Tax News Update    Email this document    Print this document  

The Joint Select Committee on Solvency of Multiemployer Pension Plans held its organizational meeting on March 14, 2018. The JSC was created by Congress in the February 8 budget agreement (HR 1892). Testimony from the meeting is available here.

Committee Co-Chairman Sen. Orrin Hatch (R-UT) said the meeting was to adopt the rules for the Committee and for opening statements. The rules (posted here) were adopted by voice vote.

Members attending the meeting made opening statements focusing on the tremendous challenges of finding solutions to the difficulties facing multiemployer plans; the human and economic costs of not doing so; and the critical need for bipartisan give-and-take under the statute creating the committee and for the ultimate enactment of a legislative solution. Democrats generally made the point that the workers who had the most to lose had earned their benefits, and should not suffer "through no fault of their own." Republicans placed more emphasis on the importance of not burdening the taxpayers or bankrupting the Pension Benefit Guaranty Corporation (PBGC).

The importance of bipartisanship in working toward a solution led to a rare note of discord toward the end of opening statements, when Sen. Rob Portman (R-OH), citing his previous experience on a "Supercommittee," remarked that he was concerned to hear reports that the Democratic members of the Special Committee had already met and agreed that they would "stick together" in supporting an approach to the problem. The committee's other co-chair, Sen. Sherrod Brown (D-OH), responded that he had reached out to all members of the Select Committee and had talked with a number of members on both sides of the aisle regarding the Butch Lewis Act (S. 2147 / HR 4444), a multiemployer pensions bill he has offered with Rep. Richard Neal (D-MA). But Brown was quick to say that he has no preconditions for the Select Committee's work. Sen. Heidi Heitkamp (D-ND) also pushed back on Portman's statement, noting the low attendance by Republican members at the opening hearing.

Member statements

Sen. Hatch cited his long experience in crafting bipartisan agreements, and emphasized the need to be honest about this issue and the hopes and expectations of the Committee. He noted that Congress had passed two major bipartisan bills — the Pension Protection Act of 2006 and the Multiemployer Pension Reform Act of 2014 — that addressed multiemployer plan funding problems. He argued that the current problems did not indicate that the two previous measures had failed.

Sen. Brown talked about the 60,000 Ohioans who face severe pension cutbacks they have earned if Congress does not devise a solution. He noted the statement of principles the U.S. Chamber of Commerce released supporting financial assistance in the form of loans to plans, as called for in the Brown-Neal legislation.

Rep. Neal said he was not in Congress for what led to the savings and loan crisis of the late 1980s, but he was there for the bailout, and that his bill is not a bailout but a federal backstop.

Rep. Virginia Foxx (R-NC), the chairman of the House Education and Workforce Committee, said she had heard the admonition of Chairman Hatch and that she was there to listen. She made no statement.

Sen. Joe Manchin (D-WV) spoke of John L. Lewis and the original pension plan for coal miners from 1946, and how the bankruptcy laws allowed companies to walk away from their obligations. He spoke emotionally about having attended too many coal miners' funerals, and how their work had provided the fuel that built our economy and powered our national defense. He said the average pension provided by the miners' plan is $595 a month. He mentioned his proposal to fund coal miners' benefits by borrowing from the Abandoned Mine fund.

Rep. Phil Roe (R-TN) mentioned the mechanism established by the 2014 Multiemployer Pension Reform Act, a bipartisan bill that allowed a reorganization of the Teamsters Central States fund that was rejected by the Treasury Department in 2016. He said there were three goals for the Committee: Preserve pensions without bailouts; PBGC stability; and coming up with new options. Roe offered his own legislative proposal as part of a "multi-pronged solution" to the problem.

Rep. David Schweikert (R-AZ) said his office was guided by the thought that "math always wins." He said the current model for multiemployer pensions doesn't work and "we are looking for a model for stability," pointedly noting that the members of the Select Committee need to be aware that the solution they provide for multiemployer plans will become a template for other financially troubled pension plans, presumably a reference to state-run plans.

Rep. Robert Scott (D-VA) spoke about the cascading effect of insolvency on the economy. The "Last Man Standing" rule could lead to the bankruptcy of remaining businesses, and he warned that credit lines would dry up for those businesses that are on the hook for pension liabilities on their financial statements.

Rep. Donald Norcross (D-NJ), the lead Democratic cosponsor of the Roe legislation, and also a cosponsor of the Neal legislation, mentioned that he had spent 37 years as an electrician, the last 17 as a plan negotiator. He said it is not a matter of "if" but when the plans collapse, if Congress does nothing.

Sen. Tina Smith (D-MN) recalled that in one of the first conversations she had with Sen. Brown he talked about the Butch Lewis Act. She argued that the looming insolvency of the Central States Plan was not the result of mismanagement, because the federal government took over the plan 30 years ago and investments were handled by professionals. She said a solution is important for the country and the 20,000 Teamsters in Minnesota.

Rep. Debbie Dingell (D-MI) made a short statement noting that the collapse of the multiemployer pension plan system would lead to an economic crisis in the country without a solution.

Sen. Portman mentioned his long involvement with the issue, the many Ohio families and companies that would be severely impacted by a collapse of multiemployer plans, and the importance of bipartisanship in the work of the select committee.

Sen. Heitkamp challenged Rep. Roe's characterization of the Treasury Department's rejection of the Central States reorganization proposal, saying that the proposal would have led to benefit cuts of 80%.

The Joint Committee adjourned without setting a date for its next meeting.

———————————————

Contact Information For additional information concerning this Alert, please contact:   Washington Council Ernst & Young    • Any member of the group, at (202) 293-7474.