Participants in failing multiemployer pension plans have fought for years to have their benefits restored and pension reform legislation passed, and to this point those incredible efforts have mostly fallen on deaf ears. They have been close at times to getting the relief that they need, such as the Butch Lewis Act being passed by the House of Representatives in 2019, only to have the US Senate fail to act on it. They were recently encouraging that negotiations surrounding another stimulus package would include the necessary funds to FINALLY get pension reform passed.
Regrettably, those efforts were once again met with empty promises by our “leaders” in Washington DC. In fact, the Senate has turned its collective back once more by recessing until November 9th, thus eliminating any possible last-ditch effort to provide necessary economic support to struggling American workers and pensioners prior to the election. Instead of getting legislation passed that would protect and preserve the promised benefits, we have only gotten legislation (MPRA) that allows struggling pension systems to break their promise to their workers by CUTTING benefits, and in many cases, those cuts amount to more than 50%. To date, 18 plans covering more than 100,000 plan participants have been permitted by the DOL to slash those promises – shameful!
Unfortunately, there are roughly 130 other Critical and Declining multiemployer plans that are on the cusp of failure and another 200+ that are deemed to be in Critical status. There are approximately 1.4 million Americans in the C&D plans that could see their retirements dramatically altered. These folks did nothing wrong, and to penalize them is just not right. It would be one thing if the PBGC’s multiemployer insurance pool actually had the financial resources to protect the promised benefits, but this entity’s financial condition is atrocious.
The PBGC has recently published the maximum benefits for 2021 for a 30-year employee at age 65-years-old, and it is once again $12,870. This is 5.6 times lower than the maximum benefit for a similarly tenured employee in a private single employer plan, which stands at $72,409 for next year. This massive difference continues to grow each year as the single-employer pension benefits are indexed, while the multiemployer protection is negotiated, and that level of protection hasn’t changed in years.
It would be one thing if the annual premiums per participant were 6 times greater for a single employer fund versus a multiemployer fund, but that is just not the case. According to the PBGC’s website, the 2021 premiums are $31 per participant in a multiemployer plan and $86 per participant in a single-employer plan. At the very least, participants in multiemployer plans should have their benefits protected to 36% of the maximum single-employer pension or $26,100. But, why stop there? Does it make sense to protect one class of beneficiary at nearly 6 times that rate of another group?
According to a research report from the Congressional Research Service, a majority of pension beneficiaries had promised payouts greater than the $12,870 limit. For those plans that aren’t currently receiving any support from the PBGC, the average benefit is more than twice the maximum protected benefit. If Congress would just get their act together and raise the maximum protected benefit to 50% of the single-employer protection ($36,000), a significant percentage of retirees would receive the benefit that they were promised.
If you find this situation faced by multiemployer pensions to be as unfair as I do, please reach out to your representatives in DC to get them off the fence. Passing the Butch Lewis Act should be the highest priority for the US Senate, but at the very least a renegotiation of the maximum PBGC benefit for multiemployer pensioners should be completed. The benefits to our economy, in the form of demand for goods/services and tax revenue, from these pensioners getting their full promised benefits far outweighs the cost of government support. Plus, it is the right thing to do!