House Passes Multiemployer Pension Bill with Dim Senate Prospects

Democrats and Republicans divided over fate for underfunded union pensions

Stephen Miller, CEBS By Stephen Miller, CEBS July 29, 2019
House Passes Multiemployer Pension Bill with Dim Senate Prospects

The U.S. House of Representatives passed legislation July 24 to provide federally backed loans to underfunded multiemployer defined benefit pension plans. H.R. 397, the Rehabilitation for Multiemployer Pensions Act, passed the Democrat-controlled House by a mostly party line vote of 264-169, with no Democrats opposing the measure and only 20 Republicans voting in favor.

The legislation is called the Butch Lewis Act, after a late Teamster union leader in Cincinnati who fought pension cuts. The GOP-controlled Senate has not introduced a companion measure and many Republicans are critical of what they see as a government bailout for mismanaged plans.

Multiemployer pension plans, also known as Taft-Hartley plans, cover unionized workers and pensioners. Employer contributions are determined by collective bargaining, and the plan is governed by a joint labor-management board of trustees. Both single-employer and multiemployer pensions are insured by the federal Pension Benefit Guaranty Corporation (PBGC), which only pays participants in failed plans a portion of their vested benefit.

We've rounded up articles from SHRM Online and other trusted news sources to provide a deeper look at this topic.

A Deep Political Divide

Proponents argue the bill is necessary as there are 1,400 multiemployer plans covering about 10 million people throughout the United States. A large number of those are at risk of running out of money, placing workers' ability to retire—and the overall economy—at risk. But critics argue that H.R. 397 would be a taxpayer bailout for private sector multiemployer pension plans, which they say sets a bad precedent for other private industries and public pension plans. The bill is likely to face an uphill battle in the Republican-controlled upper chamber.

(The Hill)

Vicious Cycle for Troubled Plans

Multiemployer plans involve several companies collectively funding plans. Should one employer go bankrupt or leave, the burden to maintain the plan builds for those who remain in it. Unions favor multiemployer plans because they can remain with workers even if they lose or switch jobs. But if several companies leave, the plans can become a financial burden on the remaining employers and create a vicious cycle that drags the whole thing down.

(Washington Examiner)

[SHRM members-only toolkit: Designing and Administering Defined Benefit Retirement Plans]

Workers' Retirements at Risk

In an impassioned speech before the House vote, Rep. Haley Stevens, D-Mich., who served as chief of staff to the auto task force that helped save General Motors and Chrysler in 2009, took on the bill's critics, saying, "If we do nothing, 1.3 million hard-working Americans will lose what they paid into their entire working life."

(Detroit Free Press)

Bipartisan Solutions Missing

Rep. Anthony Gonzalez, R-Ohio, said he voted against the measure because it won't fix the pension system's structural problems, isn't fiscally responsible and isn't likely to pass the Senate. "Our pensioners deserve bipartisan legislation that will address the immediate crisis, implement lasting reforms and protect taxpayer dollars to ensure they and their families are taken care of," reads a statement from Gonzalez. "I will continue working with my colleagues on both sides of the aisle and members of the Senate to ensure the Ohio retirees relying on these pensions are not abandoned."

The Congressional Budget Office estimates the bill would cost $64.4 billion. It is opposed by organizations including Citizens Against Government Waste and the National Taxpayers Union Foundation, which argued it would cost taxpayers money while failing to require pension fund reforms that would ensure taxpayers are not on the hook when the loans mature. Along with labor unions, groups that support the measure include AARP.


A Lingering Problem

As many as 114 multiemployer pension plans covering nearly 1.3 million workers are severely underfunded and headed toward failure in the next 20 years, according to an analysis that draws on annual financial reports that multiemployer pension plans filed with regulators. Underfunded multiemployer plans "pose a severe threat to the PBGC," said John Lowell, a partner and actuary with October Three, a pension advisory firm. The Multiemployer Pension Reform Act, passed at the end of 2014, allows severely distressed multiemployer plans to seek permission from the U.S. Treasury Department to reduce future payouts to avoid bankruptcy and termination, and by doing so to keep solvent the PBGC's multiemployer pension insurance fund.

(SHRM Online)



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