House approves loan program for troubled pension plans
The House voted 264-169 on Wednesday to pass legislation that would create a new Treasury Department agency to provide taxpayer-backed loans to endangered multiemployer pension plans and some other types of endangered plans.
The loans would be distributed by a Pension Rehabilitation Administration and would go to programs listed in “critical and declining” status by the Pension Benefit Guaranty Corporation, the federal agency that insures the plans. The bill, which is dubbed the Rehabilitation for Multiemployer Pensions Act, or "Butch Lewis Act," is estimated to cost $55 billion over 30 years, according to the Congressional Budget Office. It is likely to face opposition in the GOP-led Senate.
Advocates of the bill argued the cost of inaction was too high and could leave too many people's retirements in doubt. "When your house is on fire, you don't speculate on how the fire got started or pontificate on how to prevent future fires. You put out the fire," said Education and Labor Chairman Bobby Scott.
Republican North Carolina Rep. Virginia Foxx countered that such thinking was the problem because it didn't address the root causes of the pension crisis. "What this bill does is give more gasoline to the arsonists who started the fire," she said.
Multiemployer plans, as the name suggests, involve several companies collectively funding plans. Should one employer go bankrupt or otherwise leave, the burden to maintain the plan builds for those who remain in it. Unions favor multiemployer plans because they can remain with workers even if they lose or switch jobs. But if several companies leave, the plans can become a financial burden on the remaining ones and create a vicious cycle that drags the whole thing down.
Unions have urged lawmakers to pass the bill. "This legislation will work to lift troubled multiemployer plans out of their financial hole, while maintaining the financial integrity of the PBGC. Most importantly, the Butch Lewis Act provides a pathway to accomplishing these venerable goals without stealing from retirees, workers, and their families,” said Machinists Union International President Robert Martinez, Jr.
That there is a crisis with multiemployer pension plans that must be addressed is something about which all sides agree. The PBGC reported late last year that it had a $54 billion deficit in its multiemployer program and it is projected to run out in 2025. Nationwide, the plans are less than 50% funded, relative to their current liabilities and need $600 billion to cover them all, though a few seriously troubled plans such as the Teamsters’ Central States Fund throw off the average.
A total of 29 Republicans joined with Democrats to back the legislation. "These are ordinary, day-to-day Americans. The people we claim to represent," said Republican New York Rep. Peter King, urging his fellow Republicans to back the bill.
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