Congress Turns Attention Back to Multiemployer Pension Crisis
From Pension Notes, March 9, 2019
On Thursday, March 7, the House Subcommittee on Health, Education, Labor and Pensions (HELP) held a hearing titled, “The Cost of Inaction: Why Congress Must Address the Multiemployer Pension Crisis.” This was the first Congressional hearing of 2019 to focus entirely on the crisis.
Congress is moving forward with the work performed in 2018 by the Joint Select Committee on the Solvency of Multiemployer Pension Plans, and the expectation is that the House of Representatives will take the lead. Video of the hearing is available for viewing here:
Because many members of the HELP Subcommittee are new to Congress, this hearing was intended to provide a broad overview of the crisis from a variety of perspectives, including some that had been heard during Joint Select Committee hearings last year. Witnesses included:
Joshua Shapiro, Vice President, Pensions, American Academy of Actuaries
Mary Moorkamp, Chief Legal Officer, Schnuck Markets
James Morgan, Retiree, Bakery and Confectionery Union and Industry International Pension Fund
James Naughton, Assistant Professor of Accounting Information & Management, Kellogg School of Management at Northwestern University
Glenn Spencer, Senior Vice President, U.S. Chamber of Commerce
Charles Blahous, J. Fish and Lillian F. Smith Chair and Senior Research Strategist, Mercatus Center at George Mason University
Mariah Becker, Director of Research and Education, National Coordinating Committee for Multiemployer Plans
Mr. Shapiro’s testimony described the scope of the multiemployer pension crisis. More than 120 funds that cover more than one million participants are projected to become insolvent in the next 20 years. “A combination of demographic trends, industrial shifts and economic declines” has limited these funds’ ability to recover. Because the Pension Benefit Guaranty Corporation (PBGC) is projected to run out of money by 2025, these participants face the possibility of losing nearly all of their benefits if their pension funds become insolvent. The two stakeholders in multiemployer pensions, Ms. Moorkamp and Mr. Morgan, described in personal terms what this disastrous scenario would mean for participants and employers.
Mr. Spencer and Ms. Becker made the case for immediate financial assistance from Congress to prevent troubled multiemployer funds from becoming insolvent, noting that any further delay will cause the crisis to worsen and the solution to become more expensive. Some members of the Subcommittee voiced support for proposals that would provide such assistance, such as the Rehabilitation for Multiemployer Pensions Act (the House version of the “Butch Lewis Act”).
Other members of the Subcommittee were skeptical of using taxpayer dollars for this purpose, with some demanding that any assistance be tied to structural changes in the multiemployer system. Two academics, Mr. Naughton and Mr. Blahous, argued in favor of such structural changes, including revisions to the “discount rate” rules used by multiemployer pension funds and increases to premiums that funds pay into the PBGC.
The potential damage that could be caused by changing the “discount rate” is described in more detail in the July 27, 2018 issue of Pension Fund Notes. Ms. Becker explained that this could destabilize the entire multiemployer system by driving most healthy plans into the “red zone,” causing large increases in employer contributions and potentially dramatic benefit reductions. An increase in PBGC premiums would only cause troubled funds to become insolvent even faster.
There was general agreement among Subcommittee members that some solution must be agreed upon soon, and that delays to this point have only made matters worse. What that solution is, however, still remains to be seen. The AFM-EPF Trustees will continue to push for a solution that addresses our Fund’s financial issues and treats participants fairly. AFM-EPF participants can use the tools on the Fund website to contact their Members of Congress and urge them to take action.