Solutions to a multiemployer pension crisis will be painful but will only get harder and more costly if there is further delay, witnesses told the House Education and Labor subcommittee on health, employment, labor and pensions Thursday.
The hearing, titled "Cost of Inaction: Why Congress must address the multiemployer crisis," heard from business executives, multiemployer actuarial experts, academics and a retiree from Hostess Brands Inc. on the imminent crisis for an estimated 10% of multiemployer pension plans covering 1.5 million participants that are headed toward insolvency.
The situation is equally dire for the Pension Benefit Guaranty Corp.'s multiemployer program. Without congressional action, participants in struggling plans face benefit cuts of 50% or more; when the PBGC multiemployer program itself becomes insolvent as projected to happen by 2025, those cuts will deepen to 90%, testified Joshua Shapiro, vice president of pensions with the American Academy of Actuaries.
The impact on federal tax revenue and social safety nets is also sizable, said Mariah Becker, director of research and education for the National Coordinating Committee for Multiemployer Plans. Over a 30-year horizon, an estimated $32 billion to $103 billion in taxes would not be paid if some plan participants lose their pension benefits, while government social safety program costs could increase $170 billion to $240 billion.
Committee members on both sides of the political aisle voiced support for a bipartisan solution that addresses the current plans in crisis but also offers structural reforms for all multiemployer pension plans. Possible reforms discussed included higher multiemployer PBGC premiums, changes to discount rates used to calculate obligations, and changes to assumed rates of return on investments, all of which could build on last year's legislative proposal to create a federal loan program for multiemployer pension funds.
H.R. 397, the Rehabilitation for Multiemployer Pensions Act, is sponsored by House Ways and Means Committee Chairman Richard Neal, D-Mass., and has bipartisan support. United Steelworkers International President Leo W. Gerard said in a statement that the bill "would make sure that American workers get the secure retirements they deserve," and pledged to support its passage.
"I don't think we can talk about this without assuming there will be shared pain," said ranking subcommittee Chairman Tim Walberg, R-Mich.
"This crisis is one of the most important and urgent issues within our committee's jurisdiction," said subcommittee Chairwoman Frederica S. Wilson, D-Fla., who promised more hearings soon to work on a solution. "Congress cannot afford to wait any longer," Ms. Wilson said.