In The News

WSJ: U.S. House Reaches Bipartisan Agreement on Pension Legislation

By John D. McKinnon, Dan Fitzpatrick and Laura Stevens

House lawmakers on Tuesday announced an agreement on legislation to avert a crisis that threatens pensions of hundreds of thousands of retirees.

Sponsors of the bill were aiming to get it added as an amendment to a spending bill by the House Rules Committee on Wednesday.

Some unions and employers have backed the measure's basic outlines. But it has drawn criticism from some unions and pension-rights activists. Its future remained unclear.

Reps. John Kline (R., Minn.) and George Miller (D., Calif.) announced the bipartisan agreement on a conference call with reporters Tuesday evening. Mr. Kline said the measure would protect retirees from receiving "nothing or close to nothing" from their pensions, and would shield employers from "pretty crushing" liabilities for the shortfalls that plague the affected pension plans.

"We have a plan that first and foremost works for the members of the unions, the workers...and it works for the companies," Mr. Miller said.

The deal drew praise from the head of a joint labor-management group that had helped develop many of its major elements.

"Today, leaders from both parties came together under very difficult circumstances and stood up for the employers, workers and retirees who count on multiemployer pensions," said Randy DeFrehn, executive director of the National Coordinating Committee for Multiemployer Plans.

The proposal is aimed at forestalling a looming crisis in a type of pension that is common in trucking, retail, construction and some other industries. These plans, known as multiemployer plans, are typically managed jointly by unions and employers.

Amid broad economic changes and light government oversight, some large multiemployer plans have become badly underfunded and could run out of money within a few years. The collapse of just one or two of them in turn would quickly bankrupt a federal safety-net program that backs up all of the plans, which cover more than 10 million people.

The safety-net program's unfunded long-term liabilities from expected failures of multiemployer plans soared from $ 8 billion last year to $42 billion in this year's annual report of the Pension Benefit Guaranty Corp.

But the measure under consideration to fix the system's problems requires some bitter medicine, and it has generated criticism in recent days.

In broad terms, the bill is aimed at allowing deeply troubled plans to trim benefits for current retirees to avoid running out of money. It also would raise safety-net premiums on multiemployer plans, to help shore up the PBGC.

Senior advocates have objected to the benefit cuts, contending that they are unfair to retirees and would overturn a basic principle of federal pension-protection laws.

In response, lawmakers said they have written provisions giving participants the right to vote on proposed benefit cuts. But their vote could be overridden in cases where a plan's failure would threaten the entire safety net.

Some unions also have objected to big premium increases that are under consideration. Mr. Kline said on Tuesday that premiums would increase to $26 per worker from the current $13. That is down from earlier proposals, however.

Still another provision could reduce pension-contribution liabilities for delivery giant United Parcel Service Inc., and potentially others. That drew fire on Tuesday from Teamsters head James P. Hoffa, who criticized the provision as a "secret backroom deal" for UPS. Lawmakers said on Tuesday that UPS had sought a broader exemption but didn't get it.

UPS disputed the Teamsters' characterization of the measure, saying it didn't initiate the legislation and has only recently seen specifics. "UPS strongly disagrees with the International Brotherhood of Teamsters' mischaracterization in a letter written to Congress," the company said in a statement.

After negotiations with the Teamsters, UPS paid $6.1 billion to exit the Central States plan in 2007, establishing a new single-employer plan for about 45,000 employees and eliminating its contribution requirements to the multiemployer plan. But many of its retirees are getting pension payments from the Central States plan.

In its master contract with the Teamsters, UPS is expected to make up the difference if the Central States plan benefits are "reduced as permitted or required by law."

In its response to the Teamsters letter, UPS added that it is committed to maintaining its employees' long-term benefits, as well as to addressing viability issues of multiemployer pension plans. UPS is still involved in about 20 multiemployer pension plans, according to its 2013 annual filing, and contributed $1.4 billion to those plans last year.

Posted 14:28PM on December 10 2014 by Jessica
Categories: SNB in the News