House Democrats are set to advance legislation Wednesday to shore up endangered multiemployer pension plans by giving them low-interest federal loans and bonds, a move critics are calling a bailout. The legislation comes as unions are pressuring the party to act before pensions start going bankrupt.
“About 10 million Americans participate in multiemployer plans and about 1.3 million of them are in plans that are quickly running out of money,” House Ways and Means Committee Chairman Richard Neal, D-Mass., said Wednesday at the start of the committee mark-up of the bill. “We are in the midst of a crisis, but for years we have failed to do anything to stop it.”
The legislation, the Rehabilitation for Multiemployer Pensions Act, would create a new Treasury Department agency called the Pension Rehabilitation Administration. It would provide taxpayer-backed loans and bonds to multiemployer pension plans that are listed as in “critical and declining” status by the Pension Benefit Guaranty Corporation, the federal agency that insures the plans.
The National Taxpayers Union, a conservative group, warned in a letter to the committee Tuesday that the legislation “falls short of achieving the structural changes needed to help MPPs avoid insolvency, and will only put further strains on a struggling PBGC.” It warned that the policy would “hurt workers in the long run, by allowing plan sponsors to double down on unrealistic promises and assumptions.”
Multiemployer plans, as the name suggests, involve several companies collectively funding plans. Should one employer go bankrupt or otherwise leave, the remaining ones are obligated to take up the slack. Unions favor multiemployer plans because they can remain with workers even if they lose or switch jobs. But if several companies leave, the plans can become a financial burden on the remaining ones and create a vicious cycle that drags the whole arrangement down.
All sides agree that there is a serious crisis with multiemployer pension plans that needs to be addressed soon. The PBGC reported late last year that it had a $54 billion deficit in its multiemployer program and it is projected to run out in 2025. Nationwide, multiemployer pensions are less than 50% funded relative to their current liabilities and need $600 billion to cover them all, though a few seriously troubled plans such as the Teamsters’ Central States Fund throw off the average.
“There are >300 multiemployer pension plans across the country – including the #Teamsters Central States Pension Fund – that are in danger of failing. Teamsters have been fighting for years for a legislative solution & have worked with lawmakers on both sides of the aisle to do so,” the Teamsters tweeted Tuesday.
Neal’s legislation has 188 co-sponsors, including 9 Republican ones. It already passed the House Education and Labor Committee on a 26-18 vote last month, but is unlikely to be picked up by the GOP-led Senate, which has rejected similar legislation in previous congresses. The Labor and Treasury departments declined to comment on the legislation.
In 2014, Congress passed and President Barack Obama signed the Multiemployer Pension Reform Act. The legislation allowed trustees of endangered pension plans to request federal approval to restructure them — that is, for recipients to get paid less than they were promised. It wasn’t really popular, though, and only happened because then-Rep. George Miller, a longtime union ally and chairman of the Education and Labor Committee, pushed it through just before he retired from office. While some unions and liberal Democrats quietly supported it, they viewed it as a necessary evil for plans facing worst-case scenarios and never touted it as a solution to the broader problem.
