Why a Multi-Employer ‘Fix’ Matters

One week into the 116th Congress and the first retirement legislation has been introduced.

I will admit, the bill has a particular focus, and that many of you probably don’t interact with multi-employer plans, which are created by collective bargaining agreements and sponsored by multiple employers (not to be confused with multiple employer plans, or MEPs). But I strongly believe all members of the retirement community should hope for a quick and effective solution to this significant problem impacting multi-employer plans.

Let’s take a deeper dive on the retirement legislation introduced.

On Jan. 9, Rep. Richie Neal (D-MA), Chairman of the House Ways & Means Committee, introduced the bill – his first as Chairman of the most powerful committee in the House of Representatives), the Rehabilitation for Multiemployer Pensions Act. The purpose of this legislation is to provide a loan program within the Treasury Department for multi-employer plans that are in critical and declining status. 

Why should we care? It is true that there are only about 1,400 multi-employer plans in this country, but they cover approximately 10 million participants and retirees. More significantly, without a solution to shore up a few of the most critical multi-employer plans, we’ll be faced with a drastic reduction in benefit payments to hundreds of thousands of retirees.

If a multi-employer plan were to fail, the backstop is the Pension Benefit Guaranty Corporation (PBGC), but the benefit guarantees the PBGC provides to participants in a multi-employer plan are pennies on the dollar. And, even then, the PBGC predicts the trust fund that provides these payments will go bust in 2025, which means that retirees will be left with drastically reduced pensions or even no pension at all. Businesses that rely on spending from retirees, in their hometown and across the nation, would see a reduction in revenue. The list of negative implications to the economy doesn’t stop there – economists and policymakers have expressed concerns on the contagion effect that the failure of a few large multi-employer plans could have on the financial status of the remaining multi-employer plans.

Rep. Neal is well known and highly regarded for his focus on retirement issues, and he purposefully chose this legislation to be his first bill. The introduction of this legislation sends a clear signal that he intends to solve this particular retirement crisis under his watch as Chairman of the Ways & Means Committee. And, he has a good chance! The legislation was introduced with four Democratic sponsors and four Republican sponsors. On the other side of Capitol Hill, Senate Republicans and Democrats have been negotiating for months on the best path forward in solving the multi-employer plan crisis – and the final proposal could easily end up being the loan program within Neal’s legislation plus a few other policy ideas that Congress has debated for many years.

While it seems likely that members of Congress will slowly reintroduce retirement legislation that was focused on in the last Congress (e.g., the Retirement Enhancement & Savings Act (RESA), the Retirement Security and Savings Act and electronic delivery), it would be beneficial for the multi-employer plan crisis to be cleared and allow for a renewed focus on the remaining proposed retirement policies that will enhance current provisions and expand access to retirement savings.

Will Hansen is the American Retirement Association’s Chief Government Affairs Officer.