Bill to Aid Ailing Multiemployer Pension Plans Heads to House Floor
A House bill that would create a federal loan program for distressed multiemployer pension plans has moved a step closer to a floor vote, with approval by the Ways and Means Committee.
The measure cleared Ways and Means on July 10 on a 25-17 straight party-line vote. The House Education and Labor Committee had approved the proposal on June 11. [View summary of bill as introduced here. View draft bill text here.]
Multiemployer plans are common in construction’s unionized sector. Of the roughly 1,350 U.S. multiemployer plans in 2017, about 770, or 57%, were in the construction industry, says Ben Ablin, a consulting actuary with Horizon Actuarial Services LLC.
The construction plans cover about 4.2 million workers, retirees and other participants, or about 40% of the total 10.6 million covered by all multiemployer plans.
The next step for the bill is floor action. A Ways and Means spokesperson said that panel members are “working towards having the legislation come to the floor before the end of July and hope that will happen.”
With 197 House co-sponsors, including several Republicans, the measure has a good shot of approval in that chamber. But the substantial House GOP opposition doesn’t bode well for the bill’s chances in the Senate, which is controlled by Republicans.
The multiemployer program faces a “crisis,” said Ways and Means Chairman Richard Neal, the bill’s sponsor. He said that after economic downturns in 2001 and the 2008 recession, many companies that contributed to such plans closed up shop and those that remained had to shoulder a larger pension load.
By the numbers
Many plans now are underfunded. The federal Pension Benefit Guaranty Corp., which provides payments to participants in failed plans, said last year that about 130 multiemployer plans overall were expected to run out of funds over the next 20 years.
Horizon's Ablin says that those 130 plans in "critical and declining" condition include about 35 in construction, which cover 30,000 participants.
Neal's bill would create a new Pension Rehabilitation Administration within the Treasury Dept., which would sell bonds that would support loans to multiemployer plans in distressed condition. The plans would have to repay the loans over 30 years.
Neal said at the committee voting session, “This is not a bailout. This is a backstop, guaranteed by the good faith and full credit of the United States.” [View webcast of Ways and Means markup session here.]
But the Ways and Means panel’s top Republican, Kevin Brady (Texas), blamed the plans’ financial problems on “lousy financial mismanagement” and said that the measure “doesn’t make these failing plans more stable, doesn’t end underfunding or make them more solvent over time.”
Michael Scott, executive director of the National Coordinating Committee for Multiemployer Plans, said in a July 8 statement, “Moving this bill out of the committee is an important first step towards enacting comprehensive bicameral pension reform.” The committee is composed of leaders of organized labor and employer groups, including many in the construction industry.
Jim Young, the Associated General Contractors of America’s senior congressional relations director for labor, human resources and safety, said via email that if a bill were to be enacted it would need to be a compromise with the Senate.
In 2017, Sen. Sherrod Brown (D-Ohio) introduced a measure similar to Neal's but it failed to move. Brown has not yet introduced his proposal in the current Congress.
AGC wants to see multiemployer pension legislation that is broader in scope. Young said, “While AGC appreciates the attention Chairman Neal has brought to the multiemployer pension crisis—and will continue to advocate…addressing the currently failing plans—legislation must offer a sustainable path for the healthy plans in the construction industry and the ability to adapt new plan designs.”
AGC has recommended that Congress create “hybrid” multiemployer pension plans, which would include features of traditional defined-benefit plans and 401(k)-type defined-contribution plans.
Neal's bill is titled the Butch Lewis Act. It is named for a long-time truck driver who died of a stroke several years ago, Neal said.
He added that Lewis’s widow Rita is a beneficiary of the teamsters’ Central States Pension Fund, which Neal said is “the largest of the underfunded multiemployer pension plans.”
A special joint Senate-House bipartisan committee last year was charged with coming up with recommendations for improving multiemployer plans' solvency but failed to do so before the last Congress ended. (See 2018 ENR story.)
Story updated on 7/15/19 with data from Horizon Actuarial Services.