Two bills introduced in Congress — S 1714 in the Senate and HR 2403 in the House—would bail out the underfunded United Mine Workers of America 1974 pension plan.
The underlying reason for the legislation is more than assisting the miners plan — it also is to prevent more pension liabilities from overwhelming the Pensions Benefit Guaranty Corp.'s multiemployer program. The program had $1.8 billion in assets and $44.2 billion in liabilities, as of Sept. 30, 2014, according to the “PBGC Insurance of Multiemployer Pension Plans: A Five Year Report,” released in March.
“PBGC's multiemployer fund remains at risk of running out of money within 10 years and is likely to run out within 20 years,” said a PBGC statement about the report.
The PBGC multiemployer fund is inadequate to provide the protection envisioned at its creation in the Employee Retirement Security Act of 1974.
Senators and representatives embracing the legislation are trying to sew up a few frayed edges of a severely underfunded program instead of trying to tailor long-term solutions to address the PBGC challenges.
Congress needs to draw on academics, employers and employee representatives to devise a solution for the long term for the miners plan and the PBGC. Diverting funds from one program to another only masks the problems and undermines the ability to find a long-term solution.
The bills are wrong on at least four major counts and should be opposed by the majority in Congress, should they come up for a vote in the Senate and House.
First, the funding would likely only push back the day of reckoning for the miners plan, given the present bleak mining economics, weak investment markets and low interest rates. The plan has only $4.1 billion in assets and $9.7 billion in liabilities.
Second, the miners plan represents a large challenge, but it is only one of the challenges the PBGC multiemployer insurance plan confronts as a small but growing list of other multiemployer plans — particularly the Teamsters Central States, Southeast & Southwest Areas Pension Fund, which has $16.1 billion in assets and $35 billion in liabilities — face potential insolvency. Their benefit obligations then would be paid through the PBGC at its generally much lower rate than provided by collectively bargained pension plans.
Third, financing for the proposed miners plan bailout would come from the Abandoned Mine Reclamation Fund, whose assets are held by the Department of the Treasury and administered by the Department of the Interior, further undermining the purpose of that fund, which is to restore land damaged by mining. The bailout would draw additional assets from the reclamation fund, which Congress has already weakened by provisions that use part of its assets to finance the miners' underfunded multiemployer retiree health-care plan as well as for distributions to states and Indian tribal nations.
Fourth, Congress undercuts the integrity of the transparency in financing of pension plans, the PBGC and the land program by providing assistance through indirect channels, complicating efforts to identify financial problems and long-term solutions. Sponsors of the bills in the Senate and House prefer to kick the can down the road. Unfortunately, the bills have bipartisan support and could win approval from President Barack Obama if the legislation should pass, in part because funding would not come directly from taxpayers. Multiemployer plan sponsors, including the miners, ought to oppose the bills, and seek a long-term solution for the PBGC.
“If PBGC's finances aren't reformed, the agency will eventually run out of money to pay benefits,” then-PBGC Director Joshua Gotbaum said in 2012 testimony before the Health, Employment, Labor and Pensions subcommittee of the House Education and the Workforce committee.
Both union-represented and non-union mining companies are required to pay into the reclamation program. It is not fair for non-union mining companies to have the reclamation fund used for union health and potentially pension benefits. If the reclamation fund collects more in premiums than necessary to restore land, then the premiums should be lowered. The fund should not be diverted for purposes not intended. n
