Congress could tap the PBGC's single-employer insurance program as a "quick fix" should the agency's multiemployer program become insolvent, said Michael Kreps, Washington-based principal at Groom Law Group LLP during a keynote address Tuesday at Pensions & Investments West Coast Defined Contribution conference in San Diego.
The multiemployer program is significantly underfunded and projected to run out of money by the end of fiscal year 2025, at which point the government insurer will have to rely on revenues from premiums paid. By comparison, the funded status of the Pension Benefit Guaranty Corp.'s single-employer program continues to improve, following last year's good news that it had emerged from a negative net position for the first time since 2001, an agency report recently noted.
"The only way to solve this is for Congress to do something," Mr. Kreps said.
Tapping the single-employer program, from a policy perspective, would be "horrible," Mr. Kreps said in a subsequent interview, potentially turning to the premiums paid by corporate sponsors to bail out the multiemployer program. That, in turn, could further accelerate the move of corporate plan sponsors to get out of the business of offering a defined benefit plan.
"When it comes to writing a big check" bailing out the multiemployer program, Congress "will be looking for pots of money," he said in the interview.
PBGC officials have repeatedly stressed that money from the single-employer fund cannot be used for the multiemployer program.
Legislation addressing the multiemployer crisis is pending in Congress. The House approved in late July a reform package known as the Butch Lewis Act that would create a federal loan program for struggling plans. The next step is in the hands of Senate Finance Committee Chairman Charles "Chuck" Grassley, R-Iowa, whose committee is still working on its proposal, which is expected to provide funds to the PBGC to assist struggling plans.
In regard to other retirement issues, Mr. Kreps said he was not optimistic that SECURE Act will pass this year, given congressional gridlock. He estimated the legislation's chance of passing at less than 50%. Among other things, the Setting Every Community up for Retirement Enhancement Act of 2019 would make it easier for smaller employers to join open multiple-employer plans, ease non-discrimination rules for frozen defined benefit plans and add a safe harbor for selecting lifetime-income providers in defined contribution plans. Although it easily passed the House in May, the legislation is stalled in the Senate.
Congress is not "up to the task of governing in a traditional sense," Mr. Kreps said.
Staff writers Hazel Bradford and Margarida Correia contributed to this article.
