A Senate Republican proposal to help critically underfunded multiemployer pension funds and prevent more was introduced Wednesday by Finance Committee Chairman Chuck Grassley of Iowa and Health, Education, Labor and Pensions Committee Chairman Lamar Alexander of Tennessee.
All multiemployer pension plans would be affected by the proposed reforms, which "make significant changes to the management and operation of all multiemployer pension plans so that, moving forward, all plans will be better funded and more transparent to participants, sponsoring employers and government regulators," according to a white paper released with the announcement.
The proposed Multiemployer Pension Recapitalization and Reform Plan has five major components, three of which affect the Pension Benefit Guaranty Corp., whose just-announced record deficit confirms that the multiemployer program is itself headed toward insolvency by 2025.
The agency would gain authority and resources to do more partitions, allowing a struggling plan to spin off some liabilities that will be covered by the PBGC.
Multiemployer benefit guarantees that are significantly smaller than those for single-employer plans would see a boost, but plan sponsors would see their premiums jump to $80 per participant up from the current $20, along with a new variable-rate premium on underfunded plans.
Participants in all multiemployer pension funds — active workers and retirees — would see a new co-payment to help shore up PBGC finances and pay for the benefit increase.
Plan sponsors would also face new rules for measuring liabilities and funding levels, and determining their plan funding zone-status. To encourage employers to stay in plans and new ones to join, the plan calls for new rules on withdrawal liability.
The costs of the changes "should be born principally by the stakeholders within the system," the white paper noted.
Greg Reardon, a principal consulting actuary with Cheiron Inc. said in an interview that changes including higher premiums and lower discount rates would hurt even healthy plans and participants. “The proposal shores up the PBGC so that it continues to be a backstop, but it would save the struggling plans at the expense of healthy plans and retirees.”
In a statement, the senators said their proposal incorporates the work of the 2018 Joint Select Committee on the Solvency of the Multiemployer Pension System, which failed to reach a consensus among the bipartisan group. Recognizing the severity of the crisis for more than 125 struggling plans, Mr. Grassley said: "We need to act quickly, but we can't just pour money into failing and mismanaged funds. Our plan will provide relief and reform now, without it our retirees will be left without the future they worked for."
In the same statement, Mr. Alexander said, "the PBGC will be unable to meet its future obligations without necessary reforms because employers and unions have made pension promises to millions of American workers that they can't keep." The proposal "will involve a limited infusion of taxpayer dollars instead of an open-ended bailout, and institute important structural reforms so this does not happen again," he said.
Republican Sen. Rob Portman of Ohio, who chairs the Senate Finance subcommittee with jurisdiction over multiemployer pension reform, called the proposal “a positive first step” that will require changes, with he and colleague Sherrod Brown, D-Ohio, stressed that it will take a bipartisan approach, as Mr. Portman said in a statement, “to produce a truly impactful, lasting bipartisan solution.”
