Saving underfunded pension plans from bankruptcy has a better chance of coming to fruition now that Democrats control both the White House and Congress.
Under divided rule, lawmakers pushed pension solvency via standalone bills, as part of economic relief packages, and in supercommittee talks that ultimately failed because of partisanship. But with unified control, Democrats can expedite their utmost priorities in a simple majority-based budget reconciliation vote.
Whether pension solvency rises to that level remains to be seen.
“I don’t think it’s a first 100 days project,” Tom Reeder, former director of the Pension Benefit Guaranty Corporation, said. “But it could get passed with a Covid relief bill.”
Rescuing multiemployer plans from ultimately collapsing and overwhelming the federal pension insurer that backs them gets pricier every time tax writers punt the issue to the next year. Disagreements about who should cover the tens of billions in promised benefits—taxpayers, struggling plan sponsors, retirees, or a combination—have thwarted legislative compromise for years.
Solving the multiemployer pension crisis remains a “top priority” for House Ways and Means Chairman Richard Neal (D-Mass.), a committee aide told Bloomberg Law. “He will continue to try to advance a solution as soon as possible in the 117th Congress,” the aide said.
The PBGC projects its multiemployer arm will go broke by 2026.
Priority Shuffle
Pension solvency doesn’t appear in the economic agenda Neal outlined Jan. 11. But he has put forward two measures in recent years in an effort to resolve the issue.
His first attempt—a standalone 30-year government loan program known as the Butch Lewis Act—passed the House in July 2019.
His second attempt, the Emergency Pension Plan Relief Act, was included in the coronavirus-related Heroes Act, which the House passed in May and again in October 2020. The EPPRA, among other things, authorizes benefit cut-free reorganization of failing plans and restores benefits suspended by financially distressed plans that qualify for the administrative relief.
Neither gained traction in the Republican-run Senate.
GOP leaders late last year released their pension proposal, which features higher fees for struggling plans, contributions from plan participants, and an unspecified amount of taxpayer-funded financial aid for the PBGC.
Supporters insist the higher fees are needed to counter mismanagement by irresponsible plan sponsors, while opponents view the strategy as payback against labor unions.
Incoming Senate Finance Committee Chairman Ron Wyden (D-Ore.) didn’t immediately respond to a request for comment on how or when he’ll address pension solvency in the new session.
Neal, House Speaker Nancy Pelosi (D-Calif.), and incoming Senate Majority Leader Chuck Schumer (D-N.Y.) have indicated they are all on board with getting pension solvency done as soon as possible, according to Gene Kalwarski, CEO of actuarial firm Cheiron Inc. and a Butch Lewis Act supporter.
“Many of Schumer’s constituents have already faced benefit cuts under the Multiemployer Pension Reform Act and many more will unless Congress acts soon,” Kalwarski said, citing the 2014 law financially distressed plans must contend with now.
Cutting Deals
Preston Rutledge, a Labor Department official and Senate Finance Committee staff alum turned founder of Rutledge Policy Group LLC, hailed introduction of the GOP proposal—something Senate Republicans workshopped over the past year—as “a very promising” development.
Tucking a bipartisan compromise into a “larger, must-pass package” would be one way to fast-track a solution, he said. Otherwise it’s back to the status quo—until that becomes untenable.
“The pressure to pass something will become more intense the closer we get to the projected insolvency date,” Rutledge predicted.
Terrence Deneen, a PBGC alum who is now a fellow at the Pension Rights Center, estimated that a handful of Senate Republicans might agree to a deal sooner if the failing Central States Pension Fund decimates the retirement holdings of “hundreds of thousands of teamster retirees and families in key Midwestern swing states.”
The decades-old retirement plan represents an army of participants—including Teamsters, bakers, and miners—in danger of losing their promised benefits within the next few years because of financial instability.
“So there is a 50/50 chance this will be a must pass bill for the 2022 midterms,” Deneen said.
Reeder sees no reason to drag this out past then.
“They’ve done enough groundwork. They know where everybody stands,” he said.
