A committee of the U.S. House of Representatives has begun looking at a looming crisis of failing union-sponsored multi-employer pension plans. Multiemployer pensions are pensions created through collective bargaining agreements between employers and a union. They’re common in construction, where they provide a retirement benefit for workers who may have multiple employers over a career.
There are about 1,400 multiemployer pension plans in all, with about 10 million union workers and retirees enrolled. Most are doing fine financially, but a significant minority are seriously underfunded and are projected to run out of money within the next 20 years.
When they do, they’re expected to exhaust the assets of the government program that’s supposed to insure them. The Pension Benefit Guaranty Corporation (PBGC) maintains a separate program for multiemployer pension plans: Plans pay premiums to the PBGC, and the PBGC pays benefits if the plans become insolvent.
The program’s premiums and benefit levels are low. Premiums were just $9 a year per participant until 2012, and are now $28 a year. As for benefit levels, the maximum guaranteed benefit for a retiree with 30 years of service is $12,870 annually. That guarantee hasn’t increased since 2001 and isn’t indexed for inflation.
The financial condition of the PBGC’s multiemployer program is dire, and without action will be worse, PBGC director Thomas Reeder told the Subcommittee on Health, Employment, Labor and Pensions of the House Committee on Education and the Workforce at a Nov. 29 hearing. As of Sept. 30, the program had assets of $2.3 billion and projected liabilities of $67.3 billion. That’s because more than 100 multiemployer plans are expected to fail, in addition to the 72 that already have.
If the PBGC’s multiemployer program runs out of money, the result will be catastrophic, Reeder said: The only money available for benefit payments would be the ongoing incoming multiemployer premiums, and currently those amount to less than $300 million a year.
The Nov. 29 hearing didn’t discuss solutions, but some Democratic members of Congress have one: a proposal for the U.S. Treasury to issue bonds to fund 30-year loans to the pension plans to enable them to make investments and pay benefits as scheduled. If the investments do sufficiently well, the loans could be repaid. It’s known as the Butch Lewis Act, named after a former Teamsters Local 100 president who fought to save Teamster pensions until his death in December 2015. In the Senate, the bill, S 2147, is sponsored by Sen. Sherrod Brown (D-Ohio) and has 13 Democratic co-sponsors. Its House version, HR 4444, is sponsored by Congressman Richard Neal (D-Mass.) and has 106 co-sponsors, including Oregon representatives Suzanne Bonamici, Earl Blumenauer and Peter DeFazio.
MORE: Read the PBGC director’s full report to the Committee here or watch the full hearing below:
