The Senate Finance Committee on March 1, 2016, held a hearing on "The Multiemployer Pension Plan System: Recent Reforms and Current Challenges" that included discussion of the propriety of a 2014 law change allowing for benefit cuts under multiemployer plans as well as proposed legislation to transfer funds toward the retiree health benefits and pensions of certain mine workers.

The Consolidated and Further Continuing Appropriations Act of 2015 approved in December 2014 included provisions of the Multiemployer Pension Reform Act (MPRA) to permit trustees of severely underfunded plans to adjust vested benefits, give the Pension Benefit Guaranty Corporation (PBGC) authority to take earlier action to help save failing plans, and adjust the PBGC premium structure.

In an opening statement, Chairman Orrin Hatch (R-UT) said the MPRA is controversial, to say the least, but was enacted as a response to the threat of a potential PBGC bankruptcy if plans like the Central States and United Mine Workers were to default. He said some would face more drastic cuts without the MPRA, down to PBGC levels, and also expressed doubt that a taxpayer bailout of the PBGC multiemployer pension plan program is possible.

With regard to the miners issue, both Chairman Hatch and ranking member Ron Wyden (D-OR) expressed support for action on the Miners Protection Act of 2015 (S.1714), sponsored by Senators Shelley Moore Capito (R-WV) and Joe Manchin (D-WV), to provide the transfer of funds to pay health benefits to retired miners and prevent insolvency of the United Mine Workers of America pension fund. "It's my view that this Committee and the Congress should move on this bill as soon as possible," Senator Wyden said, adding that the presence of more than a dozen senators during the hearing was a testament to interest in the issue.

Witnesses at the hearing were:

— Joshua Gotbaum, Guest Scholar, Economic Studies Program, The Brookings Institution
— Andrew G. Biggs, Resident Scholar, American Enterprise Institute
— Cecil E. Roberts, Jr., International President, United Mine Workers of America
— Rita Lewis, Beneficiary, Central States Pension Plan

In testimony, Gotbaum, a former PBGC director, said MPRA is controversial and rightly so for authorizing benefit cuts, but that repealing the law would likely result in greater benefit cuts. "Without MPRA, Central States and other distressed plans will become insolvent — and most participants' pensions will be cut far more," he said. Gotbaum further said the premium increases under MPRA are insufficient and need to be increased much more substantially.

Biggs testified about the future financial viability and plan design issues of multiemployer plans. With regard to the interest among employers and unions in hybrid defined benefit/defined contribution plans, or "collective defined contribution plans," he said, "as plans invest heavily in equities or other risky assets in order to keep contributions low, it will be difficult or impossible to provide a stable benefit for retirees."

Roberts advocated for S. 1714, which he said would keep the promise of health care for retired miners whose companies have been forced into bankruptcy. Without it, funds available to pay lifetime health benefits assumed by the United Mine Workers of America will run out at about the end of 2016, if not sooner, he said.

Lewis discussed the devastation that will ensue if the Central States Pension Plan is allowed to go through with cuts authorized under the MPRA, and implored senators to "find a bipartisan solution to shore up underfunded multiemployer plans and protect retirees."

During questioning from Chairman Hatch, Gotbaum said the MPRA is the best alternative for the retiree pension crisis, even if the government were to decide to bail out the PBGC, because it gives plans a chance to keep plans above PBGC guarantee levels, which are low. It is probably the difference between $1,000 per month in benefits and $2,000, he said.

Member statements and witness testimony from the hearing are attached.

———————————————

———————————————
ATTACHMENTS

Hatch Statement

Wyden Statement

Biggs Testimony

Gotbaum Testimony

Lewis Testimony

Roberts Testimony