Multiemployer pension reform has been decades in the works with still no outcome that protects and preserves the earned benefits for millions of American Workers. As Congress debates the merits of HR397 or some bi-partisan piece of legislation the cost grows and the economic impact looms ever larger. The full impact of the current economic crisis brought about by Covid-19 is not yet understood, but we know that it is having a major impact on Pension America from the loss of asset values, to growth in liabilities (using a legitimate discount rate), to the loss of jobs and contributions. Something needs to be done almost immediately or a significant percentage of the Critical and Declining plans will be lost forever. The PBGC is not currently funded to handle anywhere close to the number of participants that might become their responsibility.
The debate continues to rage over whether or not this legislation is a government bailout despite the fact that low-interest loans to sure up these plans will have 30-years to make interest and principal payments. That is 30-years of benefit payments that wouldn’t be received if these critically important funds are allowed to fail, and they will fail without help now! There is no way for these cash-starved funds can earn their way to solvency. We actually have a wonderful environment to provide these loans as 30-year Treasuries are currently trading at 1.21% and the loan would be issued at that the prevailing rate plus 25 basis points.
According to several sources, including the NIRS and Michael Scott, Executive Director, NCCMP, the Federal government stands to lose far more in lost tax revenue than they would gain by doing nothing at this time. It is estimated that in 2015 alone, the multiemployer system provided $158 billion in taxes to the U.S. Government. They also provided $41 billion in pension income to retirees and paid more than $203 billion in wages to the 3.8 million active workers. Combined, the pension and wage income supported 13.6 million American jobs and generated $1 trillion in GDP. Furthermore, original estimates for the then 114 Critical and Declining plans (now roughly 130) calculated that $32 billion in tax revenue over 10-years would be lost to the Federal government should the C&D plans be allowed to fail. That $32 billion was more than 50% of the expected “cost” of the loan program. Lastly, this estimated cost would decrease with every loan that is repaid, and with these low interest rates, that probability is improved.
Obviously, we are in unprecedented times, and much needs to be done to sure up our economic system, the businesses, and workers before this crisis escalates beyond our capacity to rescue it. However, that doesn’t mean that retirees should be ignored at this time. They deserve every protection that any other American is receiving at this time. Failure to secure funding is not an option.