Controversial reforms for multiemployer pension funds will be part of a congressional spending deal set for a final vote Thursday.
Based on a proposal from the Partnership for Multiemployer Retirement Security, a business and labor group, the legislative amendment expected to be approved Wednesday would allow the most distressed multiemployer plans to cut retiree benefits to prevent plans from becoming insolvent and winding up at the Pension Benefit Guaranty Corp. It also increases PBGC premiums to $26 from $13 per participant for all multiemployer plans, to address some of the multiemployer funding shortfall at the PBGC.
The final legislation does not include the proposal's call to allow for innovative plan designs such as variable annuities and target variable benefit plans, “but we've come a long way toward resolving the systemic problems of the multiemployer community, and we're thankful to the (House) leadership, Rep. John Kline and George Miller, in recognizing the needs to protect the benefits” of people in severely underfunded plans, said Randy DeFrehn, executive director of the National Coordinating Committee for Multiemployer Plans, which spearheaded the proposal. NCCMP coordinated its efforts with the Partnership for Multiemployer Retirement Security.
Some groups representing retirees condemned the legislation and what they say was a rushed process. “Cutting (benefits for) retirees should be the last resort, not the first, and they did not examine other alternatives,” said Karen Friedman, executive vice president and policy director at the Pension Rights Center. “Nor was there a public discourse to hear from the most vulnerable people who are being hurt by this, the retirees, and that is outrageous.”
Crafted following a series of hearings in the House Education and the Workforce Committee, the legislation requires plan participants and the Treasury Department to approve proposed benefit adjustments and protects the most vulnerable retirees. Cuts could go no lower than 110% of the PBGC guarantee level.
Mr. Miller defended the final package in an e-mailed statement. “This is the last chance that labor unions and their members have to gain some control over the future of their pensions, and this reform would give them the tools they need to rescue themselves.”