Following a contentious markup session, a key House Committee approved legislation on June 11 that would address the funding problems facing multiemployer pension plans.
The House Education & Labor Committee’s approval of an amended version of the Rehabilitation for Multiemployer Pensions Act (H.R. 397) (dubbed the “Butch Lewis Act” by its sponsors) came after Republican committee members made strong allegations that the committee had not adequately considered the bill’s ramifications and had shut down debate on the bill. “It is simply irresponsible to bring a bill addressing such a complex and far-reaching issue before the Committee for markup with only days’ notice,” argued Rep. Virginia Foxx (R-NC), the ranking Republican on the committee.
But the bill is a priority of Ways & Means Committee Chairman Richard Neal (D-MA). “More than a million Americans are in multiemployer pension plans that are quickly running out of money, putting families across the country at risk of unexpected financial hardship,” Neal stated after the legislation was approved by the Education & Labor Committee. “It’s simply not right that – by no fault of their own – these workers and retirees could lose decades’ worth of savings they earned and chose to take instead of wage increases.”
The Ways & Means Committee will consider the legislation next before it moves to the full House for consideration.
According to a summary of the legislation, it calls for the creation of the Pension Rehabilitation Administration (PRA), a new agency within the Treasury Department that would be headed by a director appointed by the president to serve a five-year term.
The PRA would issue government bonds to finance loans to multiemployer pension plans, plans that have suspended benefits, and some recently insolvent plans currently receiving assistance from the Pension Benefit Guaranty Corporation (PBGC). The loan amount would be the amount of cash needed to fund the plan’s obligations for the benefits of participants and beneficiaries in pay status at the time the loan is made. The bill would not cut any benefits.
Plans that receive a loan would be required to fund the plan’s obligations to those in pay status in one of three ways:
- annuity purchase;
- cash matching or duration matching portfolios; or
- some other portfolio prescribed by the Treasury Secretary in regulations which has a similar risk profile as cash matching and duration matching and is equally protective of participants’ and beneficiaries’ interests.
Except in the case of an annuity purchase, the PRA would maintain oversight over all loan proceeds used to fund retiree liabilities. Such oversight would include a mandatory triennial review of the adequacy of the portfolio to fund retiree benefits.
In addition, the annuity contracts and fixed income portfolios purchased with the loan proceeds and the benefits covered by the annuity contracts or portfolios would not be considered in determining minimum required contributions, but remaining payments due on the loan (interest and principal) would be, as well as benefits not covered by the annuity contracts or portfolios.
A plan could also apply for PBGC financial assistance in conjunction with a PRA loan, but only if that plan can demonstrate that a PRA loan alone will not allow the plan to maintain solvency or become solvent.
Neal notes that the bill is not a bailout and that it would require plans to pay back PRA loans. “The federal government is simply backstopping the risk,” he stated when introducing the legislation. In general, the loan terms would require the plan to make interest payments for 29 years with final interest and principal repayment due in year 30. The bill also includes an incentive for early repayment.
In the last session of Congress, a task force of Senate Republicans and Democrats negotiated for months over the best path forward in solving the multiemployer plan crisis, but were unable to reach an agreement.
During the June 11 Education & Labor Committee markup, the Committee also approved the Protecting Older Workers Against Discrimination Act (H.R. 1230) and the Workplace Violence Prevention for Health Care and Social Service Workers Act (H.R. 1309).