19 April 2018 Multiemployer Committee holds hearing, requests input On April 18, 2018, the Joint Select Committee on Solvency of Multiemployer Pension Plans held its first public hearing, titled "The History and Structure of the Multiemployer Pension System," during which members essentially agreed that the issues facing the plans are complex and solutions are not readily apparent. Co-chairs Senators Orrin Hatch (R-UT) and Sherrod Brown (D-OH) also announced that the committee is seeking input from stakeholders with a deadline of September 30. Established by the Bipartisan Budget Act of 2018 enacted on February 9, the Committee is, not later than November 30, to vote on a report containing a detailed statement of findings, conclusions, and recommendations, and on proposed legislative language to carry out the recommendations described in the report. Approval requires support by a majority of Committee Republicans and a majority of Democrats. In an opening statement, Senator Hatch said the Committee has a heavy workload ahead in dealing with a sensitive and difficult issue. "No matter what direction we take, we are bound to anger some folks," he said. Senator Brown said many factors played a role in bringing plans to the brink of failure: many of the plans are in the same industries that have been affected by "decades of bad trade deals, outsourcing of jobs, and general shifts in the American economy," and "the economic collapse of 2008 devastated these plans and the people and businesses who depend on them." He noted that the Pension Benefit Guaranty Corporation is $67 billion in the red, with just $2 billion in assets, and said, "If the PBGC fails, it will be up to Congress to step in, or allow the entire multiemployer pension system to fail." He said the funding problems facing the multiemployer pension system were not the fault of the workers or the companies. PBGC said last year the insurance program for multiemployer pension plans is likely to run out of money by the end of 2025 and that over 1.2 million people are now in about 100 "critical and declining" plans. Barthold said at present, approximately 10.5 million individuals are participants in one or more of approximately 1,400 multiemployer defined benefit plans. Goldman said challenges emerged as plans matured, and were exacerbated by the recession of 2007–2009. Contributors to the current challenges relate to investment performance, past benefit increases, the maturation of plans, the decline of unions and some industries, and weaknesses in the withdrawal liability requirements, he said. In some industries, the workforce has shifted to more non-union employees as a result of restructurings or regulatory changes, while others have seen declines in the number of employees needed due to global competition, automation, or general declines in the industry, Goldman said. Goldman said one of three actions must be taken: benefits are reduced, the current course if there are no interventions; contributions are increased; or plans can make riskier investments. During questioning, Rep. Virginia Foxx (R-NC) asked how many benefit suspensions to prevent insolvency were undertaken pursuant to the Multiemployer Pension Reform Act of 2014 (MPRA). Goldman said there were four approvals under the MPRA applications and it is too soon to tell if the cutbacks will be successful. Foxx also questioned how benefit levels were set in multiemployer plans. Rep. Richard Neal (D-MA) applauded the Obama Treasury Department's decision to reject the application of the Teamsters' Central States fund to restructure benefits under the 2014 Multiemployer Pension Reform Act (MPRA), citing the 50% benefit cuts it would have imposed on some plan participants. He noted the legislation he and Senator Brown have introduced that would establish borrowing authority within Treasury to help the PBGC set the funding shortfall. Rep. Phil Roe (R-TN) noted that multiemployer plans had very different premium structures from single employer plans, and challenged the legitimacy of assumptions the multis make regarding rates of return. He discussed his legislation to create new "composite" plans for multiemployer pensions, calling it a way to move forward after the current funding crisis had been addressed. Rep. Donald Norcross (D-NJ), who has cosponsored both the Neal bill and the Roe legislation, argued that without the loan program proposed in the Neal-Brown bill, within a couple of years millions of plan participants will see their modest pensions reduced to nothing. Senator Heidi Heitkamp (D-ND) said the multiemployer issue has festered for a long time, is a "complex issue with no simple solutions," and asked about the window for a solution. Goldman said time is of the utmost importance, with some plans on the precipice of going off the cliff given the PBGC's 2025 projection for the insurance program to run out of money. Senator Rob Portman (R-OH), who has a long history of involvement in pension policy, also said the issue is complicated and that there is consensus among members that the status quo is unacceptable. Portman pointedly focused on whether companies that withdrew from plans and paid withdrawal liability generally paid as much as they owed based on their prior contributions and the benefits owed their workers. Rep. David Schweickert (R-AZ) asked about the differences in economic behavior or plan management between plans considered in the "green", or financially healthy, category, and those characterized as fitting into the "red," or financially distressed group. He suggested that many of the so-called "green" plans might face difficulties as well. Senator Joe Manchin (D-WV) was the most animated of the Committee members, saying "bankruptcy laws in America are the absolute atrocities of what's going on," but was unable to get the witnesses to opine on that issue. Manchin is concerned about benefits for 63,000 miners in his state whose multiemployer plan is projected to be insolvent in 2022. He said average benefits are $595, mostly for widows, and, "You take any of that away from them, they are done." He expressed some exasperation at the rudimentary nature of the hearing and the lack of willingness to provide recommendations, saying, "We can do all the history that you want. We need to start getting to the crux of this thing because this thing is going to come to a head very quickly." Manchin was unable to get witnesses to opine on or recommend changes to legislation he sponsors that would provide a government loan to the miners plan to avoid insolvency. "What the hell are we having this meeting for then?" he asked. Stakeholders can submit input to the Joint Select Committee's mailbox at JSCSMPP@finance.senate.gov.
Document ID: 2018-0846 | |||||
