Leading Senate Republicans have unveiled a proposal for dealing with the severe financial problems facing dozens of multiemployer pension plans. But the proposal, released on Nov. 20, differs greatly from a pension rescue bill that the House approved on July 24 and the new plan has quickly drawn strong criticism from construction unions.
Multiemployer pensions are widespread in the unionized construction sector. Of the approximately 1,350 multiemployer plans in the U.S. as of 2017, some 770, or 57%, were in the construction industry, according to Ben Ablin, a consulting actuary with Horizon Actuarial Services LLC.
Those construction plans have about 4.2 million active workers, retirees and other participants. That equals about 40% of the 10.6 million individuals covered by multiemployer plans across all industries.
Senate Finance Committee Chairman Charles Grassley (R-Iows)—who drafted the proposal with Health, Education, Labor and Pensions Committee Chairman lamar Alexander (R-Tenn.)—said that 125 plans are in “critical and declining” condition. Ablin said that as of last year, about 35 such plans were in the construction industry. Those 35 plans have 30,000 participants.
Grassley said in a statement that the multiemployer pension system is in deep trouble. "The crisis is severe and growing worse every day," he said.
The Grassley-Alexander proposal includes a major increase in annual per-worker premiums paid by employers in multiemployer plans; and new co-payments for companies and unions in the plans—and for plan participants.
It also would provide broader authority for the Pension Benefit Guaranty Corp.—the federal backstop for participants in troubled plans—to split healthy parts of multiemployer plans from struggling parts; and changes in rules for how pension plans calculate the future value of their benefits.
In addition, the proposal calls for what Grassley terms "a limited amount" of additional federal funds to shore up PBGC's multiemployer pension program, which is now deeply in the red.
With the higher premiums and new co-pays, the proposal says PBGC's guaranteed benefits to multiemployer plan participants would rise to an estimated $20,000 per year, for someone with 30 years' service, from $13,000 per year now.
The Grassley-Alexander package differs dramatically from the House-passed multiemployer bill. That legislation, sponsored by Ways and Means Committee Chairman Richard Neal (D-Mass.), would establish a new unit within the Treasury Dept. that would sell bonds to support loans to multiemployer plans in the most dire condition. [View ENR story on House bill's passage here.]
Grassley criticized the House bill as basically "a pure, no-strings-attached bailout plan." He said his and Alexander's proposal "addresses the immediate needs of the few multiemployer plans facing immediate crisis in a manner that protects participant benefits and ensures a sustainable multiemployer pension system for the long haul, all in a fiscally responsible way."
Unions Blast Proposal
But construction unions slammed the Grassley-Alexander proposal. Sean McGarvey, president of North America’s Building Trades Unions, said in a statement that the Republicans' plan “presents punitive requirements on plans, participants, employers and unions, which would cause harm to them and the 85% of the multiemployer system that are successfully meeting their obligations.”
McGarvey said unions want to work with a bipartisan group of Senate leaders and other lawmakers over the next four weeks to craft legislation that rescues failing plans and the PBGC “and reforms the entire multiemployer system.”
Sen. Rob Portman (R-Ohio), who has been working on multiemployer pension issues for many months, called the Grassley-Alexander plan “a positive step.” He added, “I believe this proposal can provide the foundation for a bipartisan solution, but it will require some changes.”
Sen. Sherrod Brown (D-Ohio), another key player in the multiemployer issue, said in a statement, “I have concerns with some of the provisions put forth by Republicans, but I look forward to working together with Chairman Grassley and Senator Portman to find a bipartisan solution.”
Stephen Sandherr, Associated General Contractors of America president and chief executive officer, called the Grassley-Alexander proposal "a vital step in prompting a much-needed debate about the best way to address the challenges facing a number of multiemployer retirement plans."
Sandherr added, "Ultimately, any final legislation must provide employees and employers with viable options for addressing pension funding shortfalls and greater plan flexibility."
Higher premiums, new "co-pays"
The Republicans propose boosting the per-worker premium to a flat rate of $80 per year, from $29 this year. (Premiums now rise annually, based on inflation.) According to a summary of the proposal, the envisioned $80 multiemployer premium is the same as the premium for single-employer pension plan participants. The PBGC single-employer program isn't in financial trouble.
The proposal also includes new "co-payments" assessed to employers and labor unions that take part in multiemployer plans and a new co-payment for retirees, with the amount on a "sliding scale," whose amount depends on the retiree's age and health. A "technical explanation" document says retirees over 80 years old and participants who are disabled would be exempt from co-pays.