Features, Finance, Law and Politics, National

Congress Eyes Pension Bills, With Little Action

February 7, 2018

By Steve Wishnia

WASHINGTON—To win a vote on the Butch Lewis Act, a measure that would set up a federal low-interest loan program to rescue endangered multiemployer pension funds, “we need more Republicans to publicly support the bill,” Sen. Sherrod Brown (D-Ohio), its Senate sponsor, said in a statement to LaborPress. Two days before yet another deadline for legislation to keep the federal government funded, that looks like an uphill battle. As of Feb. 6, only five of the bill’s 140 House cosponsors were Republicans, with Daniel Donovan of Staten Island and two others signing on in the previous week. The Senate version’s 15 cosponsors were all Democrats, most from the Midwest or Appalachia, the regions most affected by the crisis.

Teamsters International Vice President John F. Murphy, trustee of the union’s benefit funds, tells LaborPress that both Senate Minority Leader Charles Schumer (D-N.Y.) and House Minority Leader Nancy Pelosi (D-Calif.) have made a commitment that the bill will be included in any budget compromise they agree to. Schumer has endorsed the measure repeatedly, telling Teamsters in Albany Jan. 29 that it “could put multiemployer pension plans back on track and prevent further drastic cuts to retirees’ hard-earned savings.” That doesn’t guarantee that House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell, or the Trump administration will agree, however.

“The best tool we have are the workers and retirees who have been storming the halls of Congress, writing letters, and making calls to demand action,” Brown’s office says. “Their work will be what helps us get a solution across the finish line.”

In January, more than 3,000 members and retirees of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union sent senators email messages urging them to support the Butch Lewis Act. The BCTGM’s pension fund, with more than 110,000 participants, declared to the Department of Labor in 2016 that it was “critical and declining” and would be insolvent in nine years. The American Federation of Musicians, whose pension plan lost 40% of its value in 18 months during the post-2008 recession, has also endorsed the bill.

Rep. Phil Roe (R-Tenn.) told LaborPress in an email that he was reluctant to support the bill because “there needs to be some consideration of the fairness of using taxpayer resources to shore up these pension benefits when millions of other Americans’ pensions have previously been reduced. I would prefer a solution that is fair to all Americans, not just those affected by this crisis.”

Roe and Rep. Donald Norcross (D-N.J.) plan to introduce a different bill, the Give Retirement Options to Workers (GROW) Act. It would allow “composite” retirement plans that “are neither a defined-benefit plan nor a defined-contribution plan, but instead include the best features of each,” Roe says.

Employers would contribute an amount negotiated through collective bargaining, and benefits would be paid as annuities. They would still have to make contributions for workers in “legacy plans,” but those workers would stop accruing higher future benefits. Employers would also not have to pay premiums to the federal Pension Benefit Guaranty Corporation, which pays partial benefits to workers in plans that have gone broke.

Norcross and Roe are an odd pair of allies. Norcross is the former head of the Southern New Jersey Central Labor Council and has sponsored bills for card-check elections for union representation and to raise the federal minimum wage to $15 an hour. Roe, from the eastern tip of Tennessee, is the sponsor of the “Employee Rights Act,” which would require unions to be recertified periodically by a majority vote of all employees, not just those voting. He’s also cosponsoring a bill that would ban the union shop.

“The reality is the multiemployer pension system is severely broken,” Roe says. “Some of the larger plans may be broken beyond repair, and there is concern about the solvency of the PBGC if these plans go under.”

North America’s Building Trades Unions has endorsed the GROW proposal. “This new structure will give peace of mind to workers who will still receive lifetime income through the composite plan, while giving employers certainty in how much they will be required to pay into the system,” NABTU President Sean McGarvey and Associated General Contractors CEO Stephen Sandherr wrote in The Hill in December. They said those plans were not meant to be replacements for “healthy defined-benefit plans,” but would give workers more security than a 401(k) plan.

Several other unions, including the Teamsters, the International Association of Machinists, and the United Steelworkers, have strongly opposed the idea, joined by the American Association of Retired Persons and the Pension Rights Center. The proposed bill “does not ensure that earned pensions will be fully paid in either existing multiemployer pension plans or in newly created plans,” they said in a joint statement Dec. 20. “Money that would be needed for the new composite plans will be taken from money needed to fund existing plans—likely leading to underfunding of both plans—without adequate benefit protections.”

Meanwhile, the United Mine Workers of America are seeking separate legislation to save their pension plan, which they say is “at risk of becoming insolvent by 2022” due to the decline of the coal industry and the 2008 recession. The American Miners Pension Act, introduced last October by Sen. Joe Manchin III (D-W.Va.) and Rep. David B. McKinley (R-W.Va.), would give it unused funds from the federal Abandoned Mine Land program and require the federal government to loan it up to $600 million a year at 1% interest, depending on how much the plan’s trustees certify is necessary to prevent it from going insolvent.

The bill has drawn bipartisan support, with 23 Democrats and 18 Republicans cosponsoring it in the House. A previous version was included in the December 2016 temporary funding agreement, but neither house has taken any action on this one.

“If we do nothing and the government-sponsored insurance company known as the Pension Benefit Guaranty Corporation is allowed to fail, taxpayers could be on the hook for billions more,” Sen. Brown’s office warns. “It’s also important to understand that slashing the retiree benefits or allowing these plans to fail would not only hurt the workers themselves, it would hurt our economy and cost taxpayers by forcing retirees onto government programs to survive.”

According to the PBGC’s annual report for fiscal 2017, released last November, its Multiemployer Program had liabilities of $67.3 billion and assets of $2.2 billion as of Sept. 30—a $65.1 billion shortfall, up from $58.8 billion in 2016. The increase, it said, came from 19 plans that were either terminated or are expected to run out of money within the next decade, offset by one plan that had reduced benefits. The Multiemployer Pension Reform Act of 2014 allows troubled plans to cut benefits to 110% of the PBGC’s maximum payment, which was about $13,000 a year in 2014.

“The assets and income of PBGC’s Multiemployer Program are only a small fraction of the amounts PBGC will need to support the guaranteed benefits of participants in plans expected to become insolvent during the next decade,” it said. PBGC director Tom Reeder called the situation “dire.”

“You either stop the problem now or you’re going to have a bigger problem in the future,” says Karen Friedman of the Pension Rights Center. If one of the large endangered plans—the Teamsters Central States fund, the Mine Workers’, or the BCTGM’s—goes under, she adds, “it’s going to take the PBGC down. It’s going to take employers down. It’s going to take retirees down.”

To Rep. Marcy Kaptur (D-Ohio), “bailout” is not necessarily a bad word. The Keep Our Pension Promises Act, which she is sponsoring along with Sen. Bernie Sanders (I-Vt.), would “close two tax loopholes used by the wealthiest Americans” to give direct federal aid to troubled multiemployer plans and shore up the PBGC. That bill has been stuck in committee with no action since it was introduced last May.

People worked and paid into those plans, so they deserve to receive their benefits, she says. “The injustice is so great, we have to find a solution.”

 

February 7, 2018

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