[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]


                  FISCAL CHALLENGES FACING THE PENSION
                     BENEFIT GUARANTY CORPORATION:
                    IMPLICATIONS FOR PENSION PLANS,
                         WORKERS, AND RETIREES

=======================================================================

                                HEARING

                               BEFORE THE

                        SUBCOMMITTEE ON HEALTH,
                    EMPLOYMENT, LABOR, AND PENSIONS

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE

                     U.S. House of Representatives

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

           HEARING HELD IN WASHINGTON, DC, NOVEMBER 29, 2017

                               __________

                           Serial No. 115-30

                               __________

  Printed for the use of the Committee on Education and the Workforce
  
  
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                COMMITTEE ON EDUCATION AND THE WORKFORCE

               VIRGINIA FOXX, North Carolina, Chairwoman

Joe Wilson, South Carolina           Robert C. ``Bobby'' Scott, 
Duncan Hunter, California                Virginia
David P. Roe, Tennessee              Ranking Member
Glenn ``GT'' Thompson, Pennsylvania  Susan A. Davis, California
Tim Walberg, Michigan                Raul M. Grijalva, Arizona
Brett Guthrie, Kentucky              Joe Courtney, Connecticut
Todd Rokita, Indian                  Marcia L. Fudge, Ohio
Lou Barletta, Pennsylvania           Jared Polis, Colorado
Luke Messer, Indiana                 Gregorio Kilili Camacho Sablan,
Bradley Byrne, Alabama                 Northern Mariana Islands
David Brat, Virginia                 Frederica S. Wilson, Florida
Glenn Grothman, Wisconsin            Suzanne Bonamici, Oregon
Steve Russell, Oklahoma              Mark Takano, California
Elise Stefanik, New York             Alma S. Adams, North Carolina
Rick W. Allen, Georgia               Mark DeSaulnier, California
Jason Lewis, Minnesota               Donald Norcross, New Jersey
Francis Rooney, Florida              Lisa Blunt Rochester, Delaware
Paul Mitchell, Michigan              Raja Krishnamoorthi, Illinois
Tom Garrett, Jr., Virginia           Carol Shea-Porter, New Hampshire
Lloyd K. Smucker, Pennsylvania       Adriano Espaillat, New York
A. Drew Ferguson, IV, Georgia
Ron Estes, Kansas
Karen Handel, Georgia

                      Brandon Renz, Staff Director
                 Denise Forte, Minority Staff Director
                                 ------                                

        SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS

                    TIM WALBERG, Michigan, Chairman

Joe Wilson, South Carolina           Gregorio Kilili Camacho Sablan,
David P. Roe, Tennessee                Northern Mariana Islands
Todd Rokita, Indiana                   Ranking Member
Lou Barletta, Pennsylvania           Frederica S. Wilson, Florida
Rick W. Allen, Georgia               Donald Norcross, New Jersey
Jason Lewis, Minnesota               Lisa Blunt Rochester, Delaware
Francis Rooney, Florida              Carol Shea-Porter, New Hampshire
Paul Mitchell, Michigan              Adriano Espaillat, New York
Lloyd K. Smucker, Pennsylvania       Joe Courtney, Connecticut
A. Drew Ferguson, IV, Georgia        Marcia L. Fudge, Ohio
Ron Estes, Kansas                    Suzanne Bonamici, Oregon
                            
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on November 29, 2017................................     1

Statement of Members:
    Sablan, Hon. Gregorio Kilili Camacho, Ranking Member, 
      Subcommittee on Health, Employment, Labor, and Pensions....     5
        Prepared statement of....................................     6
    Walberg, Hon. Tim, Chairman, Subcommittee on Health, 
      Employment, Labor, and Pensions............................     1
        Prepared statement of....................................     3

Statement of Witnesses:
    Reeder, Mr. Thomas W. Jr., Director, Pension Benefit Guaranty 
      Corporation (PBGC), Washington, DC.........................     8
        Prepared statement of....................................    10

Additional Submissions:
    Questions submitted for the record by:
        Estes, Hon. Ron, a Representative in Congress from the 
          state of Kansas........................................    51
        Mr. Sablan...............................................    51
    Mr. Reeder responses to question submitted for the record....    52

 
                  FISCAL CHALLENGES FACING THE PENSION
                     BENEFIT GUARANTY CORPORATION:
                    IMPLICATIONS FOR PENSION PLANS,
                         WORKERS, AND RETIREES

                              ----------                              


                      Wednesday, November 29, 2017

                       House of Representatives,

                        Subcommittee on Health,

                    Employment, Labor, and Pensions,

               Committee on Education and the Workforce,

                            Washington, DC.

                              ----------                              

    The subcommittee met, pursuant to notice, at 10:03 a.m., in 
room 2175, Rayburn House Office Building, Hon. Tim Walberg 
(chairman of the subcommittee) presiding.
    Present: Representatives Walberg, Roe, Rokita, Allen, 
Mitchell, Smucker, Ferguson, Estes, Foxx, Sablan, Wilson of 
Florida, Norcross, Blunt Rochester, Shea-Porter, Espaillat, 
Courtney, Fudge, and Bonamici.
    Also present: Representatives Brat, Grothman, and Scott.
    Staff present: Andrew Banducci, Workforce Policy Counsel; 
Marty Boughton, Deputy Press Secretary; Courtney Butcher, 
Director of Member Services and Coalitions; Michael Comer, 
Press Secretary; Rob Green, Director of Workforce Policy; 
Callie Harman, Professional Staff Member; Amy Raaf Jones, 
Director of Education and Human Resources Policy; Nancy Locke, 
Chief Clerk; Kelley McNabb, Communications Director; James 
Mullen, Director of Information Technology; Alexis Murray, 
Professional Staff Member; Krisann Pearce, General Counsel; 
Brandon Renz, Staff Director; Molly McLaughlin Salmi, Deputy 
Director of Workforce Policy; Olivia Voslow, Legislative 
Assistant; Joseph Wheeler, Professional Staff Member; Lauren 
Williams, Professional Staff Member; Michael Woeste, Press 
Secretary; Tylease Alli, Minority Clerk/Intern and Fellow 
Coordinator; Christine Godinez, Minority Labor Policy 
Associate; Ron Hira, Minority Labor Policy Fellow, Stephanie 
Lalle, Minority Digital Press Secretary; Kevin McDermott, 
Minority Senior Labor Policy Advisor; Richard Miller, Minority 
Labor Policy Director; Udochi Onwubiko, Minority Labor Policy 
Counsel; and Veronique Pluviose, Minority Staff Director.
    Chairman Walberg. A quorum being present, the Subcommittee 
on Health, Employment, Labor, and Pensions will come to order.
    Good morning and welcome to today's subcommittee hearing on 
the financial challenges facing the Pension Benefit Guaranty 
Corporation and, more importantly, the impact to workers and 
retirees.
    George Miller was a proud liberal lion of this committee. 
While we very often disagreed in the years that I served with 
him on this committee, I admired his commitment to ensuring 
Americans have the ability to retire with dignity.
    In 2014, he worked with John Kline, then our chairman, to 
try to solve a real problem: a retirement system on the brink 
of collapse. They put politics aside, worked with employers and 
labor unions, and negotiated a set of reforms to the 
multiemployer pension system in order to preserve benefits for 
millions of workers. President Obama signed this bipartisan 
approach into law in 2014.
    The law was based on the premise that the plan trustees, 
who have a legal and moral obligation to pensioners and 
workers, would have the ability to take early action in order 
to avoid disaster.
    While the 2014 statute was an important step, regulations 
written by President Obama's Treasury Department implementing 
the law made it difficult, if not impossible, for trustees to 
use the tools the law contains. And so, the problems continue.
    We know they persist because the Pension Benefit Guaranty 
Corporation, the backstop for private defined benefit plans, 
released its annual report 2 weeks ago. According to PBGC, more 
than 100 multiemployer plans are expected to fail, in addition 
to the 72 that already have.
    This kind of widespread collapse will directly impact the 
millions of workers, retirees, and their families who spent 
their careers planning their retirement with these promised 
pension benefits in mind.
    And who promised these benefits? Unions and employers who 
established and administered these plans. The Federal 
Government and nonunion workers had no role in negotiating the 
contracts that made the promises that will be broken.
    Mr. Miller, when he chaired the committee, recognized this. 
That's why this committee, under his leadership in 2009, 
refused to advance a legislative proposal to put taxpayers on 
the hook for these promises.
    Implementation of the 2014 law has been ineffective, and 
the workers and retirees in these plans are worse off because 
of it. When their plans fail, their benefits will be cut, in 
many cases significantly. And when these retirement systems 
fail, the PBGC will collapse as well.
    The agency's multiemployer insurance program currently has 
about $2 billion in assets, receives less than $300 million in 
premium revenue annually, and has a long-term deficit of $65.1 
billion. Again, that's $65 billion.
    When the money runs out, likely sometime in 2025, 
pensioners will receive pennies on the dollar of what they were 
promised, employers will close their doors, and previously 
healthy plans may go bankrupt.
    Congress took bipartisan action just 3 years ago to prevent 
this looming disaster. We believe the Trump administration will 
work hard to ensure the law's tools are utilized more 
appropriately. But if Congress is to consider further reforms, 
it's critical that the committee fully understand the scope of 
the financial challenges facing PBGC no matter how dire they 
are.
    Today's witness, Tom Reeder, is the PBGC's Director. He 
administers not just the multiemployer insurance program, but 
also the agency's very large insurance program for single 
employer defined benefit plans.
    While the finances of that program are trending upward, it 
is still underfunded by nearly $11 billion. The program ensures 
more than 27 million Americans in more than 22,000 pension 
plans. We look forward to examining that program in today's 
hearing as well.
    There are no easy answers to these problems, but we owe it 
to workers, retirees, employers, and taxpayers to put politics 
aside, as we've done in the past, and work toward finding a 
fiscally responsible, bipartisan solution. Millions of 
Americans are counting on us.
    Before I yield to Ranking Member Sablan for his opening 
remarks, I want to yield to Chairwoman Foxx for a brief 
comment.
    [The prepared statement of Chairman Walberg follows:]

   Prepared Statement of Hon. Tim Walberg, Chairman, Subcommittee on 
                 Health, Employment, Labor and Pensions

    George Miller was a liberal lion of this Committee. While we very 
often disagreed, I admired his commitment to ensuring Americans have 
the ability to retire with dignity.
    In 2014, he worked with John Kline, then our Chairman, to try to 
solve a real problem: a retirement system on the brink of collapse. 
They put politics aside, worked with employers and labor unions, and 
negotiated a set of reforms to the multiemployer pension system in 
order to preserve benefits for millions of workers. President Obama 
signed this bipartisan approach into law in 2014.
    The law was based on the premise that the plan trustees who have a 
legal and moral obligation to pensioners and workers should have the 
ability to take early action in order to avoid disaster.
    While the 2014 statute was an important step, regulations written 
by President Obama's Treasury Department implementing the law made it 
difficult if not impossible for trustees to use the tools the law 
contains. And so, the problems continue. We know they persist because 
the Pension Benefit Guaranty Corporation, the backstop for private 
defined benefit plans, released its annual report 2 weeks ago. 
According to PBGC, more than 100 multiemployer plans are expected to 
fail, in addition to the 72 that already have.
    This kind of widespread collapse will directly impact the millions 
of workers, retirees, and their families who spent their careers 
planning their retirement with these promised pension benefits in mind. 
And who promised these benefits? Unions and employers who established 
and administered these plans. The Federal Government and non-union 
workers had no role in negotiating the contracts that made the promises 
that will be broken. Mr. Miller, when he chaired this Committee, 
recognized this. That's why this Committee, under his leadership in 
2009, refused to advance a legislative proposal to put taxpayers on the 
hook for these promises.
    Implementation of the 2014 law has been ineffective, and the 
workers and retirees in these plans are worse off because of it. When 
their plans fail, their benefits will be cut, in many cases 
significantly. And when these retirement systems fail, the PBGC will 
collapse as well.
    The agency's multiemployer insurance program currently has about $2 
billion in assets, receives less than $300 million in premium revenue 
annually, and has a long term deficit of $65.1 billion. Again, that's 
$65 billion. When the money runs out, likely sometime in 2025, 
pensioners will receive pennies on the dollar of what they were 
promised. Employers will close their doors, and previously healthy 
plans may go bankrupt.
    Congress took bipartisan action just 3 years ago to prevent this 
looming disaster. We believe the Trump administration will work hard to 
ensure the law's tools are utilized more appropriately. But if Congress 
is to consider further reforms, it's critical that the Committee fully 
understand the scope of the financial challenges facing PBGC.
    Today's witness, Tom Reeder, is the PBGC's director. He administers 
not just the multiemployer insurance program, but also the agency's 
very large insurance program for single-employer defined benefit plans. 
While the finances of that program are trending upward, it is still 
underfunded by nearly $11 billion. That program insures more than 27 
million Americans in more than 22,000 pension plans. We look forward to 
examining that program in today's hearing as well.
    There are no easy answers to these problems. We owe it to workers, 
retirees, employers and taxpayers to put politics aside and work toward 
finding a fiscally responsible, bipartisan solution. Millions of 
Americans are counting on us.
                                ------                                

    Ms. Foxx. Thank you, Mr. Chairman.
    I want to take a moment to recognize a member of our staff, 
Andy Banducci, who is leaving the committee to pursue a new 
opportunity across the Capitol as labor policy director for the 
Senate Committee on Health, Education, Labor, and Pensions.
    Andy has been a valued member of our team since 2011, most 
recently as the committee's work force policy counsel. He's 
been at the forefront of our efforts to help America's workers 
save for retirement, modernize the multiemployer pension 
system, preserve access to affordable retirement advice, and to 
expand access to affordable healthcare for all.
    Over the years, Andy worked diligently in support of our 
committee's work force policy agenda and has helped us to 
advance important legislative initiatives, including, most 
notably, as Chairman Walberg just talked about, the bipartisan 
Multiemployer Pension Reform Act of 2014.
    I know all our current and former committee colleagues 
would agree, Andy has always provided us with wise counsel and 
important technical expertise. Many of our successes would not 
have been possible without his commitment, hard work, and 
positive demeanor.
    Andy, on behalf of myself and the members of the committee, 
thank you for the time and devotion you've put into doing the 
people's work. Of course, we know we'll have an opportunity to 
stay in touch, and we wish you all the best as you embark on 
this new chapter in your congressional career. God bless you.
    Mr. Scott. Will the gentlelady yield?
    Ms. Foxx. Yes, I will.
    Mr. Scott. Thank you.
    Mr. Chair, I want to join in the best wishes to Andy. The 
chairwoman has indicated that our staffs work very well 
together even on issues where there's disagreement, and that's 
so important in getting good legislation passed. Andy has been 
a constructive staffer and will be missed.
    I want to join in the congratulations of the chairwoman and 
wish you well.
    I yield back.
    [Applause.]
    Chairman Walberg. And, Andy, I too want to echo the same 
sentiments, though I would alter a bit. I know you're taking a 
lateral transfer, but we know that you will give great benefit 
to that other body with truth and clarity that maybe they've 
been lacking for quite some time.
    I also want to add an additional point, that while you have 
done this with all good humor and support and optimism, 
positive in moving forward and giving us good counsel, you've 
also been very good at telling me no. And sometimes the best 
thing you can hear from good counsel is no, so you have a 
chance then to understand what is actual truth and what we can 
and can't do and how we need to move forward.
    So I too, Andy, would say thank you for your service. It 
has been invaluable.
    We are blessed in this committee that there will be other 
staff that follow you that will do excellent work, it just 
happens with this committee and subcommittee. So we're not 
worried about that. But they'll have to prove themselves. You 
did. God bless you as you move forward.
    Now I yield to my ranking member, a good friend and 
colleague, Representative Sablan.
    Mr. Sablan. Thank you, Mr. Chairman.
    And good morning, everyone.
    Let me start also by recognizing and thanking Mr. Andy 
Banducci, who is departing the majority committee staff this 
week. Andy has honorably served the committee for 6-1/2 years 
and has played a leadership role on several important 
retirement security issues.
    On behalf of all of your friends, Andy, the Democratic 
subcommittee members and their staff, friends all to you, I 
want to thank you and wish you well as you transition to the 
Senate. Just don't forget to recognize House Members when 
you're Senate staff.
    I want to express my thanks to Chairman Walberg. Since I 
became ranking member, we have sought common ground on ways we 
can help Americans retire with financial security. Last month, 
we introduced legislation that updates a two-decade-old 
standard for automatic IRA rollovers. And in May, we conducted 
a subcommittee hearing where there was a fair amount of 
consensus on practical retirement security solutions.
    At the conclusion of that hearing, I noted how the 
multiemployer pension system and the looming insolvency of the 
Pension Benefit Guaranty Corporation, or PBGC, demands our 
immediate attention. So I appreciate Chairman Walberg's 
willingness to convene today's hearing.
    Welcome, Director Reeder. I enjoyed meeting with you 
yesterday. I look forward to your testimony.
    I'd also like to recognize some of the members of the 
miners, Teamsters union, who also, some of you, came to my 
office yesterday.
    Mr. Chairman, it is clear the multiemployer pension program 
remains in significant financial distress. As the PBGC's 2017 
annual report notes, the multiemployer pension program has $2 
billion in assets to cover $67 billion in liabilities. That's a 
deficit of $65 billion, up from $59.8 billion last year, and an 
all-time high. The PBGC also estimated that unless Congress 
acts, the multiemployer pension program is likely to run out of 
money by the end of 2025. That's the present estimate.
    We have to focus on the biggest cost of the crisis: the 
looming failure of a few very large multiemployer pension 
plans. If Congress works together to help these failing plans, 
we can go a long way toward improving PBGC's financial outlook.
    Several of my subcommittee colleagues and I recently 
cosponsored Congressman Neal's legislation that proposes a 
solution to prevent troubled multiemployer plans from failing 
while safeguarding retirees' hard-earned pensions. I will be 
interested to hear Director Reeder's thoughts on Mr. Neal's 
bill.
    The bottom line is that Congress must address the 
multiemployer pension crisis, and we must act soon.
    As we proceed, I believe we should be guided by the simple 
principle that it is not the fault of the workers or the 
retirees that their pension plan is on the brink of insolvency. 
These Americans worked a lifetime and earned their pension. 
American workers don't want a bailout. They just want the 
pension promise that was made to them to be upheld.
    We must also keep in mind that the costs and consequences 
of inaction are enormous and the consequences will be 
devastating. Impacted retirees could see catastrophic 
reductions to their pension benefit, as high as 90 percent. 
Governments will see reduced tax revenues from impacted 
pensioners. There will likely be significantly increased social 
safety net spending. Employers throughout the multiemployer 
system will be impacted. Some may have to file bankruptcy, 
while others may have a worsened financial outlook due to 
having absorbed additional pension liability. The economic 
fallout will touch most all of our congressional districts.
    Today's hearing should provide subcommittee members an 
understanding of the scope and magnitude of the multiemployer 
pension crisis. And more importantly, Mr. Chairman, today's 
hearing should underscore the urgency for Congress to take 
responsible action to prevent the foreseeable collapse of the 
multiemployer pension program. I hope that we can do that 
sooner, rather than wait until the last minute, and I'm hopeful 
we will do that.
    With that, Mr. Chairman, I want to thank you again for 
convening today's hearing, and I yield back my time.
    [The prepared statement of Mr. Sablan follows:]

  Prepared Statement of Hon. Gregorio Kilili Camacho Sablan, Ranking 
     Member, Subcommittee on Health, Employment, Labor and Pensions

    Thank you, Mr. Chairman. Good morning.
    I want to start by recognizing and thanking Andy Banducci, who is 
departing the Majority Committee staff this week. Andy has honorably 
served the Committee for six and a half years and has played a 
leadership role on several important retirement security issues. On 
behalf of all the Democratic Subcommittee Members and our staff, I want 
to thank Andy and wish him well as he transitions to the Senate.
    I also want to express my thanks to Chairman Walberg. Since I 
became Ranking Member, we have sought common ground on ways we can help 
Americans retire with financial security. Last month, we introduced 
legislation that updates a two-decade old standard for automatic IRA 
rollovers. And in May, we conducted a Subcommittee hearing where there 
was a fair amount of consensus on practical retirement security 
solutions. At the conclusion of that hearing, I noted how the 
multiemployer pension system and the looming insolvency of the Pension 
Benefit Guaranty Corporation--or PBGC--demands our immediate attention. 
So I appreciate Chairman Walberg's willingness to convene today's 
hearing.
    Welcome, Director Reeder. I enjoyed meeting with you yesterday and 
I look forward to your testimony.
    Mr. Chairman, it is clear the multiemployer pension program remains 
in significant financial distress. As the PBGC's 2017 annual report 
notes, the multiemployer pension program has $2 billion in assets to 
cover $67 billion in liabilities. That's a net deficit of $65 billion--
up from $58.8 billion last year and an all-time high. The PBGC also 
estimated that, unless Congress acts, the multiemployer pension program 
is likely to run out of money by the end of 2025.
    We have to focus on the biggest cause of the crisis: the looming 
failure of a few very large multiemployer pension plans. If Congress 
works together to help these failing plans, we can go a long way toward 
improving PBGC's financial outlook.
    Several of my Subcommittee colleagues and I recently co-sponsored 
Congressman Neal's legislation that proposes a solution to prevent 
troubled multiemployer plans from failing while safeguarding retirees' 
hard-earned pensions. I will be interested to hear Director Reeder's 
thoughts on Mr. Neal's bill.
    The bottom line is that Congress must address the multiemployer 
pension crisis and we must act soon.
    As we proceed, I believe we should be guided by the simple 
principle that it is not the fault of the workers or the retirees' that 
their pension plan is on the brink of insolvency. These Americans 
worked a lifetime and earned their pension. American workers don't want 
a bailout, they just want the pension promise that was made to them to 
be upheld.
    We also must keep in mind that the costs and consequences of 
inaction are enormous and the consequences will be devastating. 
Impacted retirees would see catastrophic reductions to their pension 
benefit, as high as 90 percent. Governments will see reduced tax 
revenues from impacted pensioners; there would likely be significantly 
increased social safety net spending. Employers throughout the 
multiemployer system will be impacted. Some may have to file 
bankruptcy, while others may have a worsened financial outlook due to 
having to absorb additional pension liability.
    The economic fallout will touch most all of our congressional 
districts.
    Today's hearing should provide Subcommittee Members an 
understanding of the scope and magnitude of the multiemployer pension 
crisis.
    But more importantly, today's hearing should underscore the urgency 
for Congress to take responsible action to prevent the foreseeable 
collapse of the multiemployer pension program.
    I am hopeful we will do that.
    With that, Mr. Chairman, I want to thank you again for convening 
today's hearing and I yield back the balance of my time.
                                ------                                

    Chairman Walberg. I thank the gentleman.
    Pursuant to Committee Rule 7(c), all members will be 
permitted to submit written Statements to be included in the 
permanent hearing record. And without objection, the hearing 
record will remain open for 14 days to allow such Statements 
and other extraneous material referenced during the hearing to 
be submitted for the official hearing record.
    It's now my pleasure to introduce our distinguished 
witness. Mr. Tom Reeder was confirmed as the Director of the 
PBGC in 2015. Prior to joining PBGC, he practiced employee 
benefits law at private firms. Following private practice, he 
joined the Treasury Department, where he rose to the position 
of benefits tax counsel in 2005. In 2009 he started serving on 
the staff of Senate Finance Committee Chairman Baucus and then 
joined the IRS in 2013.
    [Witness sworn.]
    Chairman Walberg. Before I recognize the Director to 
provide your testimony, let me briefly explain our lighting 
system. I think you know the lighting system, so I won't go 
through the script here. It is a system that we generally 
follow on the road. Green, go; yellow, start to stop; and red, 
stop.
    We want to hear your full testimony, though we have your 
full testimony in written form, and then after that have the 
opportunity for our committee here to ask questions. So we 
welcome you and thank you for your testimony.

  STATEMENT OF THE HONORABLE W. THOMAS REEDER, JR., DIRECTOR, 
  PENSION BENEFIT GUARANTY CORPORATION (PBGC), WASHINGTON, DC

    Mr. Reeder. Thank you, Chairman Walberg, Ranking Member 
Sablan, and members of the subcommittee. I very much appreciate 
the opportunity to appear before you today to discuss the key 
challenges that PBGC faces. As you mentioned, my full testimony 
has been submitted, so I'll focus on the most pressing issue 
facing us today.
    Congress established the PBGC in 1974 as part of ERISA to 
provide basic protection for participants' benefits in defined 
benefit pension plans. Under ERISA, PBGC insures plans without 
regard to their financial situation. Today, PBGC insures 
benefits for nearly 30 million people in the single-employer 
program and about 10 million people in the multiemployer 
program.
    While each program protects pension benefits when plans 
fail, the guarantees, the premiums, and other features differ 
significantly. By law, the assets of one program can't be used 
to pay benefits under the other.
    Both programs have been in deficit for about 15 years. 
However, the financial condition of the single-employer 
program, as the chairman noted, has been steadily improving, 
but the multiemployer program is in dire straits and getting 
worse.
    As of September 30, the single-employer program had 
liabilities of $117 billion and assets of $106 billion. So 
there's still an $11 billion deficit. Our projections show that 
will improve, but it's not a certainty.
    By contrast, as the chairman noted, we have $67 billion in 
liabilities in the multisystem and only $2 billion in assets. 
That's a $65 billion deficit, and it's likely to become worse. 
And we project that the program will be insolvent--more likely 
than not to be insolvent by the end of 2025.
    That's due to many factors--financial, economic, and 
demographic--and the recession of 2008-2009 amplified the 
effects of each of these factors. As a result, the funded 
status of the multiemployer program fell below 50 percent after 
the 2008 crisis. Many plans have recovered, but about 10 
percent of them didn't and probably will not recover.
    So today the multiemployer program faces an unprecedented 
level of plan failures. Over 100 multiemployer plans with more 
than a million participants have already reported to their 
participants that they expect to fail within the next two 
decades.
    PBGC, our financial Statement with some of these plans 
already on our balance sheet reflects the serious underfunding 
of these critical and declining multiemployer plans. Our 
Projections Report shows that this underfunding is likely to 
increase our deficit as the years come. And as I mentioned, we 
are likely to be insolvent by the end of 2025.
    With PBGC's multiemployer funds exhausted, when and if they 
get exhausted, the only money available to pay plans--or 
benefits under plans--will be the annual premium revenue that 
we collect, which is now a little over $200 million a year, and 
it's projected to grow to $400 million a year. So we're paying 
billions of dollars in obligations with millions of dollars of 
income.
    Multiemployer guarantees are already very, very low 
compared to the single-employer program. And so a failure of 
the PBGC's multiemployer program will result in those low 
guarantees becoming even lower, much lower. Right now, if you 
have 30 years of service, your guarantee level is a little 
under $13,000. That compares to the single-employer program 
where your guarantee, regardless of your service, is more like 
$64,000. So one of them is livable and the other one is not 
quite livable. Cuts of this size are catastrophic to 
participants.
    We will continue to work with the administration, with 
Congress, and the multiemployer plan community that includes 
both participants and the plans themselves to address this 
problem. And I look forward to addressing your specific issues 
in the coming few moments.
    Thank you.
    [The prepared statement of Mr. Reeder follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Walberg. I thank the gentleman. And I thank you 
for giving us information difficult to hear. But as my father 
used to tell me, there's no ability to achieve a solution 
unless you know the full facts and the depth of those facts. So 
I appreciate that, and I know that you have further responses 
to the questions we have.
    I now recognize the chairwoman of the full committee, the 
gentlelady from North Carolina, Ms. Foxx.
    Ms. Foxx. Thank you, Chairman Walberg.
    And, Director Reeder, thank you so much for being here 
today. As Chairman Walberg said, we need to know the facts, we 
need to know the story. A lot more attention is being paid to 
the issues related to pensions and retirement in the country, 
and it is important that we have the baseline to deal with. And 
we want to work with you on helping to solve these problems 
you're presenting.
    You talked about the single-employer pension insurance 
program being in better financial position. Can you discuss how 
the reforms to the single-employer pension plan made in the 
Pension Protection Act of 2006 have contributed to this 
stability? And do you have some recommendations on reforms that 
Congress should consider to the multiemployer pension funding 
rules?
    Mr. Reeder. Yes. Thank you, Madam Chairman.
    I do believe that the Pension Protection Act included 
significant funding reforms. They included reforms in both the 
single and the multiworld, but the funding rules in the single 
world have much more teeth. There's more consequences to 
failing to follow the funding rules in the single-employer 
world.
    And just as importantly, with PPA and subsequently enacted 
legislation, the premiums that single-employer plans pay is 
more consistent with the benefit and the guarantee level that's 
provided under the single-employer world. And I think the 
primary effect of the PPA on the single world was the teeth in 
the funding rules.
    Including those kinds of teeth in the multiemployer world 
would help prevent the program from getting worse, but I'm not 
sure that funding rule changes would help us dig out of the 
problem that we're in the multiworld. The problem we're in is 
so deep that it's difficult to dig out of without some other 
funding source other than putting--we can't fund up all the 
multiemployer plans quickly enough to avoid the disaster.
    Ms. Foxx. Thank you for that.
    I was here in 2006, and many people have heard me say this 
comment. I was on this committee. Chairman Boehner said to us 
on the morning that we had the markup, he always wondered why 
nobody had done any pension reform for 30 years. And then when 
he got into it, he realized it was very hard work. And those 
words have stuck with me since that time.
    We know also from your comments that too many pensioners 
may not receive the benefits they were promised. When the plans 
are terminated, what liability attaches to contributing 
employers? What liability attaches to unions who participated 
in making these promises?
    Mr. Reeder. When the plans terminate, if they completely 
terminate, there will be a withdrawal obligation, a withdrawal 
liability obligation on the part of all the participating 
employers who were contributing to the plan, and they will have 
to contribute amounts equal to the underfunding up to certain 
limits. And that's if the plan terminates.
    Oftentimes, when a plan becomes insolvent, it doesn't 
necessarily terminate, and the employers can continue to 
contribute at the same rate that they were contributing. But if 
it terminates, the employers would have withdrawal liabilities. 
The unions would not have a liability.
    Ms. Foxx. Thank you very much.
    I yield back, Mr. Chairman.
    Chairman Walberg. I thank the gentlelady.
    Now I recognize the ranking member of the full committee, 
Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman.
    And, Mr. Reeder, thank you for being here.
    What we're facing is a problem of arithmetic in the 
multiemployer plans. The PBGC, as we've heard, has $2 billion 
in assets and $67 billion in present value liabilities.
    According to your testimony, Mr. Reeder, the PBGC will need 
to make about $2 to $4 billion a year in pension payments with 
a premium revenue of only $400 to $500 million. So the problem 
is imminent, and it reminds me of the old saying: Nothing 
focuses the mind in the morning like an execution scheduled 
later that night.
    I hope this hearing helps focus our minds, and that we 
recognize that bipartisan action on this matter cannot be 
postponed later. As you pointed out, the longer you wait, the 
more difficult and more expensive it is to solve the problem. 
And so we can talk about the problem. I think you've 
articulated the problem. Let's see what some kind of solutions 
there may be.
    First, let me ask whether or not the premiums of 
multiemployer programs are sufficient.
    Mr. Reeder. I think the multiemployer program has premiums 
that have been too low for too long. They were $9 per 
participant until 2012, and they increased to $28 today in 
their index now. That is below what I believe is a market rate 
for what it would take to insure that kind of benefit, 
especially when the insurer has no ability to decide who it's 
going to insure and who it's not. As I said in my testimony, we 
cover all plans regardless of their condition.
    I think the premiums are still too low. I realize that 
raising them is difficult, but I don't think they reflect the 
economic reality of the obligations we have.
    Mr. Scott. Are there any ways to set premiums in a risk-
based way so that we recognize not only the present solvency 
based on assets, but also assess the risk based on the quality 
of the assets? Is there any plan that you know of that could 
set premiums like that?
    Mr. Reeder. The administration has included in its most 
recent budget a proposal that would restructure the 
multiemployer plan premium so that it would have a risk-based 
element. It's a variable premium rate that increases with the 
level of underfunding.
    That is not exactly a risk-based premium like you 
suggested. But the single-employer world has that variable rate 
premium, and it's one of the reasons why the single-employer 
program is doing better, because plans have an incentive to 
fund up their plans--employers have an incentive to fund up 
their plans to avoid that variable-rate premium.
    Mr. Scott. That's based on present level of assets.
    Mr. Reeder. Yes, sir.
    Mr. Scott. Do you have any examples where you could look at 
the volatility of the plan, the quality of the assets, and base 
premiums on that?
    Mr. Reeder. I'm not aware of any proposal, concrete 
proposal to do that. There have been proposals in the single-
employer world to have a risk-based premium based on the 
financial condition of the sponsor, but they have been 
rejected. I mean, that proposal has been made by every 
administration I'm aware of back to President Reagan, I 
believe, that they have a risk-based premium in the single 
world, but it's been reject every time it's been proposed.
    Mr. Scott. Are there volatility assessments anywhere else 
that you're aware of?
    Mr. Reeder. I'm sure insurers--
    Mr. Scott. You do have a plan in the United Kingdom that 
allows that kind of--
    Mr. Reeder. Yes. The United Kingdom does look at the 
quality of assets.
    Mr. Scott. And base the premium on that based on the 
quality?
    Mr. Reeder. Yes.
    Mr. Scott. So that those who are volatile and likely to go 
broke would pay a higher premium than those who have invested 
in more stable, safe assets.
    Mr. Reeder. That's correct.
    Mr. Scott. Is there anything else we can do to address the 
fact that every 20 years the stock market goes broke?
    Mr. Reeder. Well, again, I'd point to the single-employer 
world where plan sponsors are using liability-driven 
investments that match the volatility of the assets with the 
timing of the obligations. And as plans become more fully 
funded, they invest more in fixed-income securities.
    Chairman Walberg. I thank the gentleman.
    I recognize myself now for my 5 minutes of questioning.
    Director Reeder, again, thanks for being here.
    The multiemployer insurance program has a deficit that 
exceeds $65 billion, as we've indicated so far. In townhalls 
throughout my district, including one just this past Monday, 
I've heard of the devastation facing--pensioners are worried 
that they will not receive what they promised, as well as 
employees, present employees, who are paying into the system 
that they believe will not have any benefit for them as well. 
I've heard from businesses that feel the same way in the 
present situation, and they feel captive.
    While I share their frustration and anger, I certainly 
don't share their reality. I'm not dealing with that, and I 
don't think anyone here in the desks looking down share that 
same reality. But the frustration, the anger that we hear is 
important to recognize.
    In your opinion, what have been the major contributing 
factors causing these looming plan insolvencies?
    Mr. Reeder. It is a combination of factors. It's 
demographic, it's economic, and it's investments.
    I think it's also been regulatory as well. I think there 
were periods in the history of multiemployer plans when the 
amount that was bargained for to be contributed to the plans is 
more than the plans needed. The plans were fully funded and yet 
employers and employees still bargained for contributions to 
the plan.
    And in order to make those contributions deductible, 
because under the Tax Code they're not deductible if they're 
more than is required to be held, the plans reacted by 
increasing benefits. And then in hard times, like Congressman 
Scott recognized it, in hard times, when the value of the 
assets fell, you had these higher benefits that were very 
difficult to get rid of, if not impossible to get rid of.
    Chairman Walberg. So there were overpromises to plan 
participants?
    Mr. Reeder. That's correct. That's correct.
    Chairman Walberg. There have been proposals to provide, for 
the first time in history, Federal taxpayer dollars to prop up 
failing plans. We're all aware of those. How much money, in 
terms of Federal taxpayer dollars, would the government need to 
provide these plans in order to solve this problem permanently 
for all multiemployer plans?
    Mr. Reeder. I can't give you a number, but it's much more 
than would--it's exponentially more than is required to keep 
PBGC solvent. The level of benefits that are promised under 
plans are up here; the level that we guarantee is down here. 
And I'm focused on making sure that guarantee works.
    And as you mentioned, there are other people who would like 
this level of promised benefits paid. It would help us with the 
lower level if the people who made these promises never come to 
our door. So any amount that can be provided to plans to keep 
them from coming to our door would help us. But--
    Chairman Walberg. Tens of billions of dollars?
    Mr. Reeder. Yes.
    Chairman Walberg. Or more?
    Mr. Reeder. Much--yes, or more.
    Chairman Walberg. OK.
    Mr. Reeder. As I said, the plans are about 50 percent 
funded, or a little bit less than 50 percent funded on the 
whole. And if you wanted to fully fund them all up, you'd need 
a lot of money.
    Chairman Walberg. Director Reeder, most independent 
observers agree that multiemployer pension premiums are too 
low, as you've said. The size of the deficit indicates that the 
government has been undervaluing the risk of these plans. How 
much more would a private insurer need to charge to insure 
these benefit promises?
    Mr. Reeder. Because of the unique aspect of what we insure, 
I can't give you that number. And you might think it's a little 
disingenuous of me to say they're undervalued, but I assure you 
it would be a lot more than what is being paid. I can't give 
you the number.
    The main reason is because, in the insurance world, they 
not only get to set their own premiums, but they get to 
regulate more as to what the insured people do.
    It's also difficult to raise the premiums after the 
accident has already occurred. And we have--I won't say the 
accident has occurred, but we're a few hundred feet in front of 
the brick wall, and we're moving at very high speed. So it's 
very difficult to raise the premiums to a market level 
immediately.
    Chairman Walberg. Thank you. My time has expired.
    I now recognize my ranking member and good friend, Mr. 
Sablan.
    Mr. Sablan. Again, thank you very much, Mr. Chairman.
    And, Mr. Reeder, I appreciate you saying in your testimony 
that legislation is needed to address the looming insolvency of 
the multiemployer pension program, and I agree. As you may be 
aware, Congressman Neal recently introduced legislation, H.R. 
4444, that would provide low interest loans to failing plans 
and potentially other financial assistance through the PBGC. 
Most of the Democratic members of the HELP Subcommittee are 
cosponsors of Mr. Neal's bill, which, most importantly, does 
not cut retirees' pensions.
    One, has the PBGC had an opportunity to review Mr. Neal's 
bill? And if so, what are your thoughts on it? If not, when 
will you finalize your review and analysis of it, and will you 
share it with us when it is completed?
    Mr. Reeder. We have not had a chance to review it fully. We 
are looking at it closely. It is very difficult to evaluate 
exactly the effect and the cost of the program, because each 
plan is plan specific, and we don't have data from plans that 
we need to see how that would affect each plan.
    And other loan proposals have actually gone to plans and 
sought out their advice on whether or not the loan proposal 
will cure the problem, cure their problem. But we can't--it's 
difficult for me to predict when our analysis is going to be 
done, but I assure you we can share it whenever we have it.
    Mr. Sablan. Thank you. And so I would go to--my next 
question is, has the PBGC reviewed the other proposals put 
forward by UPS, one, and the National Coordinating Committee 
for Multiemployer Plans? And if so, again, what are your 
thoughts on those proposals? If not, when will you finalize 
your review and analysis of these proposals, and will you share 
it with us when it is complete?
    Mr. Reeder. Again, we can share our analysis with you, but 
as I've said about the other proposal, it is very difficult to 
evaluate the loan proposal on a plan-by-plan basis. And we need 
to do that, because we need to look at whether or not it 
resolves the problem for the big plans that are facing imminent 
insolvency. And we don't have access--we have to go through the 
plans to get access to that, and so far we've been 
unsuccessful.
    But we do think that the loan proposals all would clearly 
have an effect. But exactly what that effect is, we don't know. 
And whether or not it's going to resolve the problem--and 
again, we're talking about a problem up here where a promised 
benefit is not a problem just for PBGC.
    Whether or not it resolves the problem, we can't say, 
although we're a little bit skeptical, because we think that 
maybe the assumptions that are being used by the people who are 
proposing the other proposals may be a little rosy.
    Mr. Sablan. All right. Thank you.
    Mr. Reeder, the committee chair is here, very strict on 
time, so let me try and get to my next question.
    I believe that one of the most attractive features of Mr. 
Neal's bill is that it does not include cuts to the pensions, 
retirees' pensions. So we should do our best to protect what 
was promised to these hardworking Americans. And let's be 
clear, the pension benefit that those in multiemployer plans 
receive is often quite modest. For instance, I understand that 
the average pension paid by the Mine Workers plan is $530 a 
month.
    So could you please talk about the pension benefit rates 
among multiemployer plans? And we only have 48 seconds.
    Mr. Reeder. Yes. The benefits vary greatly. There are plans 
that have very modest benefits. And as you pointed out, the 
coal miner plan has much more modest benefits and the Teamsters 
have a higher, much higher level of benefit. And so a reduction 
to the PBGC guarantee level would affect the Teamsters much 
more than the coal miners, but they will have an effect on both 
groups.
    Mr. Sablan. All right. And I'm going to yield back my time, 
but I may submit other questions for the record.
    Mr. Reeder. Yes.
    Mr. Sablan. Thank you.
    Thank you, Madam Chair. I yield back
    Ms. Foxx.
    [Presiding] Thank you, Mr. Sablan.
    Dr. Roe, you're recognized for 5 minutes.
    Mr. Roe. Thank you, Madam Chairman. I too want to thank 
Andy Banducci, who sat by me as I sat in that chair for 6 
years.
    Andy, thanks for your friendship, and thanks for the hard 
work you did on behalf of the committee.
    First of all, Mr. Director--and I appreciate you coming by 
the office and speaking with me--I can see myself sitting out 
in that audience concerned. My father was a union member, lost 
his job at 50. It was off-shored. And here he was, post-World 
War II, no job, and no pension plan.
    I can see myself sitting there. And it looks to me like 
that we have two very conflicting issues here. One, the PBGC's 
current funding can't meet its obligations; and, two, some of 
the multiemployer pension plans can't meet their obligations.
    And I guess the question I have is that if you don't have 
enough money to pay the obligations, there are things that we 
have to look at. One, are we paying premiums enough? You've 
talked about the premiums, right? Has an improving economy, 
which has improved tremendously in the last year, helped make 
these plans more solvent and extended that time? Three, can we 
reduce benefits? That's another option that you have. Increase 
premiums, improving economy, reduce benefits.
    And can you fund--and I've always thought this. You should 
be able to fund a pension plan above what we allow during good 
times, because you see in the 1990's, when the dot-com was 
going along, the economy was doing great, we should have 
upfunded those plans in, instead of not funding them, I think.
    And then last, I want to ask have there been any government 
decisions, any decisions that--government policies that have 
contributed to the failure of the plan? And going forward, do 
we need a new type of pension plan?
    Mr. Reeder. I'm sorry. I didn't take notes at the beginning 
of your question, so there were lots of items. I'm sure you'll 
remind me if I miss something.
    But, yes, I do think that there's been errors, as I 
mentioned in a prior question, in the government's behavior in 
limiting the amount that can be contributed to a plan. And I do 
believe that those rules have been loosened and people can 
contribute more in better times. But your point is, will they? 
I think with a variable rate premium, we might encourage them 
to do so in better times.
    I do think that a different sort of plan is something that 
should be examined. I am heartened by the various proposals 
that have been given about having a different plan. But I have 
to emphasize that, from my perspective, it is very important 
that we not affect the funding levels, we don't adversely 
affect the funding levels of the existing promises that have 
been made, and I'm very fearful of new plans having that 
effect.
    But I think, if there's going to be anything that looks 
like a defined benefit plan in the future for our 
grandchildren, I think it's going to have to look a little bit 
different than today.
    Mr. Roe. Well, the administration has proposed changing--
charging underfunded multiemployer pension plans an additional 
premium based on risk. Mr. Scott talked about this. How would 
the PBGC ensure that this new premium wouldn't accelerate the 
insolvency of already underfunded plans as far as the money 
they don't have?
    Mr. Reeder. Well, the proposal, the administration's 
proposal has a provision that allows for the PBGC to waive up 
to 20 percent of the premium in total for plans that it would 
adversely affect, because we certainly don't want to accelerate 
the problem. And we would exercise that authority to avoid 
charging plans that are already close to insolvency or critical 
and declining, avoid charging them a higher premium. That's 
just money that goes into our pocket and goes right back out.
    Mr. Roe. So we defined the problem pretty well. We don't 
have enough money to pay the obligations.
    What solutions have the PBGC--it's not your job--but what 
solutions have you brought forward or you think we could do to 
help solidify these plans?
    Mr. Reeder. Well, there's an array of solutions, and we've 
been looking at lots of different proposals that have been made 
that range from government funding to benefit cuts to earlier 
benefit cuts for a plan that's headed toward insolvency that's 
going to go to the PBGC. Almost certainly, the earlier they 
make the cuts, the less drastic the cuts have to be if you're 
going to cut. But all of those are very politically 
uncomfortable resolutions.
    Mr. Roe. Thank you, Mr. Director.
    I yield back.
    Chairman Walberg.
    [Presiding.] I thank the gentleman.
    I recognize the gentleman from New Jersey, Mr. Norcross.
    Mr. Norcross. Thank you, Chairman. I certainly appreciate 
you, along with our ranking member, putting together this 
incredibly important meeting.
    And as you suggested, we up here might not have a stake in 
the game or skin in the game. I am a multiemployer pensioner. I 
understand this. I've been a part of it for a better part of 37 
years. That's why I understand how important this is.
    So, Director Reeder, thank you very much for bringing it to 
us.
    This isn't a red issue, this is not a blue issue, this is 
not a Republican or Democrat issue. It's an American retirement 
security issue. Those men and women who literally deferred part 
of their compensation to have a secure retirement was a solemn 
vow they made, and they kept their promises. So we need to make 
sure that we keep our promises in making sure they get their 
full benefit.
    I'd just remind members here, we promised a lot in Social 
Security, yet we've made changes for years. So when we hear 
some of the statistics that you're talking about, 72 plans have 
failed, what is going to happen, the cost of inaction, you 
know, the changes, do you want to leave the defined benefit and 
go to a defined contribution which shifts the liability, all 
these issues come into play.
    But the cost of inaction, if we do nothing. So let me walk 
through this. You say by 2025, it's the estimate, you'll be 
bankrupt, upside down, no longer can pay premiums. Today, for a 
pensioner that makes--or gets a, let's say, a $50,000 pension, 
which is above the norm, what is the maximum benefit that he or 
she can receive if that plan goes under?
    Mr. Reeder. Today--
    Mr. Norcross. Today.
    Mr. Reeder [continuing]. that amount is a little under 
$13,000 if they have 30 years of service.
    Mr. Norcross. Right.
    Mr. Reeder. A little more if they have more service yes.
    Mr. Norcross. Yes. It's a rather complicated formula. 
$12,870 today. If you have $100,000 pension or if you have a 
$50,000, no matter what it is, the most you can get if that 
plan goes under is $12,870.
    Mr. Reeder. Correct.
    Mr. Norcross. So if we do nothing and plans crash, the 
maximum anybody can get is $12,870. Is that correct?
    Mr. Reeder. Today.
    Mr. Norcross. Today. The cost of doing nothing.
    Mr. Reeder. In 2025, they will get less than $2,000.
    Mr. Norcross. So the cost of inaction here is the issue 
that we're dealing with.
    A couple of issues. You said you were expecting the 
premiums to increase from $200 million to $400 million. How is 
that possible? Is that by your anticipating the increase that's 
indexed already?
    Mr. Reeder. Yes.
    Mr. Norcross. And that's keeping every plan healthy. So if 
a plan goes bankrupt, that would pull away from a premium 
increase.
    Mr. Reeder. Yes. That's including a consideration of some 
plans dropping out.
    Mr. Norcross. So you factored that in.
    Mr. Reeder. Yes.
    Mr. Norcross. Did you factor in the increases on how that 
might accelerate healthy plans from becoming unhealthy, going 
into yellow or red zone?
    Mr. Reeder. The premiums under their current rate, I don't 
believe we factored in an effect of the premiums.
    Mr. Norcross. The more you charge premiums, the less 
healthy, they either have to increase what they're paying or 
lessen the accumulated benefit, correct?
    Mr. Reeder. That's correct. But I think the inflationary 
increase is not going to have the same effect as a legislated 
increase. I agree that a legislative increase would have an 
effect.
    Mr. Norcross. So the risk-based premium--shifting here a 
little bit--is that based on individual plans or companies, or 
is that risk based for the entire multiemployer?
    Mr. Reeder. Well, the variable premium rate would be based 
on the underfunding of the entire plan.
    Mr. Norcross. Across the board for healthy plans and 
unhealthy plans. So you would use the healthy plans to pay for 
the unhealthy plans, correct?
    Mr. Reeder. No. No. If a plan was fully funded, it wouldn't 
pay the variable rate premium.
    Mr. Norcross. Only 100 percent. So if they're 90 percent, 
would they pay the premium?
    Mr. Reeder. Yes. I mean, the details of the variable rate 
are not specified in the proposal. And the details, you could 
say, is where the devil resides.
    Mr. Norcross. I agree. And, again, I want to thank 
everybody on both sides of the aisle here. The cost of doing 
nothing is unacceptable.
    Thank you. I yield back.
    Chairman Walberg. I thank the gentleman.
    I recognize my colleague and friend from Michigan, Mr. 
Mitchell.
    Mr. Mitchell. Thank you, Mr. Chair.
    Mr. Reeder, you referenced earlier in a conversation with 
another colleague that you have begun to look at the loan 
concept. But in looking at that, you need to look at individual 
plans. And you've been unsuccessful in being able to do that. 
Can you share with me why you've had difficulty in terms of 
being able to look at those plans?
    Mr. Reeder. We need more data on the accrued benefits per 
participant to determine what it takes to make the plan viable 
in the long run.
    Mr. Mitchell. And why have you not been able to get that?
    Mr. Reeder. Well, it's not something that we collect. I 
mean, it's not--we have a pretty complex 5500 that they--Form 
5500 that they file every year, and adding to that would cause 
some consternation. And we have added to that in the past, but 
we don't have it right now.
    Mr. Mitchell. Well, these are plans that are in pretty dire 
straits. So would they not be wise to simply supply it so that 
you could have more detailed information since they're looking 
for a way to avoid insolvency?
    Mr. Reeder. Well, with respect to the analysis of the loan 
program, I think it would be, but we haven't gotten it. We've 
asked for it.
    Mr. Mitchell. They declined to effectively provide it, 
effectively.
    Mr. Reeder. Right. I mean, we didn't ask for it in a 
judicial or legal way. We didn't subpoena it or anything. But 
we said we would like information on how the program would keep 
the plan solvent, and we have not received it.
    Mr. Mitchell. For the record, I'd like to ask, Mr. Chair, 
that we get a listing of those plans that you've asked, the 
information, what information you've asked for, and those 
who've responded or if not, if you would, please.
    Mr. Reeder. Let me just say we've asked the proponents. We 
haven't asked the specific plans.
    Mr. Mitchell. I would suggest and ask respectfully that you 
ask the specific plans since it has a significant impact on our 
deliberations here, and yours, how we address this issue 
responsibly.
    You made a reference also in your testimony about the fact 
that the individual plan teeth are far more successful and we 
don't have effective teeth in the multiemployer plans. Have you 
got specific recommendations you can share in terms of how to 
get better teeth in those multiemployer plans?
    Mr. Reeder. Well, the big teeth in the single world is an 
excise tax. And to charge an excise tax, it's a confiscatory 
excise tax, and it's something that people want to avoid. And 
in order to do that in the multiemployer world, and the reason 
it's been so difficult, is it's not clear who you charge that 
tax to. If it's the plan, then you could make the matters 
worse.
    Mr. Mitchell. Worse.
    Mr. Reeder. If it's the employer, well, it's difficult to 
get that legislated. If it's the participants, it's difficult 
to get that legislated. It's similar to raising premiums.
    Mr. Mitchell. It also seems to me that by doing that, the 
ones that effectively go bankrupt earlier are better off, 
right, because you're actually imposing the penalty on those 
that are left standing, so to speak.
    Mr. Reeder. That's right.
    Mr. Mitchell. You talk about the promises made, the current 
guarantee, which for multiemployer plans are very low. Have you 
done any analysis of--the reality is you have plans here that 
there have been decisions made for a variety of reasons, some 
poor decisions, some economic impacts. Have you done an 
analysis of some alternative levels of guarantee that is 
fiscally manageable? Have you looked at that in terms of 
alternate guarantee?
    Mr. Reeder. Well, the statute requires us to provide a 
report to Congress when we determine that we are going to go 
insolvent. And I think the time is coming up for that, and we 
need to figure out exactly how we're going to ramp down the 
guarantee level as we approach insolvency. We don't have a 
concrete plan in that regard yet.
    Mr. Mitchell. Is PBGC prepared to administer a loan program 
that's been discussed in order to help basically push off some 
of these catastrophes at this point?
    Mr. Reeder. Not currently. Loan programs that exists in the 
government already are generally administered by the Treasury 
Department or other departments.
    I don't want to be too cheeky in saying that the assistance 
that we give to insolvent plans already is technically a loan, 
and we don't collect those very well.
    Mr. Mitchell. You can be cheeky here. It's OK.
    Let me just make one more comment, which probably is more 
cheeky than likely. I think we need to be very careful when we 
talk about fully funding or using taxpayer funds for fully 
funding plans that decisions were made, such as the one you 
described, on increasing benefits when you can, but then you 
can't ramp them back, because the taxpayers didn't participate 
in those decisions.
    So while we do not want anybody--my dad was a retiree from 
General Motors--to end up without a pension, we need to be 
careful to balance that, because otherwise we create an 
incredible incentive to be irresponsible, frankly.
    So your recommendations will be appreciated. We need to 
look at those loan--what the alternatives to the loan programs 
are, and let's ask those questions and see a response.
    Thank you. I yield back. Thank you, sir.
    Chairman Walberg. I thank the gentleman.
    Before I recognize our next questioner, I'm noticing my 
ranking member's tie. It reminded me of the beautiful 
University of Michigan maize and blue. But I was also in the 
stands at the Big House this past Saturday and enjoyed the 
first half very much.
    But I would be remiss if I didn't congratulate my colleague 
from Ohio, the Buckeyes, for your, doggone it, for another win 
that continues on.
    Ms. Fudge. Thank you.
    Chairman Walberg. But there is always next year.
    So I recognize my friend and colleague from Ohio, the 
Buckeye State, the victor State this past Saturday, Ms. Fudge.
    Ms. Fudge. Thank you, Mr. Chairman. And since it is my alma 
mater, I really wasn't going say anything, but since you did, 
maybe next year.
    Chairman Walberg. I think you channeled me.
    Ms. Fudge. Thank you so much, Mr. Chairman.
    And I thank you, Director, for being here today.
    Just a couple really quick questions for you. Should the 
agency become insolvent, is there any mechanism by which the 
government steps in absent congressional action?
    Mr. Reeder. No.
    Ms. Fudge. So you need us to act. OK. That's No. 1.
    No. 2, I don't like to really talk in abstract. My 
colleague Mr. Norcross asked you about the maximum benefit that 
could be received should the worst happen. What is the floor? 
You said the maximum may be $2,000. What would be the floor?
    Mr. Reeder. It would be the benefit promised under the 
plan. And many plans don't promise a benefit that's even that 
high.
    Ms. Fudge. At all. OK.
    Mr. Reeder. Yes.
    Ms. Fudge. So then tell me, what do you think would happen 
if some of the people sitting here were to only get $1,000 or 
$2,000, on our economy, should they not be able to buy 
medication, should they not be able to maintain their homes, or 
should they not be able to send their children to school? Tell 
me what the economic benefit, if you know, would be if we 
reduce benefits to a level that people can't even live on.
    Mr. Reeder. I don't have hard numbers, Congresswoman, but I 
do know that many of these multiemployer plans have 
participants that are concentrated in geographic areas where 
the effect of a catastrophic decline in their income would have 
a similar effect on the entire community.
    Ms. Fudge. Could this happen before 2025?
    Mr. Reeder. Yes, it could.
    Ms. Fudge. So we really know that there is some urgency. It 
may not be 2025. I agree with our chairman that we haven't done 
this in more than 30 years. It is time to do it. And I think 
that it's great to look back on mistakes that were made, but 
the people who are going to be punished today had nothing to do 
with those mistakes either. And if we make people a promise, we 
should keep our word.
    So I understand that there were problems. We need to find a 
way to solve it. So my next question to you is, if there were 
any one thing you would suggest that we do to try to make this 
a better situation, what would that thing be?
    Mr. Reeder. I have to say increase the premiums to keep 
PBGC afloat long enough to make the promises that the PBGC has 
made--you limited me to one--because that's, I think, 
maintaining the government's promise is the most important 
promise of all. And if you can achieve that, then you ought to 
also think about trying to figure out a way to have the plans 
maintain their promise.
    Ms. Fudge. OK. And last I would say to you, how many people 
do you think would be affected by an insolvency, immediately, 
how many people, just sheer numbers?
    Mr. Reeder. A least a million, probably closer to a million 
and a half.
    Ms. Fudge. And that is catastrophic.
    I thank you, Mr. Chairman. And I yield back.
    Chairman Walberg. I thank the gentlelady.
    I recognize now my friend from Georgia, one who has had 
concerns about employees and their future and benefits, Mr. 
Allen.
    Mr. Allen. Thank you, Mr. Chairman. And I won't talk about 
college football, although the Iron Bowl, I am pretty happy 
about the outcome of the Auburn-Alabama game. But we are here 
for a serious conversation this morning, and it sounds very 
serious.
    You know, I'm trying to find out exactly, it seems like 
we're kind of going around the issue here. It's obvious that 
people paid into a program, paid premiums, and that the labor 
organizations and the employers adjusted benefits at will, 
disregarding the premiums that were being paid in. And how in 
the world were they able to do that? I mean, how could they 
just decide they were going to give greater benefits without 
any regard to the future solvency of the program?
    Mr. Reeder. I don't believe that anyone would say that 
trustees made a decision on benefits without regard to the 
funding level of the plan. I do believe they all sincerely 
believed when they made a promise that the assets would be 
available to pay that promise based on actuarial valuations 
that they were doing at the time.
    However, some plans, probably a majority of the plans, made 
the promise in a way that it could be adjusted in the future, 
and they made those adjustments when the economic conditions 
required it. And they increased contributions from the employer 
when the economic conditions required increased contributions.
    And we're talking about, as the Congresswoman mentioned 
earlier, we're talking only about 1 million, 1.5 million 
people. There's 8 million, 8.5 million people out there that 
are not going to have any problems and the multiemployer 
program is doing very well for them. And I think Congressman 
Norcross mentioned that there are plans that are doing just 
fine out there and it's difficult to extract higher premiums 
from them.
    Mr. Allen. Why are some programs doing well and we've got 
this one group that is upside down? And like you said, it's 
going to be an exponential cost to somebody, potentially 
taxpayers, where we already have a Nation that's 20 trillion 
dollars in debt. I mean, it's not taxpayers that are going to 
be funding any kind of assistance here. It's going to be, I 
don't know, four, five, six generations from now. I mean, we're 
not funding anything basically right now because of the 
deficit. It's all being passed down several generations.
    So what is the difference in the premiums in the programs 
that are successful or the single-employer programs and the 
programs that are in financial trouble? What's the difference 
in the premiums?
    Mr. Reeder. They're a pretty incredible difference. The 
multis pay $28 a head flat. The singles pay $74 a head flat. So 
already you're talking nearly three times as much, plus $38 per 
$1,000 in underfunding, and that's capped at $523 per 
participant.
    So a single-employer plan can have a benefit--a premium of 
up to nearly $600 per participant if they're poorly funded.
    Mr. Allen. So it sounds like somebody was misled here. In 
other words, they said: You pay in this amount, you're going to 
get this benefit. They're not going to get it. Is that a 
correct Statement, based on your concern presently?
    Mr. Reeder. Yes, I do think that $9 until 2012 per 
participant was too little to provide the insurance that we 
were providing.
    Mr. Allen. Who is responsible for that?
    Mr. Reeder. Congress sets the premium rate. The premium 
rate is set by Congress. So, as I mentioned earlier, there's 
been a lot of proposals to allow the PBGC to set the premium 
rate, but Congress sets the premium rate.
    Mr. Allen. OK.
    Mr. Reeder. You may be talking about the contribution rate, 
and the contribution rate is collectively bargained. That's the 
amount that employers pay out of the employee's salary to pay 
the benefit.
    Mr. Allen. So Congress has been unwilling to raise the 
premium because of what reason?
    Mr. Reeder. I have a difficult time answering that 
question. Premiums, I think, are largely regarded by plans, and 
in the single world by employers, as a tax. And we don't like 
to raise taxes. And it's technically not a tax but it feels 
like a tax, especially if you're well funded. So it's not easy 
to raise premiums.
    Mr. Allen. Well, I'm asking these questions. I've only been 
here, this is my second term, and I've learned a lot here.
    Chairman Walberg. The gentleman's term has expired.
    Mr. Allen. I yield back.
    Chairman Walberg. You'll have plenty more opportunities to 
hear this, and that's why we're doing it today.
    I now recognize the gentlelady from Delaware, Ms. Blunt 
Rochester. I don't recognize her.
    I recognize the gentleman from New York, Mr. Espaillat.
    Mr. Espaillat. Thank you, Chairman.
    Mr. Reeder, I had the pleasure of going to one of the UPS 
garages in the morning when they were having sort of like roll 
call. I was very impressed with the number of young people, 
both men and women, that work for that company, the kind of 
safety measures they take into consideration on a daily basis 
to ensure that everybody is safe, the professionalism that they 
had there, including also their starting salary. These are 
young people that are making about $74,000 a year. They have a 
pretty good health plan and what should be a pretty good 
pension plan.
    So this is an example of a union company that I think is 
emblematic for our Nation, what our Nation is, what it should 
be in the future, but yet they have this looming pension issue, 
right?
    And of course you have said that you support not only a 
potential reduction in the benefits, but also an increase in 
the premiums and potentially some infusion of cash loans to 
these pension plans.
    With regard to the moneys, the infusion of dollars, what 
level do you think this should occur? What's the game plan? 
What's the length, the period, the calendar period for this to 
be paid back?
    This is critical. Lots of companies go under because 
they're saddled with these pension issues, and then of course 
they can't cover their employees, and then companies like UPS 
gets saddled with this responsibility.
    What is, in terms of the infusion of cash and in terms of 
the reduction of benefits, what can you live with?
    Mr. Reeder. I want to make sure that I don't get 
misinterpreted as supporting benefit cuts. I did mention that 
as a proposal that has been made, and I think the ultimate 
solution may be difficult to get without some kind of a benefit 
cut. And I do believe the UPS proposal has a benefit cut in it.
    But we don't have a specific recommendation as to infusion 
level. The administration is not supporting--I won't say 
they're not supporting--they have not proposed, they have not 
voiced an opinion on infusions of cash into the multiemployer 
system. The only thing on the table in our world is a premium 
increase.
    Mr. Espaillat. But you said that if we do nothing this it's 
doomsday down the road. And in fact these companies, a good 
company like--union company like UPS, may find itself in real 
deep trouble, further exacerbating this general pension problem 
across the country.
    So what do you suggest? You don't want to itemize sort of 
like the pension--the benefits that you will be willing to--or 
we will be willing to live with if they're cut, we don't have 
an idea on the level of infusion that should come forward and 
the timetable. What is the recommendation then?
    Mr. Reeder. Like I said, I am focused, I am laser focused 
on the guarantee that we provide. And we think that premium 
increases that get us $16 billion over the next 10 years, and 
that continue after that 10 years, will keep us afloat for at 
least two decades.
    But, again, I'm focused on the level of our guarantee. And 
I think most of your question focuses on the level of the 
promised benefit.
    Mr. Espaillat. Let me remind you that you're talking about 
premium increases and you, yourself, have said that companies 
consider this to be a tax, this very same week as we are 
talking about so-called tax cuts. So the environment coming 
from the White House and the majority is not one that lends 
itself to the survival of this great company, American company, 
UPS, who we should all protect.
    I'll yield, Mr. Chairman, I'll yield the remaining part of 
my time to Congressman Norcross.
    Mr. Norcross. Thank you.
    Just a real quick question. You keep talking about the 
premium increase. You told me it would not save the pension 
plan. So let's remind that just extends life support for a very 
short period of time.
    Bankruptcy, the No. 1 issue in causing the deficit in this, 
the position in bankruptcy. Wouldn't you agree?
    Mr. Reeder. Yes. I don't know if it's No. 1, but it's very 
high, yes.
    Mr. Norcross. With all the calculations we've seen, by far, 
that and obviously the downturn. We just want to make sure, 
this was caused by other companies going out of business and 
those healthy companies that remain take on this liability. 
Those making incorrect decision with investments have 
liability, but it's miniscule when we compare it to the 
unfunded liability by those who went bankrupt.
    And I yield back. Thank you.
    Chairman Walberg. I thank the gentleman.
    And I recognize the gentleman from Pennsylvania, Mr. 
Smucker.
    Mr. Smucker. Thank you, Mr. Chairman.
    Thank you for being here.
    I want to followup to some of the comments that Mr. Allen 
had made earlier. And I'm even newer than he is. My first term. 
So really just beginning to grasp the magnitude of the problem.
    And I certainly believe that those who worked hard all 
their lives and saved responsibly and have counted on that 
pension that they were promised deserve to receive that 
pension. It is certainly not the beneficiary's fault that the 
pension fund was poorly structured.
    On the other hand, as was just mentioned, businesses who 
are left shouldering this may not have been party to making 
what turned out to be bad decisions as well, and certainly 
concern with any impact that this would have on taxpayers who 
don't benefit from the plans at all.
    So it is a tough problem and I'm only beginning to 
understand exactly how it works.
    I specifically want to go back, and you may have mentioned 
this before, and I apologize if you did, but tell me more about 
the difference between the single-employer plans and the 
multiemployer plans. One, the single fund is doing much better 
than the multiemployer. Is that primarily because of the 
premium level that you just described, where single-employer 
plans are, you said, I think, are paying $74, and multiemployer 
pension are only paying $28? Is that why one is more solvent 
than the other?
    Mr. Reeder. I think that's a very high ranking. If I rank 
the reasons, I think that would be very high, one or two or 
three.
    But also the fact that in the multiemployer world a single 
employer bargains for a compensation package that includes 
pension and health and everything with the union. And once they 
come to an agreement on how much the employer is going to have 
to pay toward the pension plan, the employer makes that 
contribution to the pension plan. And then the trustees of the 
pension plan determine what the benefit is.
    So you have two different entities, technically different 
entities making the ``how much you contribute'' decision and 
the ``what the benefits are'' decision. In the single world, 
it's the employer decides to provide this benefit, and they are 
on the hook for the entire benefit.
    Mr. Smucker. So is it a lack of accountability on the 
multiemployer side?
    Mr. Reeder. Accountability is a pretty strong word. I don't 
think--I wouldn't use that word. But I think there is a 
disconnect between the people who--the process for deciding on 
how much to contribute to the plan and the process for--
    Mr. Smucker. It sounds to me like a structural--you don't 
like to use the accountability--but the decisions made in 
regards to the benefit do not align with the decisions that are 
being made to pay for the benefit.
    Mr. Reeder. I think the bargainers are very much aware of 
the benefit levels and the deficit levels of the plan, and so 
they bargain accordingly. So I don't, I wouldn't accuse anybody 
of shirking their duties.
    Mr. Smucker. I don't intend--that's not what I'm implying. 
But I want to understand premiums. Paid by the employers?
    Mr. Reeder. Yes.
    Mr. Smucker. Entirely?
    Mr. Reeder. Yes.
    Mr. Smucker. And there are many good multiemployer plans 
that you said are solvent.
    Mr. Reeder. I'm sorry. You're asking about the single 
world. In the single world, they're paid by the employers. In 
the multi-world, they are paid by the plan. They come out of 
plan assets
    Mr. Smucker. Which ultimately who is paying for that, then?
    Mr. Reeder. I think the economist would say the 
participants are paying because it comes out of that package of 
compensation that the employer pays, part of which goes to the 
plan. So that's an increase in obligation of the plan.
    Mr. Smucker. So multiplans, there are some that are solvent 
and some that aren't. When premiums are raised, is that on all 
plans or only on those that are insolvent?
    Mr. Reeder. Well, an insolvent plan wouldn't pay any 
premiums at all. They are already receiving assistance benefits 
from the PBGC and it would be counterproductive for us to 
collect money and then give the money back.
    And as I said, if there were a variable rate premium, the 
PBGC would forgive some of that. But right now, under current 
law, the premiums are paid by all plans that are not 
terminated.
    Mr. Smucker. Thank you. I have a lot more questions but I 
see I'm out of time. So thank you.
    Chairman Walberg. I thank the gentleman.
    I recognize the gentlelady from Oregon, Ms. Bonamici.
    Ms. Bonamici. Thank you very, Mr. Chairman. And thank you 
for holding this hearing.
    Thank you, Director Reeder, for testifying.
    This is a critical issue. Protecting retirement security is 
crucial. And I'm here advocating for the thousands of workers 
and retirees in northwest Oregon--although my grandfather was a 
miner--who count on getting the benefits they have earned.
    And as you State in your testimony, Director Reeder, if the 
PBGC multiemployer program becomes insolvent, the result will 
be catastrophic for current and former workers, for retirees, 
beneficiaries, and for their families.
    So in your testimony, Director, you State that in the 
Pension Benefit Guaranty Corporation, $67.3 billion in 
liabilities in the multiemployer program; $62.7 billion of that 
is for 47 plans that are ongoing and have not terminated.
    You add that these are plans that the PBGC expects will 
exhaust plan assets and need financial assistance within 10 
years. That was also indicated in your recent report. The 
ongoing financial decline of several large multiemployer plans 
are expected to run out of money in the next decade.
    So unless Congress acts, the PBGC is unlikely to be able to 
provide that financial assistance. And as you noted, the result 
will be catastrophic.
    I understand it is important that the PBGC does not 
publicly name the 47 plans for the same reason the FDIC would 
not want to name the banks it predicts might fail. But 
generally speaking, will you please discuss the demographics of 
these plans, the types of workers and employers and employees 
participating in these plans, and where they are located in the 
United States?
    Mr. Reeder. I think the short answer is they are 
everywhere. And there are plans that have been before you, and 
so I don't think that there's too much--and they're represented 
by members sitting behind me--so I don't think there's too much 
secrecy in two of the very large plans.
    But I think that's underrepresentative of where the people 
live in those 47 plans. And I have to say that there's more--
there's actually more than 47 plans because we excluded from 
that number very small plans. But I think it's safe to say they 
are all over the United States.
    Ms. Bonamici. Is it reasonable to assume that people in the 
district of every Member of Congress, or at least most of them, 
will be affected by the economic fallout if these plans fail?
    Mr. Reeder. I believe so. I believe so. Nearly every 
district. It's hard to imagine a district that wouldn't be 
affected.
    Ms. Bonamici. So I quoted your Statement from your 
testimony about what's at stake. Can you talk a little bit 
about, from your perspective, how this might affect our 
communities, our economy, and our families?
    Mr. Reeder. Yes. I think there are plans that are 
concentrated that have retirees and active workers in more 
concentrated areas and there are some plans that are spread 
out. But a lot of these plans are in the industrial world, a 
lot of these plans have communities where they're dependent 
upon the incomes that the people get from the pension plan.
    And when the pension plan dries up and it goes down to the 
PBGC level--or below if we become insolvent--it will be 
devastating on the community because the grocery store and the 
hardware store and the guys who mow the lawns, they depend on 
income from those people.
    Ms. Bonamici. Absolutely.
    Well, thank you, Director Reeder. And it's pretty clear 
that Congress must act as soon as possible. I think your 
testimony uses the word urgent. There's an urgent need to 
address this. And every day that Congress delays in making 
changes to improve the solvency of the multiemployer program, 
the more egregious the problem become for participants, plans, 
employers, and the PBGC. We certainly need that action on the 
part of Congress.
    And I'm proud to be one of the 39 original cosponsors of 
the Rehabilitation for Multiemployer Pensions Act, which was 
recently introduced by the Ways and Means ranking member, Mr. 
Neal. This bill will provide an innovative way to help 
financially troubled plans through loans financed through the 
proceeds of Treasury bonds. And I urge my colleagues on both 
sides of the aisle to work with us on this issue so we can 
reach a meaningful solution for our constituents across the 
country.
    And I yield back the balance of my time. Thank you, Mr. 
Chairman.
    Chairman Walberg. I thank the gentlelady and for your 
words. That indicates you're very much committed to solutions. 
Thank you.
    Now I recognize the proud Representative from Georgia, Mr. 
Ferguson.
    Mr. Ferguson. Thank you, Mr. Chairman. And before we get 
going, I would be remiss if I didn't comment on my colleague 
from Georgia's comments about Auburn winning the Iron Bowl. 
We're coming for you this weekend in the SEC championship game. 
Go Dawgs.
    Chairman Walberg. Your time is being used with this.
    Mr. Ferguson. I understand, but it's an important comment, 
Mr. Chairman.
    Thank you so much for coming today. And I want to agree 
with your Statement that this is an urgent issue, and also want 
to express my support for thoughtfully weighing in on our 
policy decisions and what our options may be. And I think 
getting ahead of this is going to be very important.
    It's only fair to the men and women that have worked so 
many years to guarantee that they've got some sort of 
comfortable retirement. And it's only fair to keep the promises 
that were made. So how we get there, I think it's important to 
recognize that folks on both sides of the aisle are trying, 
very intentionally, to find a good solution.
    So with that, a couple of quick questions for you.
    How many multiemployer plans have failed already?
    Mr. Reeder. They're in the low seventies. I believe 72.
    Mr. Ferguson. And how many participants in those plans have 
had their benefits cut before passage of the MPRA?
    Mr. Reeder. I don't know how many of them are cut, but the 
number of participants in those plans is 63,000. But not all of 
those were cut. If their promised benefit level was below our 
guarantee they weren't cut.
    Mr. Ferguson. All right. How many pension plans for union 
executives have failed or are failing?
    Mr. Reeder. I can't--I couldn't tell you.
    Mr. Ferguson. OK. That's fine.
    So another question I have, and I want to go back to 
something that my colleague from Michigan, Mr. Mitchell, 
touched on, and that's the reporting data. I'm just curious, 
does the PBGC have the ability to go into these plans and get 
very detailed data as a condition of ensuring the plans? And I 
guess kind of in my mind what I'm looking at is how the FDIC 
would look at going into a bank and getting information and 
data. Do you have the same access?
    Mr. Reeder. We don't.
    Mr. Ferguson. I think it's pretty important that Congress 
have that data. I mean, if we're going to get involved in this 
conversation and be part of the solution, I think that it's 
really important that we consider getting that data.
    How would you suggest that is accomplished? Is that 
something that needs legislative authority to do? Is that 
something that you do administratively? What's the right 
pathway there?
    Mr. Reeder. Well, I apologize for being too brief in my 
answer and saying we don't. There's nothing that that's simple.
    We do collect a lot of data. We could use more data. But 
additional data not only costs to produce and report, but it 
costs to analyze and use it appropriately. So I do think that 
we are probably pushing the limit on what we can collect 
legally.
    Mr. Ferguson. Well, sir, not having access to that data, 
not analyzing it, not understanding the problem is about to 
cost us all a lot. So it may be wise money spent to understand 
exactly what's going on in these plans, for the plans to be as 
transparent as possible. I think every single one of us, 
whether it's Republican or Democrat, before we go and make a 
sizable commitment to be able to keep these promises, we need 
to understand those plans in the most transparent way possible.
    So I would say that not having access to that data and not 
analyzing it is probably way more costly than what you just 
described.
    But anyway, thank you so much for being here, and thank you 
for offering. I look forward to future conversations.
    And, Mr. Chairman, I yield back.
    Chairman Walberg. I thank the gentleman.
    I recognize the gentleman from Connecticut, Mr. Courtney.
    Mr. Courtney. Thank you, Mr. Chairman.
    And thank you, Mr. Reeder, for your thoughtful, helpful 
testimony here today.
    Again, I just wanted to see if we could focus, again, in 
terms of what the scope of the problem is in terms of families 
and individuals that are at risk. Again, your testimony said 
that multiemployer plans basically benefit about 10 million 
individuals?
    Mr. Reeder. Yes.
    Mr. Courtney. And those are the actual awardees or 
recipients of pension payments--
    Mr. Reeder. No.
    Mr. Courtney [continuing]. as opposed to the size of their 
families?
    Mr. Reeder. Yes, that's the participants, but they're not 
all in pay status.
    Mr. Courtney. I see.
    Mr. Reeder. Some of them are active employees.
    Mr. Courtney. That's right. So they're not eligible yet, 
right.
    So the population, given the fact that these are like 
breadwinners or the retirement benefits put food on the table 
for other family members, is really--it's bigger than 10 
million people, right?
    Mr. Reeder. Yes.
    Mr. Courtney. Without putting you on the spot in terms of 
an exact number.
    And the exposure in terms of what you indicated that the 
math shows right now is about $65 billion, is the shortfall 
that is looming?
    Mr. Reeder. Yes. For us, yes.
    Mr. Courtney. Right. So, again, just to try and put this in 
perspective, I mean, I was around here in 2008 when this 
institution moved at Mach speed to bail out the banks, to the 
tune of about $800 billion, and there really wasn't much asked 
in return in terms of the banks taking a haircut. There were no 
premiums they had to pay to get TARP payments. And, again, the 
bill that my colleague from Oregon mentioned, which is not even 
a payment out, it's really a loan that would be required to be 
paid back over time, based on investments that would be 
supervised.
    Again, I just think putting that in perspective, compared 
to what this institution did in 2008, it's actually a fairly 
modest proposal in comparison. But the benefit, obviously, 
would be to help 10 million-plus Americans who basically paid 
into their retirements, assuming that there was going to be a 
promise kept at the end of the process.
    I think also it's important to put in a little bit of 
perspective that just a couple weeks ago the House voted to cut 
the estate tax, to eliminate the estate tax, which affects 
about 0.02 percent of Americans. Again, if you do the math, 
we're a country of about 300 million people, again, that is a 
smaller fraction of people who are at risk in terms of what 
we're talking about here this morning.
    And obviously eliminating an estate tax that today has an 
exemption of $5.5 million for an individual and $11 million for 
families, that is going to cost the Treasury of this country 
$200 billion, according to the Congressional Budget Office.
    So we're talking about--we just saw this institution pass--
I voted no--but a benefit for 0.02 percent of the country of 
$200 billion, and we're really looking at a solution for this 
problem that really doesn't even involve--it involves a loan 
that would be paid back to the Treasury. And I just think that 
this is not that hard to fix. And particularly if you look at 
the history of what this institution has done in other cases, 
as recently as just a couple weeks ago, these numbers are not 
as daunting as I think some of the gloom and doom that 
surrounds this discussion.
    And I've been on this committee now for ad nauseam with 
these hearings, and it's time to just, again, put it in 
perspective and really come up with what I think would be a 
manageable, fiscally responsible solution that would protect 
people's benefits.
    I yield back.
    Chairman Walberg. I thank the gentleman.
    Now I recognize the gentleman from Wisconsin, whose 
Wisconsin Badgers will hopefully take care of Ohio State this 
coming weekend. I don't want to sound like I'm looking for 
retribution, but I am.
    Mr. Grothman.
    Mr. Grothman. Thank you. I hope we come through for you.
    I was over in another hearing on Government Oversight, so 
maybe this has been asked before. But I represent a lot of 
people in the Central States Plan, which, as you know, is a 
plan that's in a lot of trouble. And a lot of people are scared 
out there, a lot of people have expectations raised, and all of 
a sudden fearful that they're going to get nowhere near where 
they thought they were going to get.
    I'm aware that today most people probably are out there on 
their own 401(k). And a lot of people 10 years ago, they 
thought they were all set, they had a 401(k), all of a sudden 
they wake up couple months later, they are down 30 or 40 
percent of what they thought they had.
    Nevertheless, I think, particularly because of government 
involvement, it's important that we step up to the plate on 
these sort of multiemployer plans, particularly Central States.
    Could you comment on it at all as far as your vision, first 
of all, of when we're going to get some finality here, we're 
not going to wait until the last minute--maybe we will wait 
until the last minute--but if you think that we will have some 
sort of solution before the final minute? And second, give us 
options as to what you think is reasonable as far as helping 
these folks out?
    Mr. Reeder. Yes. I can't give you a recommendation because 
the answer is political. And the answer is going to have to--
political is probably not the right word--the answer is going 
to require some sort of pain, either from the government, from 
the participants, from the employers, from the plans 
themselves. And the allocation of that pain is something that 
this body does, and it's not easy.
    But the answer from the perspective of making sure that the 
guarantee of the PBGC is good can come from increased premiums 
better than anything else.
    Increased premiums is not the answer for making good the 
promise that the Central States and other plans have made to 
their participants. That has to come from either some sort of 
government funding or participant benefit cuts or a combination 
of those two. And I can't hazard a recommendation as to which 
one of those things.
    Mr. Grothman. You feel those two things. And there are two 
other things thrown out there, which I guess you could call 
government funding, low interest loans or premium increases. 
You do not feel those are appropriate?
    Mr. Reeder. Well, let me reiterate that I believe that 
premium increases are not the solution for making the promised 
whole of the plan. Premium increases make PBGC solvent for when 
the plan goes under. And so the answer to keeping plans from 
coming to the PBGC has to be something other than premium 
increases.
    Mr. Grothman. OK. And when do you think right now the 
Central States fund will run out of money?
    Mr. Reeder. They've told their participants that it will 
happen right about the same time that we go insolvent in 2025.
    Mr. Grothman. OK. And so right now, if nothing is done in 
2025, 1 month you're getting a check and the next month you're 
getting nothing?
    Mr. Reeder. One month you're getting a check and the next 
month you're getting almost nothing.
    Mr. Grothman. OK. Percentage-wise how much?
    Mr. Reeder. Oh, a tiny percent. Less than 5 percent.
    Mr. Grothman. OK.
    Mr. Reeder. That's assuming that they go under and we go 
under.
    Mr. Grothman. OK. And you feel that there's a--you think a 
premium increase is inevitable?
    Mr. Reeder. I think there's a growing consensus for some 
level of increase, yes.
    Mr. Grothman. What is it right now per employ or per wage?
    Mr. Reeder. $28 per participant.
    Mr. Grothman. For how long? $28 per year?
    Mr. Reeder. Per year.
    Mr. Grothman. Per year, OK. And how--we're not going to do 
it. But, I mean, if you had to cover the whole thing with a 
premium increase, how big would that increase have to be?
    Mr. Reeder. In our report last year to Congress, we said 
that it would have to be a little bit less than five times 
that.
    Mr. Grothman. OK. And then if you feel you got that much, 
then at least prospectively the plans would be solvent?
    Mr. Reeder. No, no, that only protects our guarantee.
    Mr. Grothman. Right.
    Mr. Reeder. The plan's solvency is going to have to come 
from some other source besides premiums. It is going to have to 
come from increased contributions by employers, benefit cuts, 
or money from the government.
    Mr. Grothman. OK. Thanks much, Mr. Chairman.
    Chairman Walberg. I thank the gentleman.
    And now I turn to my ranking member for any closing 
comments you might have.
    Mr. Sablan. Thank you very much, Mr. Chairman.
    Mr. Reeder, I want to make a personal thank you also to 
you, because in yesterday's meeting and in today's meeting you 
have gone out of your way, out of your courtesy, to explain 
this huge complicated problem and present in a way that I can 
understand, as much as I can. Thank you.
    And I want to also thank you again for being here today and 
for providing us, the subcommittee members, a clear picture of 
the looming insolvency in the PBGC's multiemployer pension 
program.
    And I believe that Director Reeder is right when he said in 
his testimony that if the multiemployer program is allowed to 
become insolvent, I quote, ``The result will be catastrophic 
for many people--current and former workers, retirees, 
beneficiaries, and their families,'' end of quote. I would add 
that I believe it would also be devastating for businesses and 
our economy.
    Working people, families, retirees, employers, and all of 
our constituents are counting on Congress to address this 
crisis and to do so soon. And, Mr. Chairman, I would like at 
this time to ask unanimous consent to insert into the record a 
November 8 letter to the Speaker, the Senate Majority Leader, 
the House Minority Leader, and the Senate Minority Leader, a 
letter signed by 170 groups representing a cross-section of 
employers, employee organizations, retiree groups, and other 
stakeholders.
    Chairman Walberg. Hearing no objection, they will be 
included.
    [The information referred to follows:]
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    Mr. Sablan. Thank you, sir.
    And it is my hope that today's hearing is a first step 
toward solving that goal, toward finding a solution to this 
problem. And as we hopefully proceed toward a bipartisan 
legislative solution, subcommittee Democrats and I believe we 
must do our best to protect Americans' hard-earned pensions. 
They worked and sacrificed over a lifetime, and they deserve to 
retire with financial security.
    The pension that these workers earned throughout their 
careers should be there for them when they retire. That's not a 
bailout. That's keeping a promise.
    Again, I want to thank Chairman Walberg for his courtesy 
and for holding this important meeting.
    And Mr. Chairman, I yield back. Thank you.
    Chairman Walberg. I thank the gentleman.
    And I, too, would like to thank Mr. Reeder for being here. 
Sadly, I'm sure you recognize, you didn't even have the benefit 
of the sword of Solomon to come up with an absolute solution 
that would be--well, I mean, the fact that you provided 
testimony here today that had great clarity of the facts, but 
also the clarity of your caution relative to solutions.
    This has been a hearing on PBGC, and it was for that 
purpose. All of the other issues relative to PBGC are fair game 
here, and I think we have to get to those discussions as well.
    But I think this really established some sense of clarity 
of the challenge that we have and the size of the problem, the 
difficulty of solutions. And I think as well it showed us the 
impact of decisions that were made and promises that were made. 
So thank you.
    We have an expression around here: Don't let the perfect be 
the enemy of the good. Well, there is no perfect in this 
situation, so we don't even have to worry about that be an 
expression we talk about, but there needs to be some sort of 
solution.
    And so I certainly commit to the members of this 
subcommittee on both sides of the aisle, as well as to you, Mr. 
Reeder, and I think as important, if not more so, to those 
individuals that have come here, who are really in the throes 
of this issue as retirees, as employees, as businesses, that I 
see out here as well that have a very personal involvement with 
this problem, that we intend to work toward a solution--not 
perfection, but work toward a solution--and to continue 
hearings to find that agreement.
    So having done that, having had this hearing, and seeing no 
other questions or testimony is to be given, and you and I 
being here together at this point in time to finish this off, I 
declare this hearing concluded and adjourned.
    [Questions submitted for the record and their responses 
follow:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    [Whereupon, at 11:49 a.m., the subcommittee was adjourned.]

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