Remember H.R. 397? This is the Rehabilitation for Multiemployer Pensions Act of 2019 (aka the Butch Lewis Act). It called for the setting up of a new agency within the U.S. Treasury Department called the Pension Rehabilitation Administration (PRA). It was to provide low-interest rate loans based on the prevailing 30-year U.S. Treasury Bond plus 25 bps. Unfortunately, nothing has happened with the legislation once it got passed by the House (July 2019) and went before the Senate.
As we wrote in a blog post from earlier today, pension plans are getting spanked with the combination of falling rates and equities, but one thing that is working in the favor of the sponsors of eligible Critical and Declining plans is their cost has been nearly cut in half. That’s right, the cost has been nearly cut in half as the current yield on the 30-year U.S. Treasury bond is 1.62% (as of 3:50 pm today), while on April 18, 2018 when we presented to House staff the yield on the same bond was at 3.14%. Being able to fund these struggling plans with the very cheap financing is an unexpected bonus. To think that a plan could get a 30-year lease on life at an interest rate of below 2% (including the 25 bps) is almost too good to believe.
Will our leaders in DC squander this opportunity?