For those of you who have a lot riding on the passage of legislation to preserve and protect multiemployer pension plans, especially those plans deemed to be in “critical and declining” status, whispers out of Washington DC should be alarming. It appears that the Butch Lewis Act legislation will undergo “significant” change before a final bill is formed. Regrettably, I’ve been told that benefit cuts are on the table as part of the negotiation. This is incredibly unfortunate and truly UNNECESSARY!
Anyone who has read a previous KCS blog post knows that the actuarial team from Cheiron did yeoman’s work to test and retest the solvency of C&D plans that receive loans from the US Treasury through the potential formation of the Pension Rehabilitation Administration (PRA). Of the 114 plans reviewed, all but 3 were able to maintain solvency while meeting existing promises and at a projected return on asset assumption of only 6.5%, which is much lower than most plans are forecasting today. The three plans that need PBGC assistance need only about 1/3 of the amount needed to protect and preserve these C&D plans should they be allowed to fail.
So we ask: why the benefit cuts? Doesn’t the Joint Select Committee understand and appreciate that the benefit payments to these retirees stimulate economic growth primarily in the local economies where they reside? The cumulative economic impact from all of these retirees is substantial. Furthermore, the average benefit payments to these individuals are very modest, and should these plans fail, PBGC support will provide benefits which equate to only pennies on the dollar for the recipients.
There has been a tremendous grassroots effort to protect and preserve these pension systems and their promised benefits, but more absolutely needs to be done at this stage. There is no need to punish the retirees because of the failure of the system to protect and preserve these pension plans. The US government enjoys the benefits of having a fiat currency to use as it sees fit. There is no excuse to get penny wise, but pound foolish at this time.
One last thought. The US Federal Reserve’s balance sheet earns more money from interest in one year than it would take to fund all of these critical and declining plans with LOANS (not bailouts). Let’s dedicate 2019’s interest to finally solving this crisis unless you really want millions of Americans to suffer the consequences of inaction or worse, foolish decisions.