A joint committee will not meet its deadline on legislation intended to bolster struggling pension plans.
The Joint Select Committee on Solvency of Multiemployer Pension Plans had hoped to vote on a package of bills on Friday, but delayed the deadline to further study the issue. Committee co-Chairmen Orrin Hatch (R., Utah) and Sherrod Brown (D., Ohio) said in a joint statement that the committee has made strides in addressing the issue, but is not yet ready to vote on any draft.
"While it will not be possible to finalize a bipartisan agreement before Nov. 30, we believe a bipartisan solution is attainable," the pair said. "Despite these challenges and a highly-charged political environment, we have made meaningful progress toward a bipartisan proposal to address the shortcomings in the system to improve retirement security for workers and retirees while also providing certainty for small businesses that participate in multiemployer plans."
Multiemployer pension systems have become a major issue as the Baby Boomer generation nears full retirement. Those plans were created to provide workers employed by multiple companies over the course of their careers, such as truck drivers and construction workers, with similar retirement plans enjoyed by those whose work years are spent with a single company. Every company involved in multiemployer plans contributes to investment funds to guarantee benefits to the workforce, but such plans have suffered in recent years due to company closures, as well as labor law that forces surviving employers to make up the difference when peers close, a practice known as "orphan liability."
Karen Friedman, policy director at the Pension Rights Center, said her group is "optimistic" about current talks in Congress. The last major push to address traditional retirement systems came in 2015 when the Obama administration approved the Multiemployer Pension Reform Act, which allowed struggling funds to cut benefits for retirees. The committee's draft shifted the conversation to compromise, rather than turning to the cuts that have seen some workers and pension recipients suffer 70 percent cuts to their retirement benefits.
"There were some promising aspects of the proposal … there's going to be a shared responsibility of shouldering this burden instead of just [focusing] on retirees," Friedman said. "It is progress that the Joint Special Committee is balancing the interests of retirees with other stakeholders instead of putting them last."
The proposal would reform orphan liabilities to remove them from the books so existing and new employers would be less hesitant to remain in the system. The proposal would also reinforce funding for the Pension Benefit Guaranty Corporation (PBGC), which insures bankrupt systems with funding from user fees rather than taxpayer dollars. The PBGC faces the prospect of running out of money in 2025 even as its mission becomes more daunting. Actuarial consulting firm Cheiron Inc. estimates that 121 multiemployer funds—nearly 10 percent of the 1,400 funds protected by the PBGC—are in danger of insolvency within two decades. Those funds cover 1.3 million workers and are underfunded to the tune of nearly $50 billion. The firm estimates that 15 new plans joined the list of potential bankruptcies in 2018.
The delays frustrated some advocates. Former representative Connie Mack IV (R., Fla.), chairman of Protect Our Workers' Earned Retirement, said lawmakers need to pass legislation to shore up retirement benefits. Mack, too, remains optimistic lawmakers are close to a deal, but said they should vote on any proposal in Congress's limited December session as President Donald Trump has already signaled a willingness to adopt reforms.
"Millions of workers and retirees are depending on Congress to get the job done—failure to act should not be an option," Mack said in an email. "Every indication is that inaction could result in the recent economic gains being erased. The Trump administration has signaled its readiness to sign a solution into law. It is well past time for action."