A Republican-led proposal to reform the multiemployer pension system released Wednesday calls for workers to contribute more to shore up the system.
Dubbed the Multiemployer Pension Recapitalization and Reform Plan, the proposal unveiled by Senate Finance Committee Chairman Chuck Grassley, and Senate Health, Education, Labor and Pensions Chairman Lamar Alexander, would also give new authority to the Pension Benefit Guaranty Corporation, or PBGC, the federal agency that backs pension programs, to make it easier to take workers from companies that exited pension programs and place them in ‘sick pensions’ that are separate from other pension recipients.”
“We need to act quickly, but we canât just pour money into failing and mismanaged funds,” said Grassley. “Our plan will provide relief and reform now, without it our retirees will be left without the future they worked for.”
Multiemployer plans 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 workers can remain in them even if they lose or switch jobs. But if several companies leave, the plans can become a financial burden on the remaining businesses, creating a vicious cycle that threatens their solvency.
Both parties agree that there is a serious crisis with multiemployer pension plans. The PBGC’s multiemployer insurance program currently has a $65.2 billion deficit.
The senators’ reform would strengthen the system by raising the current flat-rate premium from $29 per participant to $80, “A level more consistent with that required of private-sector single-employer plans.”
Grassley and Alexander’s proposal would also make it easier for the PBGC to allow “financially healthy employers to maintain a plan by carving out plan liabilities attributable to participants who have been ‘orphaned’ by employers who have exited the plan.” In other words, employers remaining in the plan would no longer be automatically obligated to cover workers that did work for them, eliminating a key component of the multiemployer system.
The PBGC already has this authority, the senators note. “In practice, however, PBGC has rarely used this authority because the standards for doing so are hard to meet.” The reform loosens the standards.
“Chairman Grassley and I have a balanced proposal to shore up the PBGCâs role as an insurance company with a limited infusion of taxpayer dollars instead of an open-ended bailout and institute important structural reforms so this does not happen again,â Alexander said. The senators did not state how many taxpayer dollars would be needed.
Earlier this year, the Democratic House passed legislation, dubbed the Rehabilitation for Multiemployer Pensions Act, but also referred to as the Butch Lewis Act, that would create a new Treasury Department agency to provide taxpayer-backed loans to endangered multiemployer pension plans and few other types of endangered plans. The Congressional Budget Office estimated the bill would cost $55 billion over 30 years.
“I believe this proposal can provide the foundation for a bipartisan solution, but it will require some changes,” said Sen. Rob Portman, an Ohio Republican. “As Chairman of the Subcommittee with jurisdiction over multiemployer pension reform, I look forward to learning about how this proposal can be improved.”
The Chamber of Commerce applauded the proposal. “Now, itâs time for both sides of the aisle to work together to ensure that legislation moves forward to result in a bipartisan, bicameral solution,” said Glenn Spencer, the chamber’s senior vice president of employment policy.
