Bipartisan multiemployer pension reform legislation that would create a federal loan program for struggling plans was approved Tuesday in a 26-18 vote by the House Education and Labor Committee.
The bill introduced by House Ways and Means Committee Chairman Richard E. Neal, D-Mass., in January has 168 co-sponsors, including eight Republicans. Mr. Neal said his committee will be voting on the bill soon, with a sense of urgency for an estimated 10% of multiemployer pension plans covering 1.5 million participants headed toward insolvency.
"More than a million Americans are in multiemployer pension plans that are quickly running out of money, putting families across the country at risk of unexpected financial hardship. Congress has no choice but to address this crisis," Mr. Neal said in a statement.
Before the vote, House Education and Labor Committee Chairman Bobby Scott, D-Va., said not shoring up the multiemployer system will cost taxpayers "hundreds of billions of dollars. In other words, doing nothing to address this crisis is the worst and most expensive option we have."
Ranking member Virginia Foxx, R-N.C., cast doubt on the prospects of the bill's final passage, which she called a taxpayer bailout, predicting that it "will meet certain death in the Senate." No action on the bill has been scheduled in the Senate yet.
Also known as the Butch Lewis Act, H.R. 397 would establish the Pension Rehabilitation Administration and a related trust fund within the Treasury Department to make loans to multiemployer plans in critical and declining status that are approved by Treasury to reduce benefits, or to plans that are already insolvent but not terminated.
Loan applicants must prove that the loan will enable the plan to avoid insolvency and they will be reasonably able to pay benefits and repay the principal. Plans could not increase benefits or bargain for reduced contribution rates during the term of the loan.
Annuity contracts and fixed-income portfolios purchased with loan proceeds would not be factored into employer withdrawal liability calculations.
The Treasury Department would have 90 days to review loan applications, which would be considered approved unless the agency objects. Treasury would issue bonds to finance the loan program and oversee the portfolio. The director of the PRA would be appointed by the president to serve a five-year term.
Sponsors of such plans could also apply for financial assistance from the Pension Benefit Guaranty Corp., which would gain more funding to provide it, if the bill clears Congress.