‘Composite’ Solution for Multiemployer Plans in the Works
Bipartisan legislation that proponents say will provide funding relief for some multiemployer plans could emerge shortly, according to published reports.
Reps. Donald Norcross (D-NJ) and Phil Roe (R-TN) have just announced a multiemployer pension bill, the Give Retirement Options to Workers (GROW) Act. At a roundtable on Capitol Hill, Politico Pro reports, the congressmen said it would facilitate a transition to what is being called a “composite” retirement plan — a new type of plan that proponents say will modernize traditional pension plans by combining the key features of defined benefit and defined contribution plans.Proponents say
that this new structure will give peace of mind to workers who will still receive lifetime income through the composite plan, while giving employers certainty in how much they will be required to pay into the system.
Opponents — including AARP, the International Association of Machinists and Aerospace Workers, the National United Committee to Protect Pensions, the Pension Rights Center, the United Steelworkers and the Western Conference of Teamsters Pension Trust — argue that
the option will divert much-needed funding from legacy DB plans.Funding Gap
More than 10 million individuals rely on multiemployer DB plans, which are created by collective bargaining agreements and sponsored by multiple employers. However, in recent years a number of these plans have been confronted with severe funding challenges. Last November, the Pension Benefit Guaranty Corporation’s Fiscal Year 2017 Annual Report revealed that the deficit in its insurance program for multiemployer plans rose to $65.1 billion at the end of FY 2017, up from $58.8 billion a year earlier. The PBGC noted
that the increase was driven primarily by the ongoing financial decline of several large multiemployer plans that are expected to run out of money in the next decade.
Under the Give Retirement Options to Workers (GROW) Act, union pension plans could create tiered systems for benefits; existing DB plans would be protected and would be required to maintain a 75% funding rate for long-term liabilities, while also creating DC plans moving forward. The DC plans would have to maintain 120% funding levels as a “rainy day” cushion against stock market volatility. Employers would not be able to force workers to join such plans without approval from the membership.
Once authorized, composite plans would be managed by the private sector, without the need for government intervention, according to the sponsors.
Similar composite plan legislation was introduced in 2016 by Rep. John Kline (R-MN), who at the time was chairman of the House Committee on Education and the Workforce. Reps. Norcross and Roe currently serve on that committee.
The Give Retirement Options to Workers Act is expected to be introduced in the next week or so.