Democrats face a tough dilemma in dealing with the looming crisis caused by underfunded multiemployer pension plans: Fight for their friends or give them the bitter medicine they may need.
Democrats’ labor allies will take the worst of it if the pension plans, which cover an estimated 10 million workers in heavily unionized industries, start dying. Many are listed as critical and declining by the government. But Republicans call the Democrats’ preferred solution little more than a bailout and are demanding fundamental reform instead, an approach that would likely result in the plans’ beneficiaries getting less than they were promised and would anger unions.
Democrats are hoping, for now, that they don’t have to go that far and can instead peel off just enough moderate GOP support to pass the Butch Lewis Act, legislation that would have the Treasury Department extend low-interest loans to endangered plans.
“Everybody has constituents who are affected by this crisis. We just have to get those constituents to talk to them,” Rep. Frederica Wilson, D-Fla., who chairs the Education and Labor’s subcommittee for pensions, told the Washington Examiner.
Republicans are giving little indication that they’ll accept Wilson’s bid. Loaning money to plans that are already underwater makes no sense, says Rep. Phil Roe, R-Tenn., who’s been one of the GOP’s leaders on the issue. Democrats are going to have to agree to put cuts on the table in order to get something through the House, he suggested.
“I whispered in [Wilson’s] ear and said, ‘Look, I know what the problem is. We need to get in a room without any cameras and find out just how much of a haircut people are willing to take and also see what can be done on the other [business] end,’” said Roe.
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 major financial burden on the rest and create a vicious cycle that drags the whole thing down. Business groups are just as eager as unions to see a fix.
[Related: Multiemployer pension plans in ‘dire’ shape, government monitor says]
Nationwide, multiemployer pensions are less than 50 percent 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 about 1,400 multiemployer plans in industries such as construction, manufacturing, mining, transportation, and entertainment.
That there is a serious crisis that needs to be addressed soon is the only thing all sides are in agreement on. The Labor Department lists 60 plans as being in “critical and declining status.” The federal Pension Benefit Guaranty Corporation, the agency that insures the plans, reported late last year that it had a $54 billion deficit in its multiemployer program. The PBGC is projected to become insolvent in 2025, meaning the government won’t be able to bail out failed plans.
There is a recent precedent for a bipartisan solution. In 2014, Congress passed and President 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, however, and only passed because then-Rep. George Miller, D-Calif., 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. The act has rarely been used to restructure plans, because cutting promised benefits isn’t a popular move with anyone.
The law is exactly the kind of solution Democrats want to avoid this time around, Wilson said. In fact, they want to roll back the 2014 law, arguing Congress should instead be doing everything it can to get workers the benefits they were expecting. “We have to revisit it,” Wilson said.
Nevertheless, they recognize they need Republicans to buy in, and Wilson indicated that they will at least talk. “We’ll take it paragraph by paragraph and line by line,” Wilson said, regarding any prospective compromise.
To Republicans, the fact that the pensions are still in crisis five years after the last reform passed is proof that the next deal has to be even more extensive and can’t shy away from hard choices. “Millions of Americans are counting on Congress to set aside our political differences and come to the table to find a bipartisan solution — as difficult as it may be — that secures their future. We owe it to them,” said Rep. Tim Walberg, R-Mich.
An official with a business trade group, who requested anonymity because of the political sensitivity of the issue, said they expect the Democrats will try to push the Butch Lewis Act through the House. That will at least get the ball rolling on finding a solution, the official said, and it will then become the basis for further negotiations once it gets to the GOP-controlled Senate.
