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Grassley, Alexander Release Plan to Shore Up Failing Multiemployer Pension System

November 20,2019

WASHINGTON – Sens. Chuck Grassley
(R-Iowa) and Lamar Alexander (R-Tenn.), chairmen of the Senate Finance and
Senate Health, Education, Labor and Pensions Committees respectively, today
released a proposal to avert the collapse of critically underfunded
multiemployer pension plans and reform rules for these plans to prevent future
funding shortfalls within these important pillars of the American retirement
system.

The Multiemployer Pension Recapitalization and Reform Plan
creates new authority, based on past assistance for financial institutions, for the
Pension Benefit Guaranty Corporation (PBGC) to take on liabilities from
financially troubled multiemployer pension plans to help the plans pay their
financial obligations to retirees and current workers. The draft legislation
also makes fundamental changes to the regulation of these plans, so that all
participants can be assured that their retiree benefits are appropriately
funded and properly managed.

“This
crisis is severe and gets worse every day. Around 125 multiemployer plans have
said they’ll become insolvent over the next two decades. Several large
plans—including the big Central States Pension Fund—predict they’ll go
insolvent in the next few years. This leaves more than 1.3 million participants
without the pension benefits they’ve been promised, including 10,000 Iowans,” Grassley
said
. “We need to act quickly, but we can’t just pour money into failing
and mismanaged funds. Our plan will provide relief and reform now, without it
our retirees will be left without the future they worked for.”

“The
Pension Benefit Guaranty Corporation which acts as the insurance company for
private sector multiemployer pensions plans will be unable to meet its future
obligations without necessary reforms because employers and unions have made
pension promises to millions of American workers that they can’t keep. Chairman
Grassley and I have a balanced proposal to shore up the PBGC’s role as an
insurance company with a limited infusion of taxpayer dollars instead of an
open-ended bailout, and institute important structural reforms so this does not
happen again,” Alexander said.

The
proposal builds on investigations and research undertaken by Chairman Grassley
in recent years, incorporating work of the 2018 Joint Select Committee on the
Solvency of the Multiemployer Pension System. As a result of these
investigations, Congress now has a stronger understanding of the legal
framework and operations of the multiemployer system, including the flaws in
the system that have led to the current crisis facing a significant portion of
these plans.

The
scale and scope of the underfunding in many of these plans is very large. Given
that the plans represent private-sector financial contracts, the costs of
reforms should be born principally by the stakeholders within the multiemployer
system.

The
Multiemployer Pension Recapitalization and
Reform Plan includes five major
components:

1.      Stabilize plans in
immediate danger of failure

    a.       Partition authority and
funding relief

2.      Secure workers’ and
retiree’s benefits

    a.       Secure the multiemployer
system overall

    b.      Increase PBGC guaranteed
benefit levels

3.      Strengthen the PBGC’s
ability to backstop the multiemployer system

    a.       Increase PBGC funding
through shared responsibility

4.      Put the multiemployer
system on a stable path for the long-term

    a.       Reform the funding and
liability measurement rules

    b.      Reform zone-status rule
for greater predictive value

    c.      Reform withdrawal
liability rules to encourage employers to stay and new ones to join

    d.      Improve plan-governance
rules and PBGC supervisory authority

5.      Ensure fiscal
responsibility

    a.       Funding reforms and
stakeholder contributions

    b.      Front-end federal contribution
offset through additional revenue

Text
of the White Paper can be found HERE
and text of the Technical Explanation can be found HERE.

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