I was pleased to read an Op-Ed by Congressman Baron Hill, Indiana’s 9th District, calling for support of multiemployer pension reform, which is clearly long overdue. What surprised me though was his comment about the funded status deficit for multiemployer plans being $638 billion before Covid-19 set upon us. Although technically true, the $638 billion number is reached if each plan valued their liabilities at a risk free rate (which they are under no legal obligation to do) and the legislative efforts were focused on helping every single plan. It’s not!
As a reminder, there are roughly 1,400 multiemployer plans in the US. There were 114 plans that were designated as “Critical and Declining” when the Butch Lewis Act (BLA) legislation was first contemplated. That number has since grown to roughly 130 or so. The funding deficit that existed for the original 114 was roughly $68 billion in 2018. Many of the other plans are well enough funded (>80%) that federal support is not necessary at this time.
There is a crisis unfolding for the participants (1.4 million) in those C&D plans that will result in pensioners receiving mere pennies on their broken pension promise. These are the funds/participants that we should be helping at this time. The other multiemployer plans don’t have the same solvency issues that the C&D plans do. They also enjoy the benefit of time to resolve some of their current funding shortfall.
Inaction on the part of Washington lawmakers has been present for quite some time. Could it be that they aren’t addressing this issue given the false impression that the magnitude of the crisis is far greater than what it truly is? As I wrote recently, the roughly $34 billion that the OMB calculated was needed over 10-years to “save” these plans is a minor rounding error relative to the $3.8 trillion deficit that has been created in this year’s Federal budget. The BLA is terrific legislation that has already passed the House in July 2019. It is about time that the US Senate passes this legislation that will preserve the promise that was made to these American workers when they began their careers.