Senator Sherrod Brown (D-OH) and 26 other Democrat Senators, including some of the former members of the now defunct Joint Select Committee on the Solvency of Multiemployer Pensions, have reintroduced pension legislation to tackle the evolving pension crisis. The legislation was filed on Wednesday, which was the same day that the House passed H.R. 397.
The passage of H.R. 397 in the House was expected given the Democrat majority, but the 29 Republicans that joined in support provides a glimmer of hope that Senator Brown’s and the other co-sponsors’ efforts will not be futile, although likely difficult.
As we’ve reported on numerous occasions kickers of the proverbial pension can down the road have finally run out of terrain. Although Republican Senators will be striving for a more bipartisan compromise, important elements must be maintained in order for this legislation to be successful. Importantly, no action should be taken to potentially harm currently healthy plans by increasing their costs, such as PBGC premiums or mandating mark-to-market discount rates.
In addition, troubled plans should be given an opportunity to borrow low-cost funds provided through the proposed Pension Rehabilitation Administration (PRA) at the current proposed rate of 25 basis points above the prevailing 30-year U.S. Treasury yield. Any meaningful change in the proposed yield, such as that which was proposed by Congressman Roe (R-TN), will adversely impact the plan’s ability to repay the loan principal in 30 years. Failure to do so increases the odds that these pension systems will collapse forcing them (and the beneficiaries) onto the PBGC, which has a benefit threshold that would severely reduce the average pension benefit.