation has been seriously exacerbated by the current pandemic.”
Section 9704 would establish a fund within the PBGC and appropriate amounts as necessary to provide special financial assistance to certain multiemployer DB plans. The special financial assistance would not have to be repaid.
On Saturday, a measure to give troubled multiemployer pension plans assistance from the Pension Benefit Guaranty Corporation (PBGC) passed the House of Representatives, as part of a larger $1.9 trillion coronavirus relief package from President Joe Biden.
The federal stimulus package, which includes $1,400 checks for many Americans and increased funding for vaccines, also holds the Emergency Pension Plan Relief Act of 2021 (EPPRA), an update to the Butch Lewis Act. It’s a bill that lawmakers expect will help stabilize the multiemployer pension plans that are in danger of insolvency.
Of the more than 10 million multiemployer plan participants, about 1.3 million are in plans that will soon run out of money.
Congress is working on a lengthy bill for further COVID relief. One small portion of it is modeled on the union-backed Butch Lewis Act, which passed the U.S. House in 2019 but not the U.S. Senate. Butch Lewis would provide loanscash grants to union-sponsored multiemployer pension plans that are otherwise headed toward insolvency.
About one in 10 multi-employer pension plans are in that situation thanks to stock market losses and declining numbers of active employees in the plans, and the wellbeing of up to 1.3 million union members and spouses is at stake. Butch Lewis would shore up declining pensions and restore benefits that were cut by some pensions in an effort to forestall insolvency.
If Congress does nothing, the Central States Teamster Pension is expected to run out of money in 2025. That would lead the Pension Benefit Guaranty Corporation (PBGC) itself to become insolvent. PBGC is a government insurance agency that guarantees pension benefits.
Without congressional intervention, about 100 multiemployer pension plans are expected to become insolvent in the next 20 years, and some much sooner. In other words, for these pension plans, their liabilities to retired employees and current employees with vested benefits far outweigh their assets and incoming contributions. Although the Pension Benefit Guaranty Corporation is intended to provide a backstop to any insolvencies, the sheer number of plans facing insolvency and the total size of unfunded vested liabilities will bankrupt the PBGC’s multiemployer program as well. It is against that backdrop that Congress has added the Butch Lewis Emergency Pension Plan Relief Act of 2021 to the COVID-19 relief bill.
Fourth, the bill would create a special financial assistance program for those plans that are expected to become insolvent in the near future. Under the bill, the Treasury would grant money to the PBGC, which would then disburse it to eligible plans. Eligible plans include (a) those in critical and declining status, (b) those that have approved benefit suspensions, (c) those that are in critical status with a funding percentage of less than 40% with more inactive than active participants, and (d) those plans that are already insolvent. The bill would instruct the PBGC to develop regulations within 120 days for applications and to prioritize applications from plans that are (a) insolvent, (b) likely to become insolvent within five years, (c) have a present value of over $1 billion in unfunded vested benefits, or (d) have already implemented benefit suspensions. The money would be paid in a single, lump-sum payment in the amount sufficient to guarantee benefits, without reductions, through 2051. If a multiemployer plan were to receive financial assistance, it would be required to reinstate any suspended benefits, and repay the amount of benefits previously suspended. Finally, an employer’s withdrawal liability would be calculated without taking into account this assistance for 15 calendar years after it was received.
Last week, the House Ways and Means Committee approved a massive taxpayer bailout of private sector multiemployer defined benefit pension plans, or MEPs, as part of a budget reconciliation package that is purportedly meant to deal with COVID-19. Senate Budget Committee Chairman Bernie Sanders claims MEPs are underfunded because “of the greed on Wall Street.” But MEPs are troubled because of mismanagement, not because of COVID-19 or Wall Street.
MEPs are jointly sponsored by a union and companies employing members of that union. It is not clear why taxpayers, who had no role in making these pension promises, should be funding them.
The proposal would saddle taxpayers with unfunded pension promises made by eligible MEPs, which are underfunded by more than $100 billion, while providing perverse incentives for other MEPs to subsequently qualify. This would be extremely expensive as MEPs are already underfunded by $673 billion as of 2017 (a funding ratio of 42%).
According to an email blast from the Road Carriers 707 Pension Fund on Thursday..
the House Ways and Means Committee reported out (passed) the Butch Lewis Emergency Pension Plan Relief Act with only technical amendments. The Bill now moves onto the Budget Committee and the Rules Committee. It is expected to move through these Committees without incident and onto a vote on the House floor. As we reported yesterday this Bill is part of a larger Covid Relief Bill expected to be voted on in mid March in the Senate after House passage.
There was a lot of discussion about workers deserving a bailout as they did nothing wrong (trusting politicians, actuaries, and union heads notwithstanding) but what struck me was the perspicacity of Congressman Adrian Smith (R-Nebraska):
Multiemployer pension plans eligible for the program would include plans in critical and declining status, and plans with significant underfunding that have more retirees than active workers in any plan year beginning in 2020 through 2022. Additionally, plans that have suspended benefits and certain plans that have already become insolvent would also be eligible.
The plans would have to apply for the special financial assistance, and, if approved, the payment made by PBGC would be in the form of a single, lump sum. The amount of financial assistance would be equal to the amount required for the plan to pay all benefits due during the period beginning on the date of enactment and ending on the last day of the plan year ending in 2051. Plans would also be required to invest the amounts in investment-grade bonds or other investments as permitted by PBGC.
It was reported that The Butch Lewis Emergency Pension Plan Relief Act of 2021, to be included in some covid-relief bill, would create a special financial assistance program under which cash payments would be made by the Pension Benefit Guaranty Corporation (PBGC) to financially troubled multiemployer pension plans so they could continue paying retirees’ benefits. The money would be provided to PBGC through a general Treasury transfer. Multiemployer pension plans eligible for the program would include plans in critical and declining status, and plans with significant underfunding that have more retirees than active workers in any plan year beginning in 2020 through 2022. Additionally, plans that have suspended benefits and certain plans that have already become insolvent would also be eligible.
So how many plans would that be? Based on the last full year of data (2018) from the DOL website here is how it breaks down.
Legislation to help struggling multiemployer pension funds is to be considered this week by a key House panel as part of a COVID-19 relief measure.
The House Ways and Means Committee is expected to start marking up a package of pandemic relief measures Wednesday, including one aimed at stabilizing pensions for more than 1 million participants in multiemployer plans approaching insolvency.
The pension section of the proposed Emergency Pension Plan Relief Act of 2021 is cited as the “Butch Lewis 4 Emergency Pension Plan Relief Act of 2021.”
It is based on a previously proposed multiemployer pension relief bill named for retiree Butch Lewis that called for a federal loan program for struggling plans and more resources for the Pension Benefit Guaranty Corp. to help troubled plans through partitions.