US Congress is considering a plan to bail out struggling multiemployer pension plans and make them more financially solvent, according to The Washington Post.
The Treasury Department would spend as much as $3 billion a year to subsidize payments for retirees from certain underfunded pensions, according to a draft of the plan, which was obtained by The Post. It would also require benefit reductions, higher premiums, and new fees for companies and union members, while limiting taxpayer contributions.
The plan is expected to be announced before the end of November, as the Joint Select Committee on Solvency of Multiemployer Pension Plans, led by Sens. Sherrod Brown (D-Ohio) and Orrin G. Hatch (R-Utah), has set a Nov. 30 deadline to vote on a report containing findings, conclusions, and recommendations to improve the solvency of multiemployer pension plans, and the Pension Benefit Guaranty Corp. (PBGC).
“The hard-working men and women who are counting on this committee deserve a solution, and Chairman Hatch and I continue to negotiate with other members of the committee to reach a bipartisan agreement,” Brown said in a statement.
According to The Post, the plan is just one option under consideration, and does not represent a final deal.
The PBGC guarantees payment of basic pension benefits earned by approximately 40 million American workers and retirees in nearly 24,000 plans. Since 1974, the PBGC has become responsible for paying guaranteed amounts that currently cover over 1.5 million people in more than 4,900 failed single-employer and multiemployer plans, making payments of $5.8 billion annually as of fiscal year 2017.
While the single-employer program is thriving, PBGC Director W. Thomas Reeder has warned that the multiemployer program “remains in deep deficit” and is projected to run out of funds within the next several years.
Multiemployer plans were weakened by recessions in 2001 and 2008, which decreased rates of unionization, and led to overall decreases in employment in some industries. Bankruptcies and plan withdrawals led to a decline in employer contributions to multiemployer plans, and many smaller employers went bankrupt as others laid off workers or reduced working hours.
According to the PBGC, this led to a sharp rise in minimum required contributions, and a “significant number of employers” responded by ending their participation in one or more of the multiemployer plans they previously supported.
“The challenges we face in the Multiemployer Program are increasing as the date of the program’s insolvency grows closer,” Reeder wrote in the PBGC’s 2018 annual report. “As more time passes, the changes required to prevent insolvency become more disruptive and painful for participants, plans and employers.”