For the multiemployer plans also experiencing underfunding problems, the Pension Protection Act gave trustees a new color-coded zone system and funding requirements based on plan funding levels, with green for healthy plans funded at 80% or better, yellow for endangered plans funded between 65% and 79%, and red for critical plans funded less than 65%.
Yellow- and red-zone plan trustees had to adopt funding improvement or rehabilitation plans, respectively.
The law's multiemployer pension piece was "geared at forcing plans to look down the road, identify problems and take proactive steps to fix their funding problems," Mr. Kreps said.
But then the economy crashed. "I think PPA probably would've worked on the multiemployer side but for the Great Recession," Mr. Kreps added. "It just couldn't work after that."
For years after the Pension Protection Act, lawmakers in Congress debated and negotiated on what to do with the steepening multiemployer pension crisis but failed to reach a consensus.
It wasn't until March, when Democrats in Congress passed the $1.9 trillion American Rescue Plan Act of 2021, that multiemployer pension plans got relief — an estimated $94 billion in federal assistance grants for the most at-risk plans to pay benefits.
The Pension Protection Act was intended to avoid using federal dollars to bail out failing pensions plans, Mr. Kreps said. "The whole point of PPA was to shore up the plans, to make trustees and bargaining parties make very, very difficult choices to shore up their plans and not let them just procrastinate on tough decisions, and they did," he said. But in the end, "The only option was (the American Rescue Plan), the special financial assistance," Mr. Kreps added.
Mr. Gotbaum noted that the American Rescue Plan's multiemployer relief was the only major pension decision in decades that wasn't bipartisan. "COVID released the budget constraints and basically the Democrats said after years of trying to negotiate an agreement with Republicans, 'We can't wait,'" Mr. Gotbaum said. Democrats passed the bill using budget reconciliation, which requires only a simple majority in the Senate instead of the usual 60 votes.
Aliya Robinson, senior vice president of retirement and compensation policy at the ERISA Industry Committee in Washington, said she's grateful a legislative solution was ultimately released and wasn't surprised by the result.
"Between the two parties there was such a philosophical difference about how to address the issue that it just seemed like it would've taken another five to 10 years to find a compromise," Ms. Robinson said.
Ultimately, Alicia H. Munnell, director of the Center for Retirement Research at Boston College, is happy benefit cuts weren't inflicted upon workers and retirees. "I haven't reconciled in my own mind whether we've missed an opportunity for reform, but I'm happy that the beneficiaries were taken care of," Ms. Munnell said.