The CBO has revised estimates for the costs associated with the loan program under the proposed Butch Lewis Act (BLA) legislation. This revised estimate is well below the CBO’s initial $101 billion projected cost and makes the BLA the most affordable option currently being considered by the Joint Select Committee on Solvency of Multiemployer Pension Plans. According to Senator Brown’s spokesperson, Jenny Donahue, the difference in the CBO’s calculation is the result of “smart changes to the legislation that make it a better bill and the cheapest option for taxpayers”.
Most importantly, it solves the multiemployer pension crisis without benefit cuts to the plan participants, who are facing the prospect of severe cuts to their benefits should Congress fail to act. As we’ve discussed previously, one option being considered is to allow these plans to fail thus placing responsibility for the management of the pension systems on the Pension Benefit Guaranty Corporation (PBGC). The cost of doing “nothing” would be roughly $78 billion according to the PBGC’s Director Thomas Reeder.
These proposed changes are not radical by any stretch of the imagination. What is being considered at this time is a cap of 0.2% on the interest rate charged to these plans relative to the 30-year U.S. Treasury Bond. In addition, pension plans can save additional money by beginning to repay the loan in year 20, as opposed to year 30. If a plan chooses to prepay the loan beginning in year 20 a 0.5% lower interest rate will be made available and the pension plan would be required to make 10 annual installment payments until the loan is paid back. Finally, only the neediest plans are eligible (those categorized as Critical and Declining plans that face insolvency within 15 years) to receive a loan, but I was under the impression that this grouping was the only cohort eligible in the first place.
Given the significant reduction in the CBO’s cost estimate, the potential paying back of the loan beginning 10 years earlier, and the fact that benefits can still be protected without burdening the PBGC, it seems that passing this legislation should be a no-brainer. There really are no more excuses for not passing this critically important legislation. The financial fate for millions of American retirees is in the hands of the members of the JSC. It is long past time for positive action.