Grassley, Alexander Release Plan to Shore Up Failing Multiemployer Pension System
WASHINGTON – Sens. Chuck Grassley (R-Iowa) and Lamar Alexander (R-Tenn.), chairmen of the Senate Finance and Senate Health, Education, Labor and Pensions Committees respectively, today released a proposal to avert the collapse of critically underfunded multiemployer pension plans and reform rules for these plans to prevent future funding shortfalls within these important pillars of the American retirement system.
The Multiemployer Pension Recapitalization and Reform Plan creates new authority, based on past assistance for financial institutions, for the Pension Benefit Guaranty Corporation (PBGC) to take on liabilities from financially troubled multiemployer pension plans to help the plans pay their financial obligations to retirees and current workers. The draft legislation also makes fundamental changes to the regulation of these plans, so that all participants can be assured that their retiree benefits are appropriately funded and properly managed.
“This crisis is severe and gets worse every day. Around 125 multiemployer plans have said they’ll become insolvent over the next two decades. Several large plans—including the big Central States Pension Fund—predict they’ll go insolvent in the next few years. This leaves more than 1.3 million participants without the pension benefits they’ve been promised, including 10,000 Iowans,” Grassley said. “We need to act quickly, but we can’t just pour money into failing and mismanaged funds. Our plan will provide relief and reform now, without it our retirees will be left without the future they worked for.”
“The Pension Benefit Guaranty Corporation which acts as the insurance company for private sector multiemployer pensions plans will be unable to meet its future obligations without necessary reforms because employers and unions have made pension promises to millions of American workers that they can’t keep. Chairman Grassley and I have a balanced proposal to shore up the PBGC’s 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,” Alexander said.
The proposal builds on investigations and research undertaken by Chairman Grassley in recent years, incorporating work of the 2018 Joint Select Committee on the Solvency of the Multiemployer Pension System. As a result of these investigations, Congress now has a stronger understanding of the legal framework and operations of the multiemployer system, including the flaws in the system that have led to the current crisis facing a significant portion of these plans.
The scale and scope of the underfunding in many of these plans is very large. Given that the plans represent private-sector financial contracts, the costs of reforms should be born principally by the stakeholders within the multiemployer system.
The Multiemployer Pension Recapitalization and Reform Plan includes five major components:
1. Stabilize plans in immediate danger of failure
a. Partition authority and funding relief
2. Secure workers’ and retiree’s benefits
a. Secure the multiemployer system overall
b. Increase PBGC guaranteed benefit levels
3. Strengthen the PBGC’s ability to backstop the multiemployer system
a. Increase PBGC funding through shared responsibility
4. Put the multiemployer system on a stable path for the long-term
a. Reform the funding and liability measurement rules
b. Reform zone-status rule for greater predictive value
c. Reform withdrawal liability rules to encourage employers to stay and new ones to join
d. Improve plan-governance rules and PBGC supervisory authority
5. Ensure fiscal responsibility
a. Funding reforms and stakeholder contributions
b. Front-end federal contribution offset through additional revenue
Comments on the reform proposals may be submitted to: MultiemployerReform2019@finance.senate.gov.
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