U.S. Senate Committee Formed to Solve the Multiemployer Pension Plan Crisis. Will it Work?
In many ways the crown jewel of the organized labor movement, defined benefit pension plans have provided retirement security for union members and their families for generations. In contrast to defined contribution plans, such as the common 401(k) plan, defined benefit pension plans are fully-funded by employer contributions and participants are promised a certain benefit amount calculated based on their years of service.
However, multiemployer pension plans have faced growing uncertainty in the last several decades. The global economic meltdown and ensuing recession of the last decade, aging workforce, and federal funding of certain agencies have darkened the outlook of many plans.
On February 9, 2018, Congress passed a budget deal to end the government shutdown. The resulting deal, the “Bipartisan Budget Act of 2018,” includes policy riders that affect multiemployer plans. This deal formed a new bipartisan committee, the Joint Select Committee on the Solvency of Multiemployer Pension Plans, to investigate possible solutions for struggling multiemployer pension plans. Specifically, the committee’s goal is “to improve the solvency of multiemployer pension plans and the Pension Benefit Guaranty Corporation.”
Currently, the PBGC Multiemployer Program, which guarantees a minimum level of benefits for more than 10 million Americans, is projected to be insolvent by 2025. That date could be sooner if a large fund like the Central States Teamsters or United Mine Workers goes insolvent before there is a legislative fix or other relief.
The looming pension crisis not only affects the workers covered under those plans, but has ripple effects throughout the whole economy. Many international unions and multiemployer funds have suggested solutions to the problem, but it remains to be seen what this Congress will do.
The joint committee will be composed of 16 members: four Senate Democrats, four Senate Republicans, four House Democrats, and four House Republicans, who will be charged with developing a report of its findings, conclusions, and recommendations, along with proposed legislation to carry out those recommendations following at least five public meetings and three public hearings.
If the majority of the members from each party agrees on the report and proposed legislation, the proposed legislation will get an expedited vote in both the House and the Senate.
The Bipartisan Budget Act of 2018 contains other changes affecting multiemployer plans, including:
Creation of special disaster-related rules for use of retirement funds, providing relief from the early withdrawal penalty for “qualified wildfire distributions.”
Modification of rules governing hardship distributions to delete the six-month prohibition on contributions following a hardship distribution and to remove the requirement to take an available loan prior to a hardship distribution.
Our office continues to monitor these and other developments. For more information regarding the Joint Select Committee on the Solvency of Multiemployer Pension Plans, or other ongoing issues in the multiemployer pension plan universe, please contact your trust fund counsel.
Author: Kristina Zinnen and Ryan Kadevari
