Recap of U.S. Congress Joint Select Committee on the Solvency of Multi-Employer Pension Plans Field Hearing

Employee Benefits & Executive Compensation
July 25, 2018
 

On July 13, 2018, members of Calfee’s Employee Benefits and Government Relations practice groups attended the U.S. Congress Joint Select Committee on the Solvency of Multiemployer Pension Plans field hearing at the Ohio Statehouse. Calfee attended as part of its ongoing monitoring of, and participation in, the Committee’s policy developments.

The Committee held the field hearing to discuss the country’s crisis with multiemployer pension plans as it considers legislative solutions to the problem. It focused particularly on the growing number of “orphan” retirees, whose former employers are no longer contributing to their multiemployer plans, leaving fewer and fewer remaining employers holding the bag. These plans are now critically underfunded. For example, the United Mine Workers of America multiemployer pension plan is believed to have a retiree and widow population that is roughly 80 percent orphans, putting the employers who are the “last men standing” in the plan in financial jeopardy as their obligations to foot the bill for the orphaned population continues to skyrocket.

Consequently, these multiemployer pension plans’ critical status is causing nationwide concern, with Ohio employers being hit particularly hard. There are 1.3 million retirees with threatened pensions in multiemployer plans. In Ohio there are over 60,000 participants in multiemployer pension plans headed toward insolvency alone. While there are roughly 1,400 of these plans across the country, 114 of those are in “critical and declining” status and around another 200 are in “critical” status. Estimates indicate that these plans are currently funded at around 52 percent funding levels, as compared to the typical U.S. single employer pension plan which is funded at 76.2 percent. At the field meeting, Senator Rob Portman told the story of a Teamster union retiree who is facing a 90 percent cut in his pension by 2025.The Pension Benefit Guaranty Corporation, the government agency responsible for monitoring and insuring multiemployer pension plans, estimates that the present value of the liabilities in these plans is $65 billion. Committee members expressed concern that if one or two large multiemployer plans go under, and require backing from the PBGC, it could bring down the entire multiemployer arm of the PBGC.

The field hearing was co-chaired by two of the Committee’s members: Ohio Senators Sherrod Brown and Rob Portman. Each addressed the severity of the problem and a desire to reach a bipartisan solution. Brown’s stance is reflected in his proposal, the Butch Lewis Act, which would give the critical and declining plans a 30-year low-interest loan designed to bring the plans to solvency. Meanwhile, Portman expresses some hesitancy in asking the taxpayers to foot the bill and instead suggests that “shared responsibility between all stakeholders is the only solution that we will be able to pass, and the only solution the American people will perceive as fair.”

Many employers are deeply concerned with developments regarding these multiemployer plans, because they could easily find themselves as the “last man standing” in the plan. For smaller businesses, the mounting liabilities may threaten their ability to stay in business. For larger businesses, growth and investment opportunities could be significantly stunted by having these liabilities remain on the books. Business owners at the hearing offered suggestions, such as: freezing the plans immediately, capping withdrawal liabilities, and funding the pensions through government loans to cover the liabilities for orphan retirees.

Calfee will continue monitoring the Committee’s actions and advocating on behalf of its clients as policy is developed.


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