It’s Time to Put the Fiddle Down!

Nero may not have actually fiddled while Rome burned, but I certainly get the feeling that Congress’s “august” Joint Select Committee on Solvency of Multiemployer Pension Plans (JSC) is jamming with every stringed instrument that they can get their hands on while struggling multiemployer plans see their funded status continue to deteriorate.

There is no more time to wait! The proverbial can has been kicked as far down the road as possible. In fact, there is little left to kick. While the JSC fiddles, more multiemployer pension systems are falling into the weakest category (status) of funding known as Critical and Declining. When Ron Ryan and I first had the opportunity to assist the Butch Lewis Act team the terrific actuaries at Cheiron had done a thorough evaluation of the 114 C&D plans at that time. Regrettably, according to Cheiron, there are now 121 plans that wear that mantle.

Cheiron’s analysis is based on the latest annual financial reports filed by multiemployer plans with regulators. Alarmingly, these 121 plans have roughly 1.3 million participants that would suffer grave social and economic consequences should these plans be allowed to fail. Cheiron’s initial study that produced 114 C&D plans was released last year. Several of those 114 have been terminated. The 121 plans include 15 new additions to the list in just one year (>6% increase). Amazingly, this has happened during the longest bull market in US equity history.

The ONLY way that these plans can escape their current death spiral is through assistance from the federal government.  The JSC is evaluating several prospective programs that would provide a lifeline to these struggling pension systems, but the only one worthy of consideration is the Butch Lewis Act. We’ve reported on the BLA in numerous KCS blog posts, but it is worth repeating.

The low-interest rate loan program contemplated within the BLA legislation is NOT A BAILOUT, but a 30-year lifeline to these critically important funds. In the analysis that Cheiron completed last year, only 3 of the 114 C&D plans at that time would need assistance from the Pension Benefit Guaranty Corporation (PBGC). The fact that legislation could extend these plans by a minimum of 30-years should be reason enough to support and pass the BLA legislation.

The economic activity that would be lost should these benefits not be paid to the 1.3 million participants is massive (estimated at >$1 trillion per year). Is Congress truly prepared to damage the U.S. economy to this extent? Furthermore, without benefit payments, the social safety net will have to be expanded tremendously.  It is a dangerous game of possum that our politicians seem to be playing with the fate of so many voters ready to cast their ballots.

Please put your fiddle down and do the job that you were elected to do. We are getting to a point of no return.


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