A proposed federal loan program for struggling multiemployer pension plans could cost $34 billion over a decade, well below an initial projection of $101 billion, according to an estimate by the Congressional Budget Office provided Wednesday to members of a congressional committee on multiemployer pension plans.
A multiemployer loan and financial assistance program is the centerpiece of the proposed Butch Lewis Act, one of the ideas being considered by the Joint Select Committee on Solvency of Multiemployer Pension Plans, a bipartisan group of House and Senate members tasked with coming up with solutions by November.
The latest CBO estimate, released by House Ways and Means Committee Ranking Member Richard Neal, D-Mass., and select committee co-Chairman Sen. Sherrod Brown, D-Ohio, represents "smart changes" to the legislation that "make it a better bill and the cheapest options for taxpayers," said Jenny Donahue, spokeswoman for Mr. Brown. It solves the multiemployer pension crisis without benefit cuts, "for less than half the cost of the alternative," Ms. Donahue said in a statement.
The alternative is having insolvent plans wind up being overseen by the Pension Benefit Guaranty Corp. and sinking the PBGC's already insolvent multiemployer program. Correcting that failure would cost $78 billion, PBGC Director Thomas Reeder said in congressional testimony last November.
Changes made to the proposed Butch Lewis Act to lower the costs include making loans and assistance available only to the neediest plans, requiring plans to exhaust their capital before accessing PBGC funds, creating an incentive for early loan repayment, and an interest rate cap of 0.2% of 30-year Treasury bonds.
A more complete estimate will be needed after final legislation is drafted by the select committee.
In a statement, Mr. Brown said, "What this score confirms is that in order to pass the best solutions for workers, retirees, businesses and taxpayers, we should start negotiations with proposals that meet the standard set by the Butch Lewis Act."