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Huffington Post: Setting the Record Straight on Multiemployer Pension Reform

By: Randy G. DeFrehnExecutive Director, National Coordinating Committee for Multiemployer Plans (NCCMP)

America is on a collision course with a massive looming retirement security crisis, and the U.S. Department of Treasury just put their foot on the gas. 

While most Americans haven’t heard of multiemployer pension plans, there are nearly 1,400 such plans in which over ten million Americans participate and receive pension benefits across all facets of the economy. While the majority of these plans are financially healthy, as many as 15% of them are projected to become insolvent in the coming years, victims of the Great Recession, and without taking action, they will likely go under and leave these Americans with nothing for their retirement years. 

Recognizing the looming crisis, Congress enacted the Multiemployer Pension Reform Act (MPRA) with bipartisan support in December 2014 to provide self-help tools for trustees of those plans to prevent their insolvency before it happens and to preserve benefits at a level above the bare minimum provided for by the Pension Benefit Guaranty Corporation (PBGC). 

When a pension plan fails, it must rely on the PBGC - the government “safety net” - to pay benefits, but usually at a drastically reduced level. However, the PBGC is itself projected to become insolvent within ten years, leaving no insurance whatsoever for Americans enrolled in pension plans that are failing.

The proposals included in the MPRA, and the MPRA itself, were debated for years in Congress and in other public forums. In fact, over a period of approximately 18 months, over 40 stakeholder groups representing employer associations and labor unions, pension plans, large employers and advocacy groups worked together to formulate the comprehensive plan of reform measures that eventually became the MPRA. It was conceived out of a belief that working people should be able to retire with dignity and that employers should be able to provide competitive benefits to their workers without jeopardizing the very existence of their businesses.

The United States Treasury Department recently rejected the first application that would utilize the tools provided by MPRA. The Central States Pension Fund’s Trustees sought relief under MPRA to save the plan and its 407,000 participants from insolvency. Without offering a solution of their own, Treasury’s decision took away Central States’ options ensuring that its participants will ultimately receive far less than was proposed in Central States’ rescue plan. Central States Pension Fund is projected to be insolvent in as few as ten years. 

How did we get here? In 2009 and 2010, Democrats held the White House and majorities in both houses of Congress and yet could not get even a hearing on bipartisan legislation proposed by Congressmen Earl Pomeroy (D-ND) and Pat Tiberi (R-OH), then members of the House Ways and Means Committee, to provide even the most basic assistance to the multiemployer defined benefit system. A similar proposal put forth by Senator Bob Casey (D-PA) faced the same fate and the Senator was attacked daily in the conservative media for proposing a “union bailout.” Since then, Congressional leaders have reiterated repeatedly that there would be no bailout for these funds. In 2012, Congress acted to underscore that message by repealing the PBGCs sole line of credit with Treasury ($100 million) that had been enacted in 1974 to make the point that no taxpayer dollars would be made available to support failing multiemployer pension plans.

As recently as March of this year, there was no indication that Congress had changed its mind. On March 1, 2016 the Senate Finance Committee held a hearing on multiemployer pension issues. Chairman Orrin Hatch (R-UT) described MPRA by saying Congress was faced with three options: bad, worse and terrible. They chose bad. He then went on to affirm that the composition of Congress made it much less likely now than in 2010 that Congress would be willing to provide taxpayer funds to bail out these pensions.

So-called retirement advocates now claim that MPRA was passed “in the dark of night” without a proper hearing. In reality, between 2010 and 2014 Congress held a total of eight hearings on challenges to the multiemployer defined benefit system, the PBGC and the effects of proposed reforms on participants and retirees. Just because today’s critics were in denial or simply asleep at the switch back then does not give them the right to deny the reality that the issues were fully vetted and the options understood by Congress before they passed MPRA. Nor does it excuse the peddling of false-hopes. 

Six years after Pomeroy and Tiberi’s efforts, Treasury’s decision has put Central States, and the multiemployer system in the position of needing a bailout or a miracle, and a miracle is more likely. Many who urged Treasury to reject Central States’ self-help solution have been actively cheering for a taxpayer-funded solution to this looming catastrophe while knowing full-well the fate of similar proposals in the past. This gives retirees false hope and sentences them to an insecure retirement where massive benefit cuts are inevitable.

And yet the ramifications of this decision are not limited to the Central States Pension Fund. The ripple effect of this decision for the multiemployer system as a whole has the potential to reach tsunami proportions. Treasury gambled that Congress will reverse its opposition to taxpayer bailouts and now appropriate the more than one hundred billion dollars required to rescue not just Central States, but the entire system. Those engaged in years of collaborative, constructive efforts to strengthen the system pray they are right, but history makes us view the prospects with a healthy dose of skepticism. It is a big bet. Unfortunately, rather than those who have engaged in this game of high-stakes poker, it will be both today’s and tomorrow’s pensioners who must pay the price if it is lost.

To read the full article online, click here.

Posted 10:02AM on June 02 2016 by Jessica
Categories: Article