Pressure Grows for Congress to Find Compromise on Multiemployer Pension Crisis This Year

Source: Retirement Security Coalition

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IN CASE YOU MISSED IT: Pressure Grows for Congress to Find Compromise on Multiemployer Pension Crisis This Year

As you may know, millions of Americans’ retirement security is threatened by today’s multiemployer pension crisis and Americans around the country are urging Congress to do something about it. Earlier this week, a local TV station in North Dakota spoke with Americans who are passionate about standing up for the pensions their family members have earned. For example, Callie Nelson lost her father three years ago and she continues to fight his battle.

I got involved because I wanted to carry on his voice so that somebody knew he still mattered. He worked his entire life for that pension. My mom is depending upon that pension,” Callie said. She continued, “Everybody says ‘Somebody else will fix it.’ and my dad had the same mentality for a while. Somebody else isn’t going to fix it. We all have to take a stand and try to fix this,” KVRR reported.

A recent article in Chief Investment Officer highlights the broader consequences of Congress failing to reach a bipartisan compromise this year, shedding light on why inaction is not an option:

 “According to congressional testimony, the cost of doing nothing in terms of lost tax revenue and increased social safety net spending is estimated to be between $170.3 billion and $241.3 billion over the 10-year budget window, and between $332 billion and $479 billion over the next 30 years.”

Thanks to people like Callie, however, Congress is paying attention. Prior to the August recess, the U.S. House of Representatives passed the Rehabilitation for the Multiemployer Pensions Act and a group of Democratic senators introduced legislation in the U.S. Senate.  However, there is much work to be done in order to reach a bipartisan compromise by the end of this year because Americans can’t afford to way any longer.

Last month, the Pension Benefit Guaranty Corporation (PBGC) announced that the multiemployer pension plan program’s financial condition is expected to worsen over the next 10 years. The PBGC also stated that absent any changes to the law, 1.4 million people will run out of money over the next 20 years.

JD Supra reported on the PBGC’s latest news:

“Without changes in the law, the financial conditions of the PBGC’s Multiemployer Insurance Program will continue to worsen over the next 10 years. Approximately 125 multiemployer plans, covering 1.4 million people, are predicted to run out of money within the next 20 years. An increase of larger claims submitted to the Multiemployer Insurance Program will exhaust the program assets and lead to the program’s insolvency by the end of FY 2025. If the Multiemployer Program runs out of money, current law requires the PBGC to decrease guarantees to the amount that can be paid from the Multiemployer Program premium income. The PBGC’s guarantee is the amount of retirement benefits that the PBGC insures for each participant, which is capped by law. As a result, the guarantees would be reduced to a fraction of current values…”

Now, Congress is back in session and the multiemployer pension crisis remains front and center, it is critical that both sides of Congress work together in order to address this issue by the end of this year.

According to Chief Investment Officer’s story:

“Legislation designed and intended to cure insolvency troubles for several multiemployer pension plans is being examined more closely in an effort to understand its practical impact.”

[…]

“The bill passed the House of Representatives earlier this year but may face hurdles advancing given the result of the CBO examination. Lawmakers are working to come up with solutions following recent statements from the Pension Benefit Guaranty Corporation that multiemployer programs are in “dire financial condition”.

If we want to protect the hard-earned retirement futures of millions of Americans, both sides of Congress must come together this year on a bipartisan, bicameral compromise and lead our country to fix the multiemployer pension plan crisis.

To learn more about the Retirement Security Coalition, click HERE. Read more on the latest news related to the multiemployer pension crisis below.

 

PBGC’s Multiemployer Insurance Program Faces Insolvency, While Single-Employer Program Improves

By Stephen Pavlick & Charnae Supplee | JD Supra | September 17, 2019

The Pension Benefit Guaranty Corporation’s Multiemployer Insurance Program is close to collapse, while its Single-Employer Insurance Program continues to improve. We discuss implications and predictions for both programs over the coming years.

The Pension Benefit Guaranty Corporation (PBGC) recently issued a press release announcing that the Multiemployer Insurance Program remains in a dire financial condition, nearing insolvency. The agency’s insurance program for multiemployer pensions, covering more than 10 million people, will likely run out of money by the end of fiscal year 2025, according to the FY 2018 Projections Report. On the other hand, the PBGC’s projection for the Single-Employer Program shows continued improvement. However, these positive projections are subject to a range of potential outcomes due to the Program’s sensitivity to economic conditions.

Without changes in the law, the financial conditions of the PBGC’s Multiemployer Insurance Program will continue to worsen over the next 10 years. Approximately 125 multiemployer plans, covering 1.4 million people, are predicted to run out of money within the next 20 years. An increase of larger claims submitted to the Multiemployer Insurance Program will exhaust the program assets and lead to the program’s insolvency by the end of FY 2025. If the Multiemployer Program runs out of money, current law requires the PBGC to decrease guarantees to the amount that can be paid from the Multiemployer Program premium income. The PBGC’s guarantee is the amount of retirement benefits that the PBGC insures for each participant, which is capped by law. As a result, the guarantees would be reduced to a fraction of current values.

The President’s FY 2020 Budget proposes to create a new variable rate premium and an exit premium for the Multiemployer Insurance Program, raising an additional $18 billion in premium revenue over the 10-year budget window. The proposal includes a provision that permits a waiver of the additional premium to avoid increasing the insolvency risk of the most troubled plans.

The PBGC’s Single-Employer Insurance Program, covering approximately 26 million participants, continues to improve and last year arose from a deficit for the first time since 2001. Continued improvement is expected, although it is not certain because the program is vulnerable to a downturn in the economy. The Single-Employer Program is exposed to a substantial amount of underfunding in plans sponsored by employers who are financially weak. The average projected net position for FY 2028 is $37 billion in future dollars ($27 billion in today’s dollar). The PBGC’s projected improvements in the Program’s financial position result from better funding of pension plans and the projection that in the future PBGC premiums will exceed projected claims.

 

Congressional Budget Office Finds Multiemployer Pension Rescue Bill is Not Enough

Chief Investment Officer | September 18, 2019

Legislation designed and intended to cure insolvency troubles for several multiemployer pension plans is being examined more closely in an effort to understand its practical impact.

The Rehabilitation for Multiemployer Pensions Act of 2019 (HR 397), works to establish a new agency called the Pension Rehabilitation Administration, which is tasked with disbursing loans to multiemployer defined benefit pension plans that are at risk of insolvency.

A congressional budget office study projected that approximately one-quarter of the pension plans that would be eligible for loans through the bill would become insolvent over the next 30 years and would not fully repay their loans. For those plans that do repay their loans the CBO projects that they will become insolvent within ten years of repayment.

To create its projections, the CBO ran 500 simulations each with different variables examining how they impact pension plan solvency rates.

As for the cost of the legislation, the CBO concluded that the government would disburse $39.7 billion in loans to multiemployer pension plans in financial trouble, and would be expecting to receive loan repayments in total of $7.9 billion – a net subsidy cost of $31.8 billion.

According to congressional testimony, the cost of doing nothing in terms of lost tax revenue and increased social safety net spending is estimated to be between $170.3 billion and $241.3 billion over the 10-year budget window, and between $332 billion and $479 billion over the next 30 years.

The bill passed the House of Representatives earlier thisbut may face hurdles advancing given the result of the CBO examination. Lawmakers are working to come up with solutions following recent statements from the Pension Benefit Guaranty Corporation that multiemployer programs are in “dire financial condition”.

Representative Richard Neal, chairman of the House Ways and Means Committee, voiced concerns facing multiemployer pension plans earlier this year. “About 1.3 million Americans are in plans running out of money, because of forces of the marketplace,” Neal contended.

The aggregate funded ratio of multiemployer pensions dropped to 74% from 81% during the second half of 2018. Actuarial and consulting firm Milliman attributed the drop to poor investment returns.

Opponents of the bill argue that a loan structure is not an appropriate solution to the problem. “Forcing hand-picked plans to accept crushing balloon payment loans they can never hope to repay, while putting off the necessary reforms to make them solvent for their workers, hurts workers, businesses, and innocent taxpayers who did nothing to create these failed plans,” said Kevin Brady, head Republican of the House and Ways Committee.

“These plans are failing at an alarming rate,” says AARP, an advocate for the bill. “About 12% of workers with vested multiemployer pensions are in plans expected to run dry within 20 years. And the plans’ weak safety net is getting weaker.”

 

Battle for Pension Protection Underway in North Dakota

By Chris Howard | KVRR | September 17, 2019

FARGO, N.D. – For thousands of retired workers across the state, the battle for their pensions began in 2014, when the Multiemployer Pension Reform Act was signed into law.

It allowed pension plans that are in a critical status, like Central States, which covers thousands of workers in North Dakota, to reduce the benefits they pay out to those covered under the plan.

“I’ve watched a lot of friends die during this process, and people are going to their deaths not knowing if they are going to be covered, or if their family is going to be covered down the line. It’s just not right,” said Dennis Kooren, Chairman of the Fargo Committee to Protect Pensions.

Now, groups like the Fargo Committee to Protect Pensions are fighting for new legislation that would help lift pension plans out of a decline.

The Butch Lewis Act of 2019 aims to solve a pension crisis that would affect thousands of people across North Dakota, and over one million people across the country.

The legislation would provide loans to pension plans to prevent them from falling further into insolvency.

It would also restore their ability to pay out benefits to workers who were promised this money to begin with.

Opponents of the plan say this is simply a bailout that the American taxpayer has no responsibility for, and does not solve the underlying issue of failing pension plans.

“It’s my dad’s money. It’s not like we are asking for a bailout. This is money that he put into his pension, that got taken out of his check,” said Callie Nelson, a supporter of the Butch Lewis Act.

Callie is the youngest person in the room. She lost her father three years ago,and continues to fight his battle.

“I got involved because I wanted to carry on his voice so that somebody knew he still mattered. He worked his entire life for that pension. My mom is depending upon that pension,” said Callie.

She is hoping more people get involved.

“There should be hundreds of people sitting in here, but everybody says ‘Somebody else will fix it.’ and my dad had the same mentality for a while. Somebody else isn’t going to fix it. We all have to take a stand and try to fix this,” said Nelson.

Former North Dakota Senator Heidi Heitkamp originally co–sponsored the Butch Lewis Act in 2017, and Senator Kevin Cramer voted yes on the bill when he was a congressman. The bill passed in the U.S. House of Representatives this July, and is now in the U.S. Senate, where it has been referred to the Committee on Finance but has yet to be voted on.

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About the Retirement Security Coalition:

Americans need an urgent solution to the multiemployer pension plan crisis. Congress must take action now to find a bipartisan compromise. We cannot afford to continue on the current trajectory, which will ultimately lead to the collapse of the entire system and the loss of billions of retirement dollars. To learn more from the Retirement Security Coalition on how the multiemployer pension crisis affects you, visit www.retirementsecuritycoalition.com.



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