I was very surprised (shocked) to read an article recently that described the Butch Lewis Act as a band aid. The pension crisis has been unfolding in our country for decades, and for various reasons it has hit multiemployer plans more severely. After many attempts to address this issue, we got MPRA in 2014. That legislation has proven less effective than a band aid would be on a 3″ gash!
The Butch Lewis Act is the tourniquet needed to stop the bleeding that these plans are experiencing, as current assets have little chance of meeting short-term spending needs. As we’ve previously reported, there are roughly 130 Critical and Declining multiemployer plans that are facing major solvency issues. Without dramatic action they are likely to fail! If they do, a transfer of assets and liabilities to the PBGC’s multiemployer insurance pool will result in very little being paid of the promise that was made to plan participants.
The low interest-rate loans that the BLA would provide to these struggling plans would ensure that the necessary funds would be there when called on, as any plan taking a loan MUST defease the Retired Lives liability. The current assets and any future contributions would be used to meet future Active Lives liabilities, interest payments on the loan, and the loan’s principal in 30-years. When the original analysis was initially performed by Cheiron US interest rates were much higher. Yet, even in that environment 111 of 114 plans were able to fully meet their obligations. This environment of low rates further elevates the probability of success.
Unlike other proposed legislation that has been discussed, the BLA doesn’t hurt healthy multiemployer plans to “save” the C&Ds and it doesn’t penalize plan participants and retirees, who did nothing wrong, but stand to lose so much. In fact, this legislation buys 30 more years! How is that a band aid? I would be happy to debate anyone regarding the merits of the BLA. Nearly 1.4 million American workers need action on this issue. For some it is already too late. Let’s not jeopardize the financial futures for the remainder. Let’s work together to push for this critical legislation to pass through the Senate.