The House has approved a bill that would create a federal loan program for distressed multiemployer pension plans.
The measure, which the chamber passed on July 24 on a 264-169 vote, had earlier cleared the Education and Labor and Ways and Means committees. [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.
Attention now will shift to the Senate, where the outlook is uncertain. Sens. Sherrod Brown (D) and Rob Portman (R), both from Ohio, are working on a possible bipartisan multiemployer pension bill, according to Portman and Jennifer Donohue, a Brown spokesperson.
“Without action, the multiemployer pension system will collapse,” Portman said in a statement to ENR. He said he hopes that his discussions with Brown “will produce reforms that both parties can rally around to help solve this pension crisis.” Donohue said via email, “Senator Brown is committed to solving this crisis.”
In addition, Brown on July 24 introduced a companion bill to the House measure. It had 26 initial co-sponsors. He had proposed a similar measure in the last Congress but it failed to move.
The multiemployer program faces a “crisis,” said Ways and Means Chairman Richard Neal, the House 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 House-approved 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 Ways and Means' July 10 voting session on the measure, “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.”
Industry reactions
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.
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 and Brown's bills are 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 7/26/19 with House floor vote, additional information on Senate developments.
