For months we’ve teased our readers with references to possible legislation to preserve and protect multi-employer defined benefit plans. Finally, the Bill named the Butch Lewis Act, is being put forth by Senator Sherrod Brown, Ohio, that will protect those promised retirement benefits. Senator Brown’s office put out a press release outlining the goals of the Bill.

As we’ve mentioned, Ryan ALM and KCS have been involved in creating an implementation that will be used to invest the proceeds from the loans provided by the U.S. Treasury through a new office called the Pension Rehabilitation Administration (PRA). The money for the loans and the cost of running the PRA would come from the sale of Treasury-issued bonds.

Unlike Pension Obligation Bonds, whose proceeds have been invested in a traditional asset allocation and subject to normal market volatility, the proceeds from the PRA must be used to secure all of the retired lives benefits earned to date.  By securing the currently retired lives, the fund has bought time to meet the remaining plan liabilities.

This process has been tested on some of the poorest funded plans, and it works! We believe that this model can be used to secure the promised benefits for state and municipal plans, too.  Please don’t hesitate to reach out to us if you’d like to learn more about the legislation or implementation.