By DON McINTOSH, Associate Editor
Severely underfunded union pension plans will be allowed to reduce current retiree benefits in order to avoid future insolvency, under a last-minute amendment attached to the $1.1 trillion federal government appropriations bill known as the “CRomnibus.”
The amendment was sponsored by an unlikely duo: anti-union House Education and Workforce Committee chair John Kline (R-Minn.), and pro-union former committee chair George Miller (D-Calif.), who was serving out his final days of office after 20 years. The 161-page amendment came under the unwieldy name of Amendment 1 to H Res 776 (which itself governed consideration of HR 83). The proposal had support from a number of unions, and opposition from others. It was drawn up by committee staff based for the most part on “Solutions, Not Bailouts” — a proposal introduced last year by the National Coordinating Committee for Multiemployer Plans (NCCMP), a group representing union benefit plans.
Right now, if we do nothing, those very same retirees that you’re worried about have a very high likelihood of losing all of their benefits, or going to the PBGC and getting a maximum benefit of $12,000 a year.” — Congressman George Miller
Amendment 1 would shore up PBGC finances by doubling the per-participant premium paid by multi-employer pension plans to $26 per person per year.
It would also allow severely underfunded plans (those expected to run out of money in 20 years or less) to reduce benefits for existing retirees — if that would prevent the plan from becoming insolvent. Plan trustees would not be allowed to cut benefits for disabled retirees or retirees 80 years or older. And the cuts for retirees ages 75 to 79 would be less than younger retirees. Benefits could not be cut to a level below 110 percent of PBGC’s minimum benefit, but that could still be a pretty hefty cut. And the consequences could be widespread: Up to 3 million people are in plans that are regarded as severely underfunded.
One part of Amendment 1 came at Miller’s insistence, and was not part of the Solutions Not Bailouts proposal: In plans with more than 10,000 participants (retirees and active workers), participants would have a chance to vote to reject the proposed cuts. But the cuts would only be rejected if more than 50 percent of participants voted against them, not 50 percent of those voting. Even then, the U.S. Treasury Department can override the vote and go forward with the cuts if it concludes that impending plan insolvency poses “systemic” risk to PBGC.
The legislation was supported by the Building Trades of North America, as well as Associated General Contractors; United Association of Plumbers and Pipefitters; International Union of Operating Engineers; International Union of Painters and Allied Trades; United Brotherhood of Carpenters; Service Employees International Union; and United Food and Commercial Workers, as well as Kroger Corporation.
“This is a tool for trustees of plans that can be made solvent long-term,” said Randy DeFrehn, executive director of NCCMP, the multi-employer trade group that originated the proposal. DeFrehn said a bailout, or other fixes, might have been preferable, but when the Democrats were in charge of the House, his group was unable to get anywhere with proposals for the government to step in to guarantee the PBGC. “I think the Republicans did this because they don’t want … PBGC to go bankrupt and have to write a $40 or $100 billion check in the future.”
On the other hand, the proposal was opposed by the Teamsters, Machinists, Boilermakers, United Steelworkers, Laborers International Union, AARP, and the non-profit Pension Rights Center — mostly because of the principle that it’s wrong to cut promised benefits after a worker retires.
Normally, legislative proposals go through committee hearings, and are subject to amendments and votes. In this case, the pension legislation took the form of Amendment 1 in the House Rules Committee to H Res 776, a bill governing consideration of HR 83, a massive bill to fund the entire federal government. HR 83 was known as the “CRomnibus” because it combined a “Continuing Resolution” (an agreement to maintain current funding levels when Congress can’t agree on the correct new level) and an “omnibus” appropriations bill (appropriations for 11 separate parts of government, all voted on as one bill.)
The closest Amendment 1 got to a Congressional debate was a Dec. 10 hearing in the House Rules Committee, at which Democrat Alcee Hastings of Florida confronted Miller, citing the AARP and quoting Machinists President Tom Buffenbarger. Hastings said it would be the first time in 40 years since the passage of the legislation known as ERISA that Congress would allow plans to cut pension benefits to those already retired.
Miller responded vigorously: “Right now, if we do nothing, those very same retirees that you’re worried about have a very high likelihood of losing all of their benefits, or going to the PBGC and getting a maximum benefit of $12,000 a year,” Miller said. “They have one pool of money. Can they make it go for a longer period of time for a greater number of people, or do they just have to go with the dictate that they all go to a minimum benefit. And if enough of them go to the minimum benefit, the ambulance that’s carrying them runs off the road — the PBGC goes bankrupt, and they get nothing.”
“It’s been great listening to this debate over the soul of the Democratic Party,” scoffed Oklahoma Republican Tom Cole.
All told, the pension debate took up less than seven minutes. [It’s available here on YouTube from minute 39:50 to 46:30]
Soon after the exchange, HR 776, attaching pension reform to the appropriations bill, passed 9-4 in House Rules. Then HR 83, the CRomnibus, passed the House 219-206 on Dec. 11, with 162 Republicans and 57 Democrats voting for it, and 67 Republicans and 139 Democrats voting against. Next, the Senate approved HR 83 by 56-40 on Dec. 13, with 32 Democrats and 24 Republicans voting for it, and 22 Demcrats and 18 Republican voting against it.
DeFrehn said the work of rescuing union pension plans isn’t done.
“We’ve put a tourniquet on a gigantic gaping wound, and now what we need to do is provide a path forward so we can have a secure retirement system.”