Four Democratic US representatives are introducing legislation they say will protect workers, retirees, employers, and taxpayers from the multiemployer pension crisis and beef up the Pension Benefit Guaranty Corporation (PBGC).
The Emergency Pension Plan Relief Act of 2021 (EPPRA), sponsored by Rep. Robert Scott, D-Virginia; Rep. Donald Norcross, D-New Jersey; Rep. Haley Stevens, D-Michigan; and Rep. Joe Morelle, D-New York, would create a special partition program that would expand PBGC’s authority, increase the number of eligible plans, and simplify the application process.
Under current law, PBGC has limited authority to partition certain troubled multiemployer pension plans. With a partition, the PBGC would assume financial responsibility over some of the benefits of an eligible plan so the plan can remain solvent, and a plan would be able to receive enough financial assistance to keep it solvent for 30 years without cutting earned benefits. Additionally, plans that had previously reduced benefits would have to restore them to the retirees who earned them. In exchange for the financial assistance, each plan would have to comply with certain conditions and would be required to file regular reports to PBGC and to relevant congressional committees.
The proposed legislation would also require PBGC to annually report to Congress, and the Government Accountability Office (GAO) would be required to evaluate PBGC’s implementation and administration of the special partition relief program regularly. The pension lifeboat would also be required to establish and regularly update a website so plan administrators, employers, participants, beneficiaries, and the public could track the implementation and administration of the special partition relief program. And because PBGC currently receives no federal money, the legislation includes funding to cover the costs of the program.
The EPPRA would also put an end to multiemployer plans’ ability to apply for a suspension of benefits under the Multiemployer Pension Reform Act (MPRA) and would double PBGC’s maximum guaranteed benefit.
PBGC currently provides a maximum guaranteed benefit of $12,870 to a participant in a multiemployer plan with 30 years of service. The guarantee is 100% of the first $11 of the monthly benefit rate, plus 75% of the next $33 of the monthly benefit rate, multiplied by the participant’s years of credited service. The EPPRA would nearly double the guarantee to 100% of the first $15 in monthly benefits per year of service and 75% of the next $70 in monthly benefits per year of service, and it indexes it after that.
Under the bill, a plan in endangered or critical status for a plan year beginning in 2020 or 2021 would be able to extend its rehabilitation period by five years to give it time to improve its contribution rates, limit benefit accruals, and maintain plan funding. The legislation would also allow a plan to use a 30-year amortization base to spread out losses over time instead of the typical 15-year time frame during which investment losses are generally required to be recouped.
The bill was lauded by the Teamsters, which said it would boost the viability of pension plans currently in financial jeopardy.
“With a new administration and new Congress now in place, the Teamsters want to let elected officials know it is time to work together across party lines to secure the hard-earned retirements of retirees and workers,” Teamsters General President Jim Hoffa said in a statement. “These hardworking Americans deserve to receive the benefits they were promised.”
The Congressional Budget Office (CBO) has not yet provided an official cost estimate of EPPRA this term. However, according to the House Committee on Education and Labor, the CBO scored similar provisions in the Heroes Act last year at approximately $52 billion over the 10-year budget window.