Why are we supporting so vigorously the Butch Lewis Act? Primarily because we are fearful that hardworking participants in failing multiemployer plans will not receive the benefits that they earned through their hard work and years of dedicated service. In fact, they likely won’t earn the minimum “guaranteed” payout should these “critical and declining” plans eventually become the responsibility of the Pension Benefit Guaranty Corporation (PBGC). Outrageous!
PBGC Executive Director Thomas Reeder claimed in testimony before the Congressional Joint Select Committee on the Solvency of Multiemployer Plans that the PBGC “is in such financial dire straits that members of failed multiemployer pension plans would likely receive only one-eighth of the minimum benefits they are supposed to be guaranteed.”
As you may recall from previous blog posts, participants in multiemployer plans supported by the PBGC get a protected “benefit” that is already about one-fifth that of a participant in a single-employer plan. A further reduction of this potential magnitude would obviously be devastating.
During the hearing, Reeder was asked if the PBGC would be able to provide the minimum guaranteed benefit to failed plan members without congressional action (such as passing the Butch Lewis Act), and he responded “no”. He estimated that the PBGC would have to cut participant benefits to about one-eighth the minimum benefit, or less. “If they’re making $8,000 in guaranteed benefits today, they’d get less than $1,000,” said Reeder. That would be an annual payout, not monthly, as full minimum payment for a 30-year employee is only $12,800 under the PBGC’s minimum guarantee.