Securing the Retirement Future for Millions of Americans
For over 70 years, retirees from diverse employment backgrounds have relied on multiemployer pensions to support them and their families throughout their retirement years. Unfortunately, because of several factors, the multiemployer pension system faces significant challenges. Multiemployer pension plans were created as retirement plans sponsored by more than one employer as part of a collective bargaining agreement. The crisis facing multiemployer pensions is not new and the problem has been growing for years. Earlier this year, Congress established the Joint Select Committee on the Solvency of Multiemployer Pension Plans, on which I’m honored to serve. I have been working with my colleagues on both sides of the aisle to find a bipartisan solution.
How did we get to this point? The problem stems from a combination of factors that has led to the underfunding of several large multiemployer pension plans. While many plans are in strong financial shape, there is a growing number of financially-distressed plans that are putting the entire system at risk. If a pension plan fails, the Pension Benefit Guaranty Corporation (PBGC) steps in but can only give plan participants a fraction of what they would have received under the terms of their pension. To make matters worse, the PBGC’s multiemployer program’s finances are also in crisis. In Fiscal Year 2018, the PBGC’s multiemployer program had a deficit of more than $53 billion, which is an increase of over $10 billion since Congress last acted on this issue in 2014. The PBGC believes that without any change it is likely that this program will become insolvent by 2025.
Four years ago, while I chaired the Education and Workforce Subcommittee on Health, Employment, Labor, and Pensions, I worked closely with then-committee Chairman John Kline and Ranking Member George Miller to pass the Multiemployer Pension Reform Act (MPRA). This critical legislation gave plans the tools to put themselves on firmer financial footing by applying to the U.S. Department of Treasury; unfortunately, as of September this year, they have approved only seven of the 32 MPRA applications received and rejected applications from some of the largest and most troubled plans. The purpose of MPRA was to give pension plans the tools to save themselves without a taxpayer bailout, and would have given troubled plans like Central States a chance at solvency. It is not a question of IF the multiemployer pension system will fail, but WHEN.
The multiemployer pension system is worth saving, but it will take some tough choices to find a solution. Republicans and Democrats share the same goal, and we have spent countless hours trying to find a solution to this crisis. It is clear we can increase the pension plan premiums or reduce plan outlays to lower costs, and some have suggested we provide taxpayer funding to create loans or direct funding. The issue with providing taxpayer funding is no one in the government helped negotiate or guarantee these benefits, and I am concerned about the precedent we set if the federal government becomes the backstop for private pension plans. We must balance the needs of employers, retirees and taxpayers alike in providing potential solutions to this crisis. Multiemployer pension plans cannot be fixed overnight. The system faces multiple challenges that are causing it to fail; unfortunately, the Joint Select Committee has yet come to an agreement on a resolution.