Draft legislation allowing new multiemployer pension plan designs was unveiled Friday in a discussion draft released by House Education and the Workforce Committee Chairman John Kline, R-Minn.
Mr. Kline said the proposal to allow composite plans, which combine defined contribution features with lifetime income provided through annuities, follows years of bipartisan work with the support of business and labor leaders, including the National Coordinating Committee for Multiemployer Plans, whose Executive Director Randy DeFrehn praised it as “providing a roadmap for making much needed” multiemployer pension reforms.
Several international unions and retiree groups, including AARP and the Pension Rights Center, strongly oppose the draft proposal, warning in a letter to members of Congress that it would weaken current funding standards and leave workers in the new plans unprotected. “Our organizations do not oppose new forms of retirement savings plans. However, we do oppose proposals that permit employers and plans to adopt new plans while putting at greater risk the funding of already unfunded pension promises in existing plans,” the groups wrote.
The draft legislation would allow for composite plans where trustees would set benefit levels based on contributions, and face stricter funding requirements. Employers in existing plans would have to fund those commitments first.
Composite plans not projected to be 120% funded within 15 years would have to implement remediation strategies that could include contribution increases or benefit decreases. Composite plan benefits would not be guaranteed by the Pension Benefit Guaranty Corp.
The House panel is also seeking input on ways to shore up the PBGC, whose multiemployer program is nearly insolvent. “Improving the multiemployer pension system is an urgent priority for employers and labor leaders that will benefit America’s workers and taxpayers. I hope my colleagues in the House and Senate will make it an urgent priority as well,” Mr. Kline said in a statement.
Former PBGC Director Joshua Gotbaum, a guest scholar in economic studies at the Brookings Institution, applauded Mr. Kline's “continuing efforts to force Congress to preserve the pension benefits of the 10 million people in multiemployer plans. His proposal is a good place to resume discussions, but even he admits that we need to do more than just allow composite plans,” Mr. Gotbaum said in an e-mail. “We need a PBGC with the legal authority and funding to pay benefits and preserve plans, and we need real protection against employers abandoning them.”