By DON McINTOSH
Help really is coming for over 2 million union members, retirees, and family members who are participants in distressed union-sponsored multiemployer pension plans.
Last year, Congress included a pension rescue program when it passed the $1.9 trillion stimulus package known as the American Rescue Plan. But in July 2021 when the government announced the initial rules to implement the pension rescue program, national AFL-CIO president Liz Shuler and others complained that the way the rules were written, they’d still leave pension plans in trouble.
Approximately 10.9 million union workers, retirees and spouses are owed pension benefits by about 1,400 union-sponsored multiemployer pension plans. The plans are common in construction and other industries where union members work for multiple employers, and their investment and administration decisions are tightly regulated. Most are in good financial health. But Wall Street financial losses, compounded by pension rules passed by Congress, put over 200 multiemployer plans on a path to near term insolvency. For years, national union leaders urged Congress to pass a pension rescue law named after Ohio union leader and pension advocate Butch Lewis —just like they’d rescued banks after the crash. Union retiree activists were overjoyed when an even better version of that rescue made it into American Rescue Plan.
But last July when the government’s Pension Benefit Guaranty Fund (PBGC) announced the rules for its “Special Financial Assistance program,” pension experts discovered serious problems. As a letter from the AFL-CIO’s Shuler to the PBGC explained, the government would determine the the amount of aid needed according to plans’ normal rate of investment return, but then say that the federal funds could only be invested in low-risk assets like bonds. That meant that distressed funds could still run out of money even after getting the aid.
Even worse was the dilemma faced by 18 pension funds that had used a 2014 law to restore solvency by cutting retiree benefits. The pension rescue program embedded in the American Rescue Plan was supposed to provide enough aid to reverse all those cuts and repay retirees for any pension payments they’d missed. But the PBGC rule said those pension plans would get only enough aid to keep them going until 2051. Pension advocates and members of Congress who had written the law protested that the rescue was intended to leave the plans fully solvent as of 2051, not having spent down their assets.
Two pension plans based in the Portland area had made the so-called MPRA cuts: Western States OPEIU Pension Fund had cut pension benefits up to 30%, and Plasterers Local 82 Pension Plan cut benefits up to 31%.
Trustees for the Western States OPEIU Pension notified participants March 6 that the plan intends to apply for the relief. But under the initial rule it wasn’t clear whether that might be placing the fund in danger of long-term insolvency once again.
In the final rule announced July 6, both of the problems the AFL-CIO identified were fixed. The final rule allows 33% of the aid to be invested in assets that are projected to receive a higher rate of return. And it provides enough aid to leave the MPRA in good health as of 2051.
President Joe Biden himself delivered the news July 6 to a cheering group of union members and retirees at a high school in Cleveland, Ohio.
The new rules take effect Aug. 8. PBGC’s latest estimate is that the pension rescue will cost the U.S. Treasury $74 billion to $91 billion.
As of July 6, PBGC had approved applications from 27 plans covering 127,532 participants, totaling $6.7 billion in aid.
The estimated 2 million people who will eventually be helped by the pension rescue program are both Republicans and Democrats, and they live in red states as well as blue. But no Republicans voted for American Rescue Plan, and when PBGC announced the revised final rule, several prominent House Republicans slammed it.
“Based on the White House’s summary of PBGC’s final rule, the Biden administration intends to bow to Big Labor’s interests and flout the law at the expense of taxpayers,” said Virginia Foxx (R-NC) the top Republican in the House Education and Labor Committee and Rick Allen (R-GA), leading Republican in its pensions subcommittee.