The Latest Senate Proposal

You have to love our “leaders” in Washington, DC. After years and years and years of hoping and praying that the multiemployer retirement crisis would finally be resolved, the 1.4 million American workers in Critical and Declining pension plans are left with a proposal (here it is in all its glory) that is so cumbersome and unnecessarily complicated (ridiculously so) as to make your teeth hurt. Why? Who writes this stuff? There are so many moving parts in this proposed legislation that I’m afraid many plans will fail before they can even figure out what to do.

Instead of propping up the Critical and Declining plans with low interest-rate loans during this period of historically low rates, we have Senators Grassley and Alexander pushing aside the Butch Lewis Act (BLA) that has passed the House in favor of trying to rescue multiemployer plans despite the fact that a significant majority of the pension plans are in fine shape. As a reminder, there are roughly 125 C and D plans from a universe of more than 1,300 multiemployer systems. The legislation is proposing to increase PBGC fees, penalize participants with an excise tax, reduce discount rates thus inflating plan liabilities, partitioning orphan participants by creating new plans to house these orphans, etc. There is no discussion on how the assets should be managed, but plenty of stuff to go around so that they get their “shared sacrifice”.

Maybe I’m too close to the situation regarding the BLA, but that legislation was very clean and clear. A pension plan in C&D status could file for a loan. If approved, the loan proceeds would be mandated to cash flow match the plan’s Retired Lives benefit payments ensuring that those promised benefits would be secure and paid. Plans couldn’t cut future benefits, they had to restore benefits to previous levels if they already gone through the process of reducing them, and all contributions would have to be paid for the 30-year life of the Treasury loans as required. No games! I believe in the math behind the BLA legislation, which indicated that all but three plans would be able to pay back the loan, while meeting future plan liabilities. It didn’t needlessly involve the roughly 90% of plans that are not in C&D shape.

I’m pleased to see that the multiemployer pension crisis is getting the attention it deserves, but at the end of the day I would be much more confident if the Senate would just take up the BLA legislation instead of mucking up the waters with the weaker and unclear Chris Allen Multiemployer Recapitalization and Reform Act.

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