It is wonderful that everyone and their sister acknowledges that the US is facing a pension crisis within the multiemployer community, if not more broadly to include public and private plans, as well. As anyone who regularly reads this blog knows, we have been highlighting this situation for years. But, as Congress fiddles, more and more plans fall into Critical and Declining status. A significant percentage of Americans continue to struggle with the fallout from Covid-19. This certainly includes the 1.5 million American pensioners who were promised a benefit only to have that benefit either slashed through the poorly designed MPRA legislation or find themselves in a plan that may become insolvent at some point within the next 15 years. Compounding the issue is the fact that the PBGC insurance pool designed to protect these plans is forecast to become insolvent by 2026 – how comforting!
Since the Butch Lewis (BLA) Act passed the House of Representatives in July 2019, I’ve been cautiously optimistic that we were finally seeing progress that would address this untenable situation. Regrettably, as Covid-19 hit, other funding priorities rose to the top of the agenda. Where was the support for these men and women who worked with the understanding that they would have a pension upon retirement? These workers often deferred salary increases to further support that promise. Yet, they continue to wait and wait and wait! As we’ve mentioned before, the BLA is terrific legislation, and the price tag is estimated to be about only $40 billion over 10-years. That is a drop in the bucket compared to the trillions being handed out by Congress for stimulus 1 and 2.
Furthermore, the economic activity and subsequent tax revenue produced through these benefit payments dwarfs any of the costs associated with this legislation. It makes absolutely no sense to me why Congress continues to treat these American workers with such little regard. Again, it is great to acknowledge that there exists a problem, but that is only the first step in the process and certainly not the last. Regrettably, a December 14th press release by Senators Grassley and Alexander announced that despite very good intentions from representatives on both sides of the aisle, pension legislation would not be included in the year-end spending bill because they had run out of time to score the cost of the legislation, etc. Come on! We’ve heard this same story for years. We know the cost of the BLA legislation. Instead of trying to ram through a proposal that forces partitioning, higher premium costs per participant paid to the PBGC, and a lower discount rate that would weaken the financial position of EVERY multiemployer plan… pass the BLA!
Our multiemployer plans cover industries that are getting crushed by this virus. As an example, just look at what it has done to Broadway and all of the folks whose livelihoods have been shuttered. Do you think that these plans will be helped by reducing the discount rate and increasing PBGC fees? Absolutely not, but that is what is creating the stalemate in this fight. Sure, if we were designing a defined benefit system from scratch, we would consider some of the elements in the competing legislation to the BLA. But we aren’t! We live with these legacy plans and all of their foibles. We must address the current situation at hand before 1.5 million Americans get mere pennies from that promise that was made decades before.
Too much time has been wasted trying to solve this problem. The answer is the BLA! Let’s get this legislation passed before more plans fail and more retirees receive a letter announcing that their pension plan has filed for benefit relief under MPRA and that their new “benefit” will be 50% or so lower. That just isn’t right!