It has been reported that two more multiemployer pension systems – Arizona Bricklayers and the Michigan Carpenters – have filed for benefit relief under the Multiemployer Pension Reform Act of 2014 (MPRA). This is the second application for the Carpenters after they withdrew their first proposal earlier this year. Although the actual cuts to benefits may be different, the factors creating the deterioration in funding are similar in that the number of active employees fell dramatically in relationship to the number of retired participants, the number of employers contributing to the plan also fell, while the number of hours worked (determines contributions) were impacted by multiple economic shocks and have yet to recover.
In the case of the Arizona Bricklayers’ plan, ALL the accrued benefits will be recalculated to a maximum of 110% of the PBGC’s guaranteed amount. As a reminder, the PBGC’s guaranteed amount for a 30-year employee at age 65 is ONLY $12,870. It can be quite smaller for those that didn’t achieve a 30-year career. For comparison purposes, the PBGC’s private insurance program protects benefits to >$72,000 for equally tenured employees. For the Carpenters, their benefits will be slashed by 32% under MPRA! How many of you could withstand a cut in compensation of this magnitude without having it jeopardize your financial future?
It really pains me to think that our government is sanctioning this action. MPRA has little to do with pension reform and everything to do with slashing benefits, while financially burdening workers who had very little to do with the problems related to their plans. Regrettably, Congress continues to dawdle as it relates to true pension reform and as they wait the crisis magnifies. Unfortunately, we have roughly 1.4 million American workers tethered to pension plans that have been designated as in Critical and Declining shape. The only potential resolution to this situation is through legislation. There is no “earning” one’s way out of this jam.
The Butch Lewis Act (BLA), which currently resides in the Senate after having been passed by the House, is wonderful legislation that actually reforms pensions, unlike MPRA, while simultaneously protecting the promised benefits. For those plans that have filed for and been granted relief under MPRA, the benefits that have been slashed would be reinstated under the BLA should they file for a loan. Let’s hope that there is finally a sense of urgency within Congress that will lead all parties to conclude that the BLA is the right path forward and the time is now!