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




                                                        S. Hrg. 115-719

                       EMPLOYER PERSPECTIVES ON 
                      MULTIEMPLOYER PENSION PLANS

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

                                HEARING

                               before the

                         JOINT SELECT COMMITTEE
                             ON SOLVENCY OF
                      MULTIEMPLOYER PENSION PLANS
                         UNITED STATES CONGRESS

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 13, 2018

                               __________

                                     
     
     
     
     
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         Printed for the use of the Joint Select Committee on 
                Solvency of Multiemployer Pension Plans
                                __________
		
                      U.S. GOVERNMENT PUBLISHING OFFICE
		                      
38-499-PDF                 WASHINGTON : 2019 
		               
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                


                 JOINT SELECT COMMITTEE ON SOLVENCY OF 
                      MULTIEMPLOYER PENSION PLANS

                 Sen. ORRIN G. HATCH, Utah, Co-Chairman

                 Sen. SHERROD BROWN, Ohio, Co-Chairman

Rep. VIRGINIA FOXX, North Carolina   Rep. RICHARD E. NEAL, 
Sen. LAMAR ALEXANDER, Tennessee      Massachusetts
Rep. PHIL ROE, Tennessee             Sen. JOE MANCHIN III, West 
Sen. ROB PORTMAN, Ohio               Virginia
Rep. VERN BUCHANAN, Florida          Rep. BOBBY SCOTT, Virginia
Sen. MIKE CRAPO, Idaho               Sen. HEIDI HEITKAMP, North Dakota
Rep. DAVID SCHWEIKERT, Arizona       Rep. DONALD NORCROSS, New Jersey
                                     Sen. TINA SMITH, Minnesota
                                     Rep. DEBBIE DINGELL, Michigan

                                  (ii) 
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                            C O N T E N T S

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                           OPENING STATEMENTS

                                                                   Page
Brown, Hon. Sherrod, a U.S. Senator from Ohio, co-chairman, Joint 
  Select Committee on Solvency of Multiemployer Pension Plans....     1
Hatch, Hon. Orrin G., a U.S. Senator from Utah, co-chairman, 
  Joint Select Committee on Solvency of Multiemployer Pension 
  Plans..........................................................     4

                               WITNESSES

Langan, Christopher, vice president of finance, UPS, Atlanta, GA.     6
Wong, Aliya, executive director of retirement policy, U.S. 
  Chamber of Commerce, Washington, DC............................     8
Moorkamp, Mary, chief legal and external affairs officer, Schnuck 
  Markets, Inc., Saint Louis, MO.................................    10
Blackman, Burke, president, Egger Steel Company, Sioux Falls, SD.    12

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Blackman, Burke:
    Testimony....................................................    12
    Prepared statement...........................................    39
Brown, Hon. Sherrod:
    Opening statement............................................     1
    Prepared statement...........................................    43
Hatch, Hon. Orrin G.:
    Opening statement............................................     4
    Prepared statement...........................................    45
Langan, Christopher:
    Testimony....................................................     6
    Prepared statement...........................................    46
Moorkamp, Mary:
    Testimony....................................................    10
    Prepared statement...........................................    51
Neal, Hon. Richard E.:
    ``Multiemployer Pension Reform Principles 2018''.............    56
Scott, Hon. Bobby:
    Letter to Co-Chairmen Hatch and Brown from Rep. Tonko et al., 
      May 31, 2018...............................................    57
Wong, Aliya:
    Testimony....................................................     8
    Prepared statement with attachments..........................    58

                             Communications

American Bakers Association......................................   103
ArcBest Corporation..............................................   105
Johnson, James E.................................................   107
Nadolinski, David................................................   107
Noon, Thomas A...................................................   109
Skrabacz, Mary Lynn..............................................   110
Strebe, Michael R................................................   112
Trzybinski, Dr. Irene............................................   117

 
          EMPLOYER PERSPECTIVES ON MULTIEMPLOYER PENSION PLANS

                              ----------                              


                        WEDNESDAY, JUNE 13, 2018

                             U.S. Congress,
              Joint Select Committee on Solvency of
                               Multiemployer Pension Plans,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 2:18 p.m., 
in room SD-215, Dirksen Senate Office Building, Hon. Sherrod 
Brown (co-chairman of the committee) presiding.
    Present: Senator Hatch, Representative Foxx, Senator 
Alexander, Representative Roe, Senator Portman, Representative 
Buchanan, Senator Crapo, Representative Schweikert, 
Representative Neal, Senator Manchin, Representative Scott, 
Senator Heitkamp, Representative Norcross, Senator Smith, and 
Representative Dingell.
    Also present: Republican staff: Chris Allen, Senior Advisor 
for Benefits and Exempt Organizations for Co-Chairman Hatch. 
Democratic staff: Gideon Bragin, Senior Policy Advisor for Co-
Chairman Brown.

        OPENING STATEMENT OF HON. SHERROD BROWN, A U.S. 
   SENATOR FROM OHIO, CO-CHAIRMAN, JOINT SELECT COMMITTEE ON 
            SOLVENCY OF MULTIEMPLOYER PENSION PLANS

    Co-Chairman Brown. The Committee on Solvency of 
Multiemployer Pension Plans will come to order.
    Senator Hatch will be here in a moment. He asked that I 
begin. And I hope he is here by the time he can introduce the 
panel. And then if not, I will introduce them and we will begin 
then, and Senator Hatch will make his opening statement.
    Thank you all for joining us today again, as always. This 
is the third hearing of the Joint Select Committee on 
Multiemployer Pension Reform. We know our job on this 
committee: to find a bipartisan solution to the crisis 
threatening 1.3 million Americans and thousands of small 
businesses across this country.
    This job is essential. We know what happens--and I know 
this panel today will help us paint a picture of what happens 
if we do not do our jobs here. And this committee was put 
together to be as bipartisan as possible.
    In the end, as I think you panelists know, we need five 
Republicans and five Democrats to come to the table and support 
whatever this committee recommends. It is what Chairman Hatch 
and I have set out to do. I thank him for his work, and I thank 
all the members of this committee. I have spoken with all of 
you. I appreciate the seriousness with which each of you is 
approaching this task.
    Chairman Hatch and I decided from the outset to use this 
initial period to educate ourselves and our colleagues about 
this complex issue and the broad impact on people whom we 
serve.
    We have made real progress. This will be our third actual 
hearing. We have three more hearings scheduled. We have 
assembled a committee staff made up of top people from the 
PBGC, the Department of Labor, and from offices here and staff 
here. Staff is working to provide us with the critical 
technical information that members of this committee require in 
deepening and broadening their expertise on this subject.
    Congressman Buchanan and I just spoke about more 
interaction, formally and informally, among the group of us as 
principals. We are all open to that. In general, we are 
convening a dozen staff briefings, half of which have already 
taken place. We have received hundreds of comments online at 
pensions.senate.gov.
    One of our witnesses today came to our attention when he 
wrote in to the committee. Thank you for that.
    As I said, we will hold two more hearings in Washington, 
one more in the field, where the workers and business people 
and retirees will have the chance to weigh in. By the end of 
July, it will be time to take what we have learned through this 
process and get serious about the actual negotiations of an end 
product--it is what it will take to address this.
    We all have to put talking points and biases and political 
parties aside. We have to take what we are learning to craft a 
bipartisan solution. Senator Hatch and I are absolutely 
committed to that, because--as we will hear today--not passing 
a solution to this crisis is simply not an option for our 
retirees, for our businesses, for the PBGC, for our companies, 
for our economy, for our country. It is not an option for the 
millions of Americans who are part of these multiemployer 
pensions. It is not an option for the millions more who will be 
affected if the system falls apart. It is not an option for the 
hundreds, actually thousands of employers and their employees 
whose entire business is at stake.
    We have heard a lot over the past year about the very real 
threat to retirees who have paid into these pensions over a 
lifetime of work. Many have talked to many of us on this 
committee. I would say all 16 of us have talked to retirees and 
heard their stories.
    It is because of their activism--and I absolutely credit 
them--their refusal to give up was the reason this committee 
was created in the first place. And I applaud them for that.
    But the threat to current workers and to small businesses 
and our economy as a whole is equally real. If the 
multiemployer pension system collapses, it will not just be 
retirees who feel the pain. Current workers will be stuck 
paying into pensions they might never receive. Small businesses 
will be left drowning in pension liability that they cannot 
afford. And that will have ripple effects through our economy.
    Small businesses that have been in the family for 
generations--I hear from dozens of those in my State alone--
could face bankruptcy. Workers will lose jobs as businesses are 
forced to close shop. These businesses are already feeling the 
effects of this crisis. Uncertainty surrounding their future 
threatens their access to credit, their ability to invest in 
their own businesses, and their decisions about whether to 
expand and create jobs. That is why this issue cuts across 
party lines, across ideological lines, through every region of 
the country.
    One of the reasons we have heard more from workers than 
from businesses is that retirees are more free to speak their 
minds. But we need to think about the plight of these small-
business owners. And this is crucial: if they speak publicly 
about fearing their business could go bankrupt, it would alarm 
their customers, it would scare their employees, and it might 
chase away their creditors. So I want to thank the witnesses 
here today for speaking for the thousands of small-business 
people who think they cannot.
    You represent businesses that by and large have done 
everything right. These businesses joined multiemployer pension 
plans to do right by their employees. They thought they were 
guaranteeing their workers a secure retirement, making their 
business an attractive place to work. They followed the rules 
set by Congress. They kept doing the work to make their 
businesses thrive; they kept contributing to the pension plan. 
Now these employers are being punished for succeeding where 
their competitors failed and for living up to their obligations 
when so many have walked away.
    Meanwhile, it was Congress that passed upside-down tax 
incentives and required insufficient premium levels. Congress 
allowed inadequate tools and financing for the PBGC. It was 
that government regulation that allowed this crisis to fester; 
it is our responsibility to clean up the mess Congress helped 
make. And that means more than the simple act--the simple, but 
inadequate act--of increasing PBGC premiums and marginally 
improving the minuscule PBGC guarantee. I do not oppose that, 
but that proposal is far too insufficient.
    Businesses and the groups that represent them all agree 
that saving the PBGC alone does not help anyone. Retirees will 
still see dramatic cuts to their pension, workers will still 
pay into a retirement they may never see, and businesses will 
face increased PBGC premiums while a crippling liability still 
hangs over those businesses' heads.
    I am confident we will find a bipartisan solution that will 
solve this current crisis and improve and strengthen the system 
so it never happens again. I am willing to consider--as I know 
Senator Hatch has told me--any idea that meets these goals.
    [The prepared statement of Co-Chairman Brown appears in the 
appendix.]
    Co-Chairman Brown. I will introduce the panel. Senator 
Hatch should be here in a moment, and we will begin the 
testimony.
    Our first witness is Chris Langan, vice president of 
finance at UPS. Mr. Langan began his 37-year career with UPS as 
a part-time employee loading package cars at night. He spent 
the last 15 years working as the finance representative for 
UPS's union labor negotiations. He currently serves as a 
trustee in the Western Conference of Teamsters Pension Trust. 
He also serves as co-chair on the jointly trusteed UPS/IBT 
full-time employee pension and the UPS Teamsters national 
401(k) savings plan with combined assets of over $20 billion.
    Welcome, Mr. Langan. Thank you for joining us.
    Our next witness is Aliya Wong. Ms. Wong is the executive 
director of retirement policy at the U.S. Chamber of Commerce. 
In this position, she is responsible for developing, promoting, 
and publicizing the Chamber's policy on employer-provided 
security plans, nonqualified deferred compensation, and Social 
Security.
    Welcome, Ms. Wong. Thank you for joining us.
    Our third witness is Mary Moorkamp. Ms. Moorkamp is the 
chief legal and external affairs officer and corporate 
secretary for Schnuck Markets, Inc.
    Thank you for joining us, Ms. Moorkamp.
    And our final witness is Mr. Burke Blackman, president, 
Egger Steel Company in Sioux Falls, SD. Founded in 1946, Egger 
Steel is a third-generation, family-owned steel fabricator that 
serves the upper Midwest. Mr. Blackman joined Egger Steel 
Company in 2002 as vice president of operations. He has served 
as vice president of finance before becoming president. He has 
several years of finance experience in the securities trading, 
mutual fund, and venture capital industries.
    Welcome, Mr. Blackman.
    Pending the chairman's arrival--okay, he is 1 minute away, 
and I will wait until he makes his opening statements.
    And then, Mr. Langan, you can proceed. But hang on a 
second.

 OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM 
   UTAH, CO-CHAIRMAN, JOINT SELECT COMMITTEE ON SOLVENCY OF 
                  MULTIEMPLOYER PENSION PLANS

    Co-Chairman Hatch. Sorry I was a little late here.
    I would just say, good afternoon and welcome to today's 
hearing.
    Today we continue our informational hearings on the 
multiemployer pension system. We have brought in business 
representatives to provide their perspectives on issues with 
the defined benefit system in order to better understand the 
realities employers face participating in the multiemployer 
system.
    We will delve into some fundamental questions, including 
why employers entered into collective bargaining contracts to 
participate in these plans to begin with, how participation 
affects a business's ability to operate as a going concern, and 
how the financial condition of these plans affects their 
ability to access credit, invest in new facilities and 
equipment, expand operations, and hire new employees.
    Before I proceed, I want to provide a brief update on the 
activities of the Joint Select Committee. The committee is 
operating on several tracks. We have the outward-facing process 
of the hearings, which have been useful to better understand 
the issues confronting the committee. Committee staff have also 
held a number of briefings on a wide variety of technical 
issues in the multiemployer area, including topics that will be 
touched upon today, such as the impact of withdrawal liability 
and the operation of the bankruptcy laws in the multiemployer 
space.
    The committee is also working on a range of possible policy 
options for review. And we continue to develop and evaluate 
these options, working with the PBGC, our in-house experts, and 
other agency officials to put some flesh on the bones of these 
ideas.
    I remain open as to what the committee may consider later 
this year. And my co-chair, Senator Brown--and I am grateful he 
started this off on time--has similarly expressed openness. I 
also know that there are members of this committee who are 
actively working on proposals which they may put forward after 
fully analyzing their ideas.
    But with all of that said, there remains a lot of work to 
do. And I think I should be clear that I do not see our choices 
as being limited to a referendum on some sort of loan program. 
I bring this up because some prior comments have indicated to 
me that some of my friends have become convinced that we are 
stuck with a loan-or-nothing choice. I have a few thoughts 
about that.
    First, some of us have genuine concerns and questions about 
the nature of the proposed loan programs, which have yet to be 
fully analyzed. And a major question remains: what is the 
limiting principle on risk to the American taxpayer?
    Multiemployer plans are private arrangements between 
employers and unions covering wage compensation and fringe 
benefits. Yes, they are shaped to some degree by the tax and 
pension laws, but so are defined contribution plans and other 
pension arrangements, as well as a whole host of other 
financial arrangements in the private sector.
    It is clear that the employer and union participants 
entered into these contracts with an understanding of the terms 
and conditions that should have allowed them to manage these 
obligations in a way that would ensure their financial 
viability. And although Federal actions over the last 50 years 
have helped shape where these plans stand today, the 
arrangements are, at their core, privately bargained-for 
contracts negotiated without the Federal Government's input. 
And candidly, the vast majority of Federal taxpayers have no 
financial interest in these plans.
    So let us be diligent and methodical as we approach these 
issues and negotiate solutions. I want to be sure that we are 
mindful of all of the consequences of our approach, intended or 
not, so that we can prevent future failures, mismanagement of 
taxpayer dollars, and the economic dangers of moral hazard.
    We need to learn from our mistakes and do better here.
    Now, none of what I am saying is to dismiss the real 
concerns of participants, including active workers and retirees 
who face real hardship as these plans decline and even fail. As 
a former skilled union member--and I did learn a skilled trade 
and practiced it as a full journeyman--I understand these 
perspectives, and I recognize that the difficult, but necessary 
choices we have to make as this committee will affect real 
people with real families. But I also know that real people who 
are currently employed and paying taxes are also affected by 
the decisions these businesses have to make.
    And the difficulty businesses encounter because of the 
current condition of these pension plans is sometimes bizarre, 
if not ludicrous. As just one example, it is alarming, as we 
will hear today, to learn that the estimates of withdrawal 
liability frequently exceed the book value of the sponsoring 
companies. And that some companies will testify there is a real 
fight to get out from underneath the burdens of pension 
liability for employees who were never even employed, let alone 
received a pay packet.
    It is truly a complicated issue, one that requires us to 
move thoughtfully instead of jumping to conclusions to score 
political points. That is why I look forward to exploring these 
issues in-depth today and beyond and am pleased by our 
witnesses today, who will share with us their views on these 
matters.
    With that, let us get going with the testimony. I am glad 
that Senator Brown has done such a good job and introduced all 
of our witnesses here today.
    So we will just begin with our witnesses.
    [The prepared statement of Co-Chairman Hatch appears in the 
appendix.]
    Co-Chairman Brown. Mr. Langan, would you, please? Thank 
you.
    Thank you, Orrin.

               STATEMENT OF CHRISTOPHER LANGAN, 
          VICE PRESIDENT OF FINANCE, UPS, ATLANTA, GA

    Mr. Langan. Good afternoon. My name is Chris Langan. I have 
been with UPS for 37 years, and I am currently a vice president 
of finance. I would like to thank the committee for the 
opportunity to speak with you today.
    Over the past 15 years, I have been deeply involved in the 
multiemployer community as a trustee and advocate for 
legislative change. As you have heard in previous testimony, 
multiemployer pension plans are critically important to over 10 
million American participants and thousands of contributing 
employers.
    The challenges facing multiemployer plans are not new. 
Since the tech bubble in 2002, the system has been strained, 
and the 2008 recession compounded their demographic problems.
    The bipartisan Pension Protection Act of 2006, or PPA, 
included the creation of the green, yellow, and red zones and, 
for the most part, worked to stabilize the system and cure 
funding issues.
    Unfortunately, no one predicted the market declines of 
2008.
    We are here today to find solutions for troubled plans that 
work for all the parties involved. The issue can be broken down 
into a few buckets: negative cash flow, the PBGC's role, 
withdrawal liability pressures, and, lastly, the contagion 
effect.
    These plans simply have a math problem. Negative cash flow 
in critical and declining plans cannot be fixed by investment 
returns or increased employer contributions alone. As the PBGC 
executive director, Mr. Thomas Reeder, testified before this 
committee, these plans need a cash infusion now to remain 
viable.
    Some have argued that employers can just increase their 
contributions to provide the necessary funding. The problem 
with this idea is that critical and declining plans do not have 
an employer base that can handle their higher contributions. 
Raising contributions to the point of unaffordability will 
cause already-struggling employers to go bankrupt and reduce 
the employer base further.
    Since the enactment of the PPA in 2006, most employers have 
seen their contribution requirements more than double.
    That leads me to my second point. The PBGC has estimated 
its unfunded liabilities at over $65 billion. Many feel that 
the PBGC's impending insolvency can be addressed with a 
significant increase in premiums. As Mr. Reeder testified, the 
agency needs $16 billion over the next 10 years just to 
survive.
    While increasing premiums to the PBGC sounds logical, it 
can have unintended consequences. The premiums are an 
administrative expense that is assessed to the plans on a per-
participant basis. The catch-22 is that plans pay premiums on 
all participants, whether they have an active employer or not. 
Most of the amount of the increases needed puts further strain 
on the plans and, ultimately, the few remaining employers.
    We believe a solution exists where financial assistance can 
be provided to the plans under a structure where it will be 
paid back in full. Under this structure, plans will not need to 
turn to the PBGC for assistance. Premiums will not need to be 
increased over 800 percent, as estimated by the CBO, to keep 
the PBGC solvent. And retiree benefits will not need to be 
slashed 50 to 70 percent.
    The other dynamic we cannot ignore is the potential 
withdrawal liability that companies face in these plans. In 
many cases, it is more than the value of the company. The 
small-business owner participating in the MEP system cannot 
sell their business or leave it to their children. The 
potential liability is impacting companies' ability to borrow 
money and grow their business. Banks and investors are not 
stepping in because, in many cases, the contingent liability is 
greater than the value of the company.
    This leads me to my last point today: the contagion effect 
between healthy and unhealthy plans is real. When plans become 
insolvent, they will impact the financial health of a well-
funded plan. Like many employers, UPS participates in multiple 
plans across the country with many of the same employers.
    I would like to pause and ask you to take a look out over 
the room. Now imagine half of the room is empty. The half of 
the room that is gone also participates in many different 
plans. The impacted plans have just lost a significant portion 
of their contribution stream.
    The contagion effect has occurred right in front of your 
eyes. The failure of these troubled plans will continue to put 
pressure on the remaining contributing employers, the 
participants, and the PBGC. Some may be skeptical of this 
scenario, but the one fact you cannot argue is that once a 
company is gone, they are no longer making contributions to any 
plan and have left their liabilities behind. Is this a risk 
worth taking?
    In closing, we think there are viable solutions that can 
save these troubled plans. Generally, we believe long-term, 
low-interest-rate loans are a viable solution and would stop 
the plans from selling assets to pay benefits, giving them an 
opportunity to regain their financial strength and repay the 
loan in full over time.
    We believe there are ways to provide assurances that the 
loans can be repaid so the taxpayers are protected as well.
    Letting the system fail will increase individuals' reliance 
on other government programs. The committee has an opportunity 
to responsibly solve a serious problem in a bipartisan fashion.
    Thank you again for the time to testify today. We look 
forward to working with you in the future.
    Co-Chairman Hatch. Well, thank you for your testimony.
    [The prepared statement of Mr. Langan appears in the 
appendix.]
    Co-Chairman Hatch. Ms. Wong, we will turn to you.

   STATEMENT OF ALIYA WONG, EXECUTIVE DIRECTOR OF RETIREMENT 
        POLICY, U.S. CHAMBER OF COMMERCE, WASHINGTON, DC

    Ms. Wong. Good afternoon. I would like to thank the co-
chairs and all members of the committee for the opportunity to 
testify in front of you today on the employer perspective in 
multiemployer plans. I am Aliya Wong, executive director for 
retirement policy for the U.S. Chamber of Commerce. Chamber 
membership includes numerous contributing employers to 
multiemployer plans. And as such, the Chamber has been engaged 
in various legislative efforts to reform the system.
    Despite the best intentions of this legislation, the 
multiemployer pension crisis remains. At the end of 2017, the 
Chamber issued a report that provides an overview of the 
current crisis. Today, the Chamber issued a subsequent report, 
``The Multiemployer Pension Crisis: Businesses and Jobs at 
Risk,'' and we ask to have this report entered into the record.
    [The report appears in the appendix beginning on p. 94.]
    Ms. Wong. This report underscores the risks to contributing 
employers, and those are the risks I wish to discuss today. To 
be clear, the risks to businesses include employers not only in 
declining plans, but also in healthy plans. And the job risks 
impact not only union employees, but also nonunion employees. 
Moreover, this is not a future crisis; it is a current crisis. 
Employees and workers are being impacted today, and it will 
only get worse the longer we wait.
    Contributing employers are currently suffering under a 
number of burdens: withdrawal liability estimates that exceed 
the value of their businesses, exorbitant partial termination 
withdrawal liability assessments, and high contribution rates. 
These burdens are resulting in less optimal lending rates and 
even the denial of credit, the inability to expand business 
operations, problems with employee retention, and, in some 
cases, the closure of the business.
    The multiemployer crisis is today, and today it is 
detrimentally impacting employers' abilities to efficiently run 
a business.
    Once we start to see additional plan insolvencies in the 
future, these problems will multiply. Here, I would like to 
stress the uncertainty of the situation. While there have been 
plan insolvencies, there has been nothing on the scale of what 
will happen if Central States and the Mine Workers' fund goes 
insolvent. And we definitely have not experienced an insolvency 
of the PBGC.
    This uncertainty is paramount. Contributing employers can 
try to make plans. But in reality, there are various scenarios 
that are out of their control and could have a devastating 
effect on their business.
    In testimony before this committee, the PBGC suggested that 
an insolvent plan may never terminate and employers can instead 
continue to make ongoing contributions to the plan. While 
continuing to pay contributions in an insolvent plan may save 
an employer from short-term economic disaster, it is doubtful 
that an employer can endure such high pension contributions 
over the long term.
    Instead, these high contributions in perpetuity could lead 
to the closure of the business, filing for bankruptcy, or both.
    On the other hand, if an employer decides to withdraw from 
a plan, it might find itself part of a mass withdrawal if all 
the other employers also decide to withdraw. Liabilities 
determined under a mass withdrawal are higher than in a 
standard withdrawal, and there is not a 20-year cap. Therefore, 
this unexpected and expanded liability could cause a business 
to end up in bankruptcy.
    Further uncertainty surrounds the minimum funding rules in 
an insolvent plan. Plans in critical status that adopt a 
rehabilitation plan are exempt from the minimum funding rules 
and corresponding excise tax. However, it is unclear how or if 
these rules would apply if there is a major plan insolvency or 
insolvency of the PBGC. It is possible that the IRS and the 
PBGC could take an aggressive approach and reinstate the 
minimum funding rules and the excise taxes.
    Because the rules are unclear, employers that continue to 
contribute in accordance with their rehabilitation plan post-
insolvency could be required to make up a funding deficiency 
and pay excise taxes, potentially putting the employer out of 
business.
    Finally, I would like to discuss the contagion effect. As 
mentioned, because employers contribute to more than one 
multiemployer plan, there is a valid concern that the failure 
of one plan, particularly a large plan, could cause other plans 
to go insolvent. Further, a plan insolvency could cause an 
employer to go bankrupt and, therefore, not able to make 
contributions to other plans, causing those plans to go 
insolvent as well.
    In addition, the bankruptcy of one large employer could 
also trigger a string of plan insolvencies. These scenarios are 
very likely in critical and declining plans in particular, 
where in a number of them over 80 percent of the contributions 
are made by only one or two employers.
    I would be remiss if I did not mention that there is a 
growing concern from healthy plans. While the focus has 
understandably been on critical and declining plans, it is also 
necessary to keep healthy plans healthy. As such, we need a 
comprehensive solution that addresses the entire multiemployer 
plan system.
    These are difficult issues, and the answers are not easy. 
However, if we do not find an immediate and comprehensive 
solution, there will be a devastating impact on businesses, 
jobs, and the entire multiemployer plan system.
    Thank you for the opportunity to testify, and I look 
forward to your questions.
    Co-Chairman Hatch. Well, thank you so much.
    [The prepared statement of Ms. Wong appears in the 
appendix.]
    Co-Chairman Hatch. Senator Brown and I have to go vote, 
but, Ms. Moorkamp, we will take your testimony.
    And then when she is finished, we will----
    Co-Chairman Brown. And all seven of us from the Senate will 
be gone for probably 20 to 30 minutes. So we have your written 
testimony, Ms. Moorkamp and Mr. Blackman, and we will return.
    Co-Chairman Hatch. So we are taking notes, and we will go 
straight----
    Co-Chairman Brown. Congressman Neal, I believe, is going to 
preside from our side.
    Co-Chairman Hatch. I will go straight across the board. And 
you are presiding over here, and Ms. Foxx will help you too.
    Representative Neal. Thank you, Mr. Chairman.
    Co-Chairman Hatch. Okay.
    Representative Neal [presiding]. So we will proceed with 
the testimony as offered.
    Ms. Moorkamp?

 STATEMENT OF MARY MOORKAMP, CHIEF LEGAL AND EXTERNAL AFFAIRS 
        OFFICER, SCHNUCK MARKETS, INC., SAINT LOUIS, MO

    Ms. Moorkamp. Co-Chairman Hatch, before you leave, Co-
Chairman Brown, and members of the Joint Select Committee, I am 
Mary Moorkamp. I am the chief legal and external affairs 
officer for Schnuck Markets based in Saint Louis, MO. Thank you 
for the opportunity to testify before you today.
    My message today is simple: this committee must succeed in 
its mission to solve the multiemployer funding crisis. The 
consequences of failure are real and significant, not only to 
retirees, but to employers, employees, and our local 
communities.
    To quote from the movie Apollo 13: ``Failure is not an 
option.''
    Schnucks is a third-generation, family-owned retail grocery 
chain. We were founded in Anna Donovan Schnuck's kitchen in 
1939 as a way to feed her family and neighbors during the 
Depression. Nearly 80 years later, we have more than 13,000 
teammates and 100 stores across five midwestern States. We are 
proud of our local heritage, and our mission of nourishing 
people's lives goes beyond selling groceries.
    We focus on promoting health and wellness, supporting human 
services such as workforce development, and reducing hunger by 
partnering with food pantries to provide almost $12 million in 
food annually to help feed those who might otherwise go 
without.
    I want to turn to the multiemployer funding crisis and how 
it could jeopardize employers. While my comments focus on 
Central States, the PBGC says about 130 funds are projected to 
go insolvent within 20 years.
    Schnucks entered Central States in 1958. This was more than 
15 years before Congress enacted ERISA or the withdrawal 
liability rules. So it is not that we made a bad deal; rather, 
the rules were changed on us after the fact.
    Our contribution rate when we entered Central States was $3 
per week. Since then, our contribution rate has increased 114-
fold. Our contribution rate today is $342 per week, which is 
nearly $18,000 per participant per year.
    According to Central States, 59 percent of the retirees in 
the plan are orphans, meaning their contributing employer no 
longer pays into the fund. Fifty-four percent of our 
contribution dollars, or $185 a week, goes to pay benefits of 
participants who never worked for Schnucks. When an employer 
leaves the fund, the unfunded liabilities of its participants 
shift to the remaining employers. This drives up our 
contribution rates and means that the responsible employers who 
followed the rules are the ones left holding the bag.
    The unfunded liabilities also create a staggering 
withdrawal liability. Of our 13,000 teammates, about 200 
participate in Central States. According to Central States, our 
withdrawal liability for these 200 participants exceeds $281 
million. This averages to $1.4 million per Teamster 
participant.
    While we expect to pay less, it makes no sense for a 
company that has made every required payment for 60 years and 
seen its contribution rate increase 114-fold to have a 
withdrawal liability that even approaches this amount.
    One question I hear is, why does Congress have to deal with 
this now as opposed to 2025? Well, I will show you why.
    First, we are reluctant to grow our business. For each new 
store we open, we have to hire a driver who must go into 
Central States. And by our calculations, each new driver that 
we add increases our withdrawal liability by $200,000.
    Second, we face recruiting problems. Prospective drivers 
know what is happening in Central States, and they want no part 
of it.
    Third, there are business decisions that make complete 
economic sense that are not being made because of withdrawal 
liability rules.
    And fourth, lenders, rating agencies, and auditors are 
becoming increasingly concerned about the impact of a Central 
States insolvency. This impacts our credit rating and our cost 
of capital.
    These are issues we face today, not 2025.
    What I have described is the Schnuck's story, but I suspect 
that you are hearing similar stories from your local employers. 
There are about 5,400 employers that contribute to plans that 
are heading towards insolvency. The future for many of these 
employers is very uncertain if the plans go insolvent.
    So what tools should the committee consider?
    The multiemployer rules date back nearly 40 years, and they 
have not kept pace with economic changes. The rules need to be 
reformed. But first and foremost, this committee must focus on 
measures to stabilize the patient before it can cure the 
patient.
    These 130 plans face a math problem, and no realistic, 
sustainable level of increased contributions, investment 
returns, or benefit reductions will solve the problem. The 
unfortunate reality is the math does not work without a long-
term, low-interest-rate Federal loan accompanied by sacrifices 
by all stakeholders to reduce the cost. And the loan program 
must be implemented quickly and structured in a way to ensure 
its repayment.
    Developing a solution will not be easy. And if structured 
fairly, all the stakeholders are going to dislike parts of it. 
But again, failure is not an option.
    Thank you again for the opportunity to appear before you 
today. And I will be happy to answer your questions.
    Representative Neal. Thank you very much.
    [The prepared statement of Ms. Moorkamp appears in the 
appendix.]
    Representative Neal. Mr. Blackman?

            STATEMENT OF BURKE BLACKMAN, PRESIDENT, 
              EGGER STEEL COMPANY, SIOUX FALLS, SD

    Mr. Blackman. Good afternoon, members of the Joint Select 
Committee on Solvency of Multiemployer Pension Plans. Thank you 
for the opportunity to speak with you today about a topic that 
has significantly impacted my business.
    I am the president of Egger Steel Company, a third-
generation, family-owned business located in Sioux Falls, SD. 
We currently have 51 employees, 34 of whom are hourly shop 
workers. On their behalf, we contribute to the Boilermaker-
Blacksmith National Pension Trust. We have been contributing to 
this pension since 1971.
    We first became aware that the Boilermaker-Blacksmith 
pension had an unfunded liability when we were notified that 
our company's 2002 withdrawal liability was over $900,000. 
Prior to that notification, we had never heard the term 
``withdrawal liability.'' Our most recent valuation indicates a 
withdrawal liability of approximately $2.1 million, or over 
$60,000 per active eligible employee.
    What impact does this have on my company? The short-term 
impact is that it increases my shop labor costs. In order to 
attract and retain employees, I have to offer competitive take-
home wages. Younger employees are cynical about the value of 
their pension benefits, so they will leave my company for a 
nonunion competitor if their paychecks are not equivalent to 
what they could receive somewhere else.
    The problem is that, while my nonunion competitors are 
offering between 3-percent and 6-percent 401(k) contributions, 
the equivalent rate for my company's total pension contribution 
is 14 percent. My shop labor costs are therefore 8-percent to 
11-percent higher than my nonunion competitors because of the 
underfunded pension.
    The long-term impact of this crisis is related to my 
company's withdrawal liability. While my competitors are 
purchasing expensive new technology to improve their 
productivity, I am limited to fixing or replacing broken 
equipment, because at any time my withdrawal liability could 
skyrocket like it did in 2008. The pension could impose steep 
increases in contribution rates. Or if too many employers 
withdraw from the pension, it could fold and assess withdrawal 
liabilities on whichever participating employers are left to 
absorb its losses.
    While it is true that, if a withdrawal liability were to be 
assessed, I could pay the liability at the same annual rate 
that I have been making contributions, in reality I would incur 
the additional cost of contributing to a new 401(k) account for 
those employees who would no longer be earning a pension 
benefit and would otherwise leave my company for a competitor 
that does offer retirement benefits. Instead of my labor costs 
being 8-percent to 11-percent higher than my competitors, they 
would now be 13-percent to 16-percent higher.
    The multiemployer pension crisis is serious, and it is 
getting worse every day because the pension plans are still 
making new defined benefit commitments without collecting 
enough contributions to cover their true costs.
    Before we do anything else, we must recalculate the true 
extent of the problem using realistic actuarial assumptions. I 
am not suggesting that all multiemployer pension plans should 
immediately recast their projections. Doing so risks a 
cascading failure in which weaker companies will fold under the 
pressure of higher contributions or higher withdrawal 
liabilities and will dump their obligations onto a shrinking 
number of survivors.
    This committee, however, should independently determine the 
realistic funding status of these plans to ensure that any 
solutions offered do more than just kick the can down the road 
for a future Congress to address.
    My second recommendation is to transition orphaned 
beneficiaries to the Pension Benefit Guaranty Corporation. The 
last man standing provision of multiemployer pension 
legislation was a mistake, and correcting it would eliminate 
the risk of cascading failure.
    The PBGC would require additional funding to support these 
orphans, which could come from higher premiums or from 
transferring proportional assets from the orphans' former 
pension funds to the PBGC.
    In either case, the PBGC should consider the funding status 
of the affected pension plans and vary the premiums or funds 
collected to avoid harming significantly underfunded plans.
    My third and final recommendation is to stop making new 
defined benefit commitments. In my company's example, instead 
of paying 14 percent of wages to the pension, I would propose 
to redirect 5 percent to a defined contribution plan for all 
new hours worked and continue contributing the remaining 9 
percent to the pension until its unfunded liabilities are paid 
off.
    The pension may require Federal loans to satisfy its short-
term cash flow needs, but if it stops making new commitments 
while continuing to collect contributions, it will eventually 
be able to pay back its loans.
    If it would take the pension 50 years under this scenario 
to pay off its liability, then perhaps we need to consider 
current retiree benefit cuts or direct taxpayer assistance. But 
before we do either of those things, we need to admit that the 
era of defined benefit retirement plans is over.
    On a closing note, I would like to mention that I have 
listened to all the previous committee hearings and am aware of 
three proposals made thus far: loans, bankruptcy law changes, 
and hybrid pension plans. I believe that each of these 
proposals has some merit. But as a small-business owner, I have 
concerns about all of them that I would be happy to share.
    And I welcome your questions.
    Representative Neal. Thank you very much.
    [The prepared statement of Mr. Blackman appears in the 
appendix.]
    Representative Neal. I think the panel offered an 
encapsulating view of what the challenge is that we all face.
    And Ms. Foxx I know has an obligation on the floor, so I am 
going to recognize her first.
    Representative Foxx. Thank you very much, Congressman Neal.
    I thank each of you and the employers you represent for 
being here today to share your perspectives and your stories 
with the members of this select committee. I especially want to 
thank the representatives of UPS, Schnuck Markets, and Egger 
Steel. It takes a lot of courage to put your company's story 
out there in a setting like this. But it is important and 
necessary in order for all of us on this committee to get the 
full picture. So thank you.
    I want you to know we are listening, that I understand the 
issues you are facing, and I understand the importance of 
finding a fair, fiscally responsible, and forward-looking 
solution to these problems.
    Ms. Wong, I have a question for you. Which of your member 
companies have made the difficult decision to withdraw from a 
multiemployer pension plan in the last decade? Are there common 
factors that went into company decisions to leave the plans?
    Ms. Wong. Thank you. So there have been a number of members 
that have decided to withdraw. I, for their purposes, will not 
give their names.
    But the main decision has been that they have looked at the 
liabilities they are facing now versus the liabilities they 
might face later and whether they could afford to pay those 
liabilities now. A number of employers have looked at that and 
have determined that they cannot make that decision now and so 
they are staying in the plans, which adds to the crisis and 
makes it even something more that we need to worry about.
    Representative Foxx. So when determining contribution 
amounts to a multiemployer plan, do your member companies aim 
to fully fund the plans in which their employees participate? 
Or do they instead aim to meet the minimum contribution amount 
required by their respective collective bargaining agreements? 
And do you believe employer contribution amounts are sufficient 
to provide plan stability?
    Ms. Wong. So our members aim to meet the requirements of 
the collective bargaining agreement. That is what they 
negotiated, and that is what they expected to pay.
    In terms of the amounts, they look to plan professionals to 
figure out exactly how that works. That is what we look to at 
the Chamber as well.
    So all of our employers aim to fulfill their commitments. 
All of them aim to be able to provide benefits.
    I think it was mentioned, the rules of the game have 
changed. There have been outside factors that have weighed in 
as well that have made that more and more--or made it harder 
for them to do.
    Representative Foxx. Thank you.
    Mr. Blackman, very quick question. Boards of trustees for 
multiemployer plans are made up of union and employer 
representatives. As a small employer in a large plan, do you 
find the interests of your employees are well-represented by 
the trustees?
    Mr. Blackman. Let me answer this without implicating 
anybody unnecessarily.
    We are a small employer. And I would answer the question 
this way. Since our company's founding, we, to my knowledge, 
have never been invited to express an opinion to the board of 
trustees of the Boilermaker pension.
    The communications that we receive from the pension are the 
legally required communications. We do not vote on the 
trustees. We have never been asked to vote on the trustees. To 
my knowledge, the employer trustee representatives must elect 
themselves, because we do not elect them.
    Representative Foxx. Thank you. I yield back, Mr. Chairman.
    Representative Neal. Thank you very much, Ms. Foxx.
    Just a couple of thoughts. I have been here for a long 
time. I think that we need to be reminded, because I do have a 
loan program out there that has been well-met. It is bipartisan 
in the House; we have Republicans and Democrats who have signed 
the legislation in the House.
    And with a long memory, I would point out that I got here 
not to create the S&L problem, but to be part of the solution. 
And there was an awful lot of money borrowed to get many of 
those S&Ls out of a problem that they had.
    In this instance here, there is a different distinction, 
though. And the distinction here is that there has been really 
no bad decision-making. These have been events that have gone 
around the pension plans that have created part of the problem 
today.
    And I do not have to remind everybody about what happened 
here in 2008 when we had a series of controversial votes. There 
was a plan that was endorsed by at that time candidate Obama, 
candidate McCain, when they were invited to the Oval Office to 
discuss a Wall Street solution in which much of the money was 
borrowed.
    And I think calling attention to those precedents is really 
important. We are not suggesting that, as one of the witnesses 
has said, that that is the only solution. What we are saying is 
that that needs to be at least part of the conversation as we 
go forward.
    Now, everything has changed over these years. And the 
financial crash dealt many of these plans a huge financial 
blow. And now with pension plans in every State in the country 
in jeopardy, millions of retired workers are facing a financial 
nightmare. Cuts to their hard-earned retirement savings are 
occurring through no fault of their own.
    The reality also is that most employers that contribute to 
multiemployer plans, including representative companies that 
are here today, have tried to do the right thing. I think that 
that needs to be emphasized as well.
    Deregulation in the 1980s and the early 1990s as well as 
large-scale economic downturns in 2001 and 2008 led to waves of 

industry-wide employer insolvencies. And the remaining 
employers in these plans are now the last man standing in their 
respective multiemployer plans.
    To address this crisis, Senator Brown and I did introduce 
legislation last year that we hoped would kick off the 
conversation. It included a loan program. The money for these 
loans and the cost of running the program would come from the 
sale of Treasury-issued bonds to financial institutions. And I 
have already established a precedent with those who would 
purchase the bonds.
    The Treasury Department would then, as I noted, sell those 
bonds in an open market to large investors. And those financial 
firms would then lend money to the plans for the sale of the 
bonds to financially troubled pension plans.
    I think that this is a program that offers a common-sense 
solution. The private sector--they have acknowledged this as 
well, and they have been generally supportive, if not 
specifically, to the concept that we have offered.
    Mr. Langan, UPS has advocated in favor of a loan program to 
address the multiemployer pension plan.
    Ms. Wong, the U.S. Chamber of Commerce has released a 
series of principles and has addressed the multiemployer crisis 
within these principles. And the U.S. Chamber has also endorsed 
a loan program.
    Could I hear from the two of you as to your notions about 
loan programs?
    Mr. Langan. Yes; thank you. We feel that a loan program is 
necessary at this point. We have been discussing a loan concept 
over the last 2 years in trying to resolve this issue, because 
the plans need cash flow. We have to stop the cash flow that is 
coming out the back door compared to the contributions that are 
coming in the front door.
    And unfortunately, 2008 brought their asset base down on 
all these mature plans that are in declining status to where 
they cannot earn their way out of it. And in a mature plan, 
your asset base really becomes a contributing employer because 
of the yield coming off those assets. You get a much different 
yield on $30 billion than you do on $15 billion.
    So the cash flow is the problem in the plans, and a low-
interest loan would solve that problem. And we have to ensure 
it is paid back.
    Representative Neal. Thank you.
    Ms. Wong?
    Ms. Wong. I agree with everything that was said. From the 
Chamber's perspective, again, there have been increased 
employer contributions. We have seen active employees--their 
benefit accruals have been cut back, decreased, and now, you 
know, retirees are seeing benefit cuts. So there really is no 
more money in the system.
    And if we want these plans to survive, and if we want the 
employers and the jobs they create to survive, we think a loan 
is the best way to do that.
    I will say we see it as one part of the solution. We are 
looking for a comprehensive solution that does help the entire 
system.
    Representative Neal. And without objection, I would like 
the Multiemployer Pension Reform Principles of 2018 to be 
included in the record.
    [The document appears in the appendix on p. 56.]
    Representative Neal. Ms. Moorkamp, you have also provided 
excellent testimony, as the other panelists have offered. In 
your testimony, you have supported the loan program. Would you 
care to expand upon that?
    Ms. Moorkamp. I look at this also as a phased approach. And 
I support what Mr. Langan and Ms. Wong have said.
    Immediately, the issue before us is, we have to treat the 
critical and declining plans. We have to stabilize the patient 
before we can cure the disease.
    There are no contribution increases, benefit cuts, or 
investment returns that will make these plans solvent. We do 
believe Federal support is needed and that the best way to do 
that is with a long-term, low-interest-rate Federal loan with 
the appropriate measures put in place to ensure repayment.
    And then, we would look to overhaul the entire system to 
take into account the current economy, the mobility of the 
workforce today, and changing demographics.
    Representative Neal. Thank you.
    My time is expired.
    I recognize the gentleman from Tennessee, Dr. Roe.
    Representative Roe. Ms. Moorkamp, your testimony can be 
placed under the ``let no good deed go unpunished'' rule.
    The solution--and I have listened to these now for years--
is not complicated. It is increased PBGC contributions, 
decreased plan benefits to people who are already out there 
getting it. That has been passed 3\1/2\ years ago. Stop new 
members, as Mr. Blackman said, do not add any more people to 
create the problem and make it worse. And then a loan or a 
bailout or whatever you would want to call it. I think those 
are the options that we have.
    And the fifth option would be to do nothing. So those are 
our options. And we can argue about how to do it.
    And I guess my question is, since the PBGC has only had one 
loan ever paid back, how do the taxpayers--I will put the 
taxpayer hat on--how do they get their money back? How does a 
failing plan--I am still trying to get my arms around how, when 
you loan a plan money that is grossly underfunded, it can pay 
back a loan that is made, as Mr. Neal has pointed out. How can 
that happen?
    Mr. Langan. I will answer that, Mr. Roe. Part of our 
proposal--and I am not here to sell either proposal or anything 
in that regard--but one of the aspects of our proposal does 
unfortunately include benefit modifications. And we feel that 
it is important to take a look at the entire plan, stabilize 
the cash flow. And in an effort to ensure that those monies are 
paid back, there has to be some source of new income coming 
into the plan.
    One way to do that is through benefit modifications so that 
those reductions in the cash flow that is going out the back 
door can be reinvested back into the plan. The liabilities that 
are in the plan today will be lowered. And if you do it over 
time and draw it down over time, the assets have an opportunity 
to deal----
    Representative Roe. Is there a number out there? Because 
you have a lot of people out there who are depending on this 
for livelihood. Is there a number? We talked 20 percent, 10 
percent, 50 percent. I mean, there is a number out there that 
will leave you enough money to do exactly what you just said. 
What is that number?
    Mr. Langan. What we have modeled, working with all the 
large plans, Central States in particular and several other 
plans, is we feel that benefit modifications up to 20 percent, 
not a flat 20 percent.
    There are a lot of ways that you could skin this cat from a 
standpoint of how you recognize or give the loans, whether you 
give them monthly, as a lump sum, every year, or every 5 years.
    The more money the plan has as an opportunity to make asset 
returns helps the situation. But you can design the loan to 
reduce the amount of cuts that are necessary in order to repay 
it.
    Representative Roe. And we have not done away with the 
economic cycles. So there will be another recession. I mean, 
the economy is doing great right now, but look, I have been 
through a bunch of them; we will have another recession 
somewhere along the line. Is that factored in?
    Mr. Langan. That is a very good point. And one aspect of 
our proposal that is different from some other proposals is, we 
propose loaning the money over time, a monthly loan, to avoid 
risks in the market, the downturns in the market.
    If you give a plan several billion dollars up front and 
they lose it in the market, through no fault of their own, just 
a decline, that is going to create a problem, and we will be 
right back here.
    So if you give it over time, they can weather the ups and 
downs of the market itself, while the modifications are still 
there trying to grow the assets back.
    Representative Roe. Do we have that? Have you laid that out 
in a proposal where it can be seen, modeled?
    Mr. Langan. Yes, we have, sir.
    Representative Roe. Okay. And I guess the other thing that 
I did not add to it was, Mr. Norcross and I have a plan going 
forward.
    Mr. Blackman, we have a 401(k) in our office, in our shop, 
but this GROW Act that we have is certainly another option that 
could be number five: just stop putting new people in and then 
begin doing exactly what you talked about--continue to pay the 
legacy liabilities, but enter new people into this new plan, 
which gives you the blend of both defined contribution and 
defined benefit.
    Mr. Blackman. Yes. And I do not pretend to be an expert on 
that proposal, but from what I understand, the new pension part 
of that actually looks a lot like the pension that we signed up 
for in 1971, the pre-ERISA plan. Now, of course, we are all 
here because that plan--the rules were changed.
    So I guess as a small-business owner, I would say, if you 
gave me the option to opt in to that, I would respectfully 
decline. It is my understanding that today's Congress cannot 
tie the hands of a future Congress, and we have a history of 
Congress changing those rules exactly like that in the past. So 
that is why my preference is for a pure defined contribution 
component, no pension promise whatsoever.
    Representative Roe. Well, that is the plan I live with. It 
is what I have myself.
    I yield back.
    Representative Neal. Thank you.
    The gentleman from Virginia, Mr. Scott, is recognized.
    Representative Scott. Thank you. Thank you, Mr. Chairman.
    Ms. Wong, we have heard a lot about the taxpayers' interest 
in this. Can you tell me what interest the taxpayer has, 
especially if we do nothing, what the taxpayer may be on the 
hook for?
    Ms. Wong. Yes. Our concern is that there is a huge 
liability out there now. But if we do not do anything, that 
liability will grow. And although the taxpayer is not 
technically on the hook for the PBGC, I think we can all agree 
that we do not think Congress will stand by and do nothing if 
the PBGC goes bankrupt.
    And it is really a question--it is not a question of if, 
but when. And so if we can address this issue now, looking at 
it from a taxpayer perspective, it seems more responsible than 
waiting until the problem is even greater.
    Representative Scott. Are you suggesting there is a moral 
obligation to make sure the PBGC pays what it has guaranteed, 
even if it runs out of money--that we have a moral obligation 
to replace the money?
    Ms. Wong. I think Congress will have a political preference 
to make sure the PBGC pays those benefits.
    Representative Scott. And we would be on the hook for other 
things like, people are not getting pensions, they are not 
paying taxes?
    Ms. Wong. And I do not have those numbers in front of me, 
but I can get them. There have been studies done talking about 
the loss of pension benefits and the impact that will have on 
the economy. And those losses will be made up somewhere, and we 
think they will be made up on the public services.
    Representative Scott. You mean like safety net--food 
stamps, Medicaid?
    Ms. Wong. Exactly.
    Representative Scott. And so if we do not do anything, we 
have the taxpayers really on the hook for, right now, unknown 
billions of dollars.
    Ms. Wong. Yes.
    Representative Scott. Do you know how many companies may be 
in a situation where their withdrawal liability exceeds the net 
value of the company?
    Ms. Wong. I do not have a specific number, but we hear from 
quite a few employers daily.
    Representative Scott. Ms. Moorkamp, you indicated some 
problems, and Mr. Blackman talked about problems running a 
business with this liability hanging over your head. Is that 
liability, is the potential liability, listed on your financial 
report?
    Mr. Blackman. I can answer that.
    Representative Scott. Okay; thank you.
    Mr. Blackman. So on our audit reports--we are formally 
audited every year--the withdrawal liability is listed as a 
contingent liability. It is on the notes to our financial 
statement. It is not on our balance sheet.
    Representative Scott. Do potential creditors, lenders, look 
at that and become reluctant to lend you any money because of 
that?
    Mr. Blackman. Well, I am happy to say that we have had the 
same lender for 72 years. That lender has told us that we have 
earned the right to have a contingent liability. Not all of 
their customers are treated with that degree of trust.
    So I would say, though, that, from a practical standpoint, 
it does limit our borrowing ability, because even our bank, 
which trusts us, would require a personal guarantee for any 
large, long-term loan that we would ask for. They already have 
a personal guarantee on our line of credit. So from an 
operational and a business-planning standpoint, if I am not 
prepared to personally pay back that loan, then I will not take 
it out.
    And what is concerning about this withdrawal liability is 
that it seems to be an uncontrollable figure. So to my mind, 
the risk associated with taking out another long-term loan is 
prohibitive.
    Representative Scott. I thank you.
    Ms. Moorkamp. Representative Scott, can I----
    Representative Scott. Yes.
    Ms. Moorkamp [continuing]. Fill in as well? Our lenders 
have told us that, when assessing our credit quality, our 
lenders as well as our rating agencies are adjusting our credit 
statistics to take into account our unfunded pension 
liabilities, which leads to higher interest rates and higher 
costs of capital.
    And anecdotally, we do understand that there are rating 
agencies that use a withdrawal liability number, and then they 
either increase the liabilities or reduce the EBITDA by a 
percentage of the withdrawal liability. And either way, it 
leads to a higher credit risk and a higher cost of capital.
    Representative Scott. Thank you. And let me follow up. I 
think you indicated, Ms. Moorkamp, that your plan was 
negotiated under the collective bargaining agreement. Is that 
adjusted to reflect what is needed to keep the fund, the 
pension fund, solvent?
    Ms. Moorkamp. So we have a negotiated contribution rate, 
but we have plans that are under rehabilitation plans. And 
there are funding increases that we have seen as a result of 
that, some as high as 225 percent over what they had been 
prior.
    Representative Neal. Thank you, Mr. Scott.
    The gentleman from Florida, Mr. Buchanan, is recognized.
    Representative Buchanan. Thank you, Mr. Neal. I appreciate 
the opportunity.
    I want to thank all of our witnesses. We have great 
companies, smaller companies, UPS.
    I was involved with the U.S. Chamber for 8 years on the 
board, so I appreciate you being here today. And I was in 
business for 30 years prior to coming to Congress and had a lot 
of employees and everything else.
    But also, I grew up in Detroit. My dad worked in the 
factory for 30-some years, paid into a stock program. At the 
end of 35 years, he ended up with zero. And one of the concerns 
I have is just the precedent we are going to be setting here 
for everybody else.
    The second thing is the idea of loans. And there might be a 
combination. I am a possibility thinker. I am sensitive to 
businesses. But we are moving a liability, not all of it, but a 
lot of it from companies and stakeholders to the taxpayers or 
other people. And we are going to put it on the balance sheet 
of the country. And we do a lot of that already, Democrats and 
Republicans, so it is unfortunate.
    But I guess when I think about being in Detroit, growing up 
in Detroit, I use this example. The fourth-largest city went 
bankrupt. All the stakeholders had to make adjustments and take 
haircuts.
    And I guess I would want to know--and I want to put this in 
the right light--you are going to benefit quite a bit by us 
doing this. If you have equity in companies, if you have 
shareholders, you are benefiting because you are removing that 
liability.
    Let me just ask you this. Everybody needs, in my sense, to 
come to the table--it is a restructuring, a reorganization--
other than just the American government. What is the business 
community willing to do in terms of their share or because they 
feel their sense of responsibility? Because it is going to make 
a big difference.
    I know that if you had to--if we did not do anything, the 
smaller companies, if you got loans, you put maybe everything 
you built at risk going forward. But I think everybody, my 
sense, has to step up and be a part of the solution going 
forward.
    So let me ask you, in terms of the business community, what 
are you willing to do or what have you given thought to short 
of the government just stepping up and fixing the whole thing?
    Mr. Langan?
    Mr. Langan. That is an excellent question. And looking at 
the whole perspective of the problem, we looked at all 
different ways in order to solve this. One of them was 
increasing employer contributions. Could we raise the 
contribution enough in order for the employer to fix the 
problem in these plans that are in trouble?
    If we go back to the enactment of the Pension Protection 
Act, most if not all of the plans that are out there have seen 
the employers double their contribution rate over less than 10 
years. And a lot of that is due to the rehabilitation and the 
funding improvement plans that are out there. So we do feel 
that that has already occurred.
    Some of these plans are asking for 6-, 8- and 9-percent 
increases in their contributions. And the employers that are 
remaining in there are obligated to pay those, because it is 
part of the collective bargaining process.
    Representative Buchanan. And let me just say, because I am 
going to run out of time, that when I started my first company 
in Detroit, we had a profit-sharing plan for everybody. Then we 
went to a 401(k). A lot of people went to the pension plan.
    But with pension plans, like city governments and State 
governments and everything, there is risk. And we had talked 
about this before, about what happened in 2008. The market 
dropped 38 percent, the S&P. So there is risk when you get into 
these plans that companies and unions and others make those 
decisions--and you have a fiduciary, but nobody could expect 
that.
    But in the first decade--just to think about that--of the 
new century, for 10 years it was zero return. And if you have a 
50-percent equity portfolio, you know, you pull out of risk.
    Ms. Wong, just in terms of--what is the business community 
willing to do instead of looking to the government for 
everything?
    Ms. Wong. Well, I would just like to reiterate what Mr. 
Langan said. The business community has already increased 
contribution rates, they have increased their PBGC premium 
rates, they have been assessed withdrawal liability, either 
partial or complete for those who could pay it.
    So even at this point--and if you read our principles, we 
are not saying that this should just be a loan program. We are 
saying everybody needs to put skin in the game. And it is not 
that the business community is waiting for Congress or for 
someone else to resolve it. They are looking for partners to 
help them resolve it.
    Representative Buchanan. But you understand, equity owners 
and shareholders of all these companies big and small benefit 
if we write a big loan in terms of that.
    Ms. Moorkamp, do you want to just respond? Your thoughts? 
You have two smaller companies, but what is the business 
community willing to do to make this deal?
    Ms. Moorkamp. Well, I echo again what Mr. Langan and Ms. 
Wong have said as to the burden that the employers have been 
carrying. But I want to get across I am not here today to 
ascribe blame. No one here is to blame. Not the contributing 
employers----
    Representative Buchanan. I am not looking to discuss blame. 
I just want to--I just want to----
    Mr. Moorkamp. It appears that way. And we think seriously 
that everybody--no one here is to blame, and everybody is going 
to have to share in the sacrifice of what needs to be done, 
first and foremost to save these critical and declining plans 
that are facing insolvency.
    Representative Buchanan. Mr. Blackman, anything, quickly?
    Mr. Blackman. Yes. All I would say is that, you know, from 
my perspective, we have a yellow zone plan. Personally, I am 
not asking for a bailout of any kind. I want an exit door; I 
want to stop making new promises.
    Representative Buchanan. Thank you.
    Mr. Blackman. And I need Congress to help me with that.
    Representative Buchanan. Thank you. I yield back.
    Co-Chairman Brown. Thank you, Congressman Buchanan.
    Senator Manchin?
    Senator Manchin. Thank you, Mr. Chairman.
    First, let me thank all of you. And I want to thank our 
chairman and the ranking member for holding this hearing.
    And we have to start coming up with some solutions. But as 
you know, I am really focused on solutions for the 
multiemployer pensions crisis, so I was glad to see that 
Senator McConnell gave us a few extra weeks of time to work 
this August. [Laughter.]
    We should be staying here on Mondays and Fridays too, but, 
I mean, that is a bridge too far.
    I encourage my colleagues on this committee to use this 
time to come to the table and seek bipartisan solutions.
    I would also note that I am very happy to see our brothers 
and sisters here, the United Mine Workers from my turf, if you 
will--people I grew up with. And I appreciate the hard work 
they are doing. I hope they continue to come back. Because I 
can tell you, when you put a face and a human being with a 
problem that we have, then we can find a solution.
    You have heard me say before, and I will keep saying it: 
the UMWA 1974 Pension Fund is the first that will fail if 
Congress does not act. And if or when the UMWA fund would fall, 
and if we do not find a solution, the others will start to 
tumble. This plan is expected to become insolvent by 2022, 
possibly even sooner if we see a market downturn or additional 
coal company bankruptcies. We should note that is unlikely.
    And while the pensions provided by this plan are small--to 
give you an example of what we are talking about with UMWA 
pensions, an average of just $595 a month; $595 a month is what 
we are talking about for the UMWA. They are critical for 
retired miners and families who rely on them, mostly a lot of 
widows. If this plan goes under, these families and the 
communities they live in will be devastated.
    So I hope that today's discussion will demonstrate for 
everyone exactly what will happen to American businesses and 
communities, to our poverty services and to our national 
economy, if these plans fail. But I also hope that all you 
witnesses will offer us more ways to address the crisis. And we 
are not putting any blame.
    But let me make sure you understand. The working person in 
America, the United Mine Worker and anybody who has ever done 
any hard work, is not to blame at all. They did not set their 
rates of contribution. They did not set the plan. They were not 
there when basically the bankruptcy laws were written. It was 
all done usually here in Congress. We set basically the slope, 
if you will, of what would happen, and this is what we are 
dealing with.
    They were not responsible for the 2008 financial crisis. 
They were not responsible for relaxed oversight of the large 
banks. None of this was their fault, but they are all taking 
the hit right now, every one of them.
    So I will start with Mr. Langan. What is Plan B, sir? What 
do we do if we walk away from this? What happens?
    Mr. Langan. Well, as was mentioned earlier in Ms. 
Moorkamp's testimony, walking away and failure is not an option 
to this crisis that we face. We have to figure out a way to 
stop the cash flow that is going out the back door and 
stabilize these plans and give them an opportunity to return 
back to health.
    Because, if we do not do that and we just allow the system 
to fail, then what is going to happen to the remaining 
employers is unknown at this point. If a plan is not, for 
example, in compliance with the rehabilitation plan, are they 
now facing funding deficiencies? Are they now going to face a 
mass exodus out the back door from the employers and the risk 
of mass withdrawal?
    If you have a mass withdrawal situation come, contributions 
stop, accruals stop, and now employers are assessed withdrawal 
liability, which now is put on their books.
    If you put a liability on your books that is greater than 
the value of your company, you are never going to be able to 
get out of this. So letting the system just fail and hoping the 
PBGC can give a little bit of a benefit is not the answer. We 
have to get cash to these plans and figure out a way to pay it 
back so the taxpayer is protected.
    Senator Manchin. Ms. Wong, if I may ask you, with the 
reduction of our corporate tax from 35 to 21 percent, that 14-
percent savings, does it put a hardship on our corporations and 
businesses now since they have this extra relief if they do 
contribute more? I know you all just talked about 
contributions. But would that put an undue hardship----
    Ms. Wong. Does the tax cut create an undue hardship?
    Senator Manchin. I am saying if I asked you to give a 
little bit more back.
    Ms. Wong. Oh, I am sorry--on the tax cut. Well, obviously, 
the tax cut helps the businesses, providing----
    Senator Manchin. Sure. You never expected to get 21, did 
you? You would have taken 25 in a heartbeat.
    Ms. Wong. I will not lean into that one. [Laughter.]
    Senator Manchin. What we are saying is that none of us 
wants to put undue hardships and create new unemployment. But 
is there enough room in there to help the PBGC? I know there is 
going to be an awful lot--anything I am asking for, there has 
to be a floor. You cannot ask a person, a widow getting $595, 
to take a 20-percent cut or a 10-percent. And we have to have 
skin in the game, but there has to be, I think, some compassion 
and some, you know, understanding of the economics we are 
dealing with here.
    Ms. Wong. I appreciate that. And again I would reiterate, 
employers already have skin in the game and have been putting 
skin in the game. We understand workers and retirees have all 
been putting skin in the game.
    So it is not an easy solution, but we are asking that, 
again, we all come to the table and resolve this together.
    Senator Manchin. My time is up. And I will save it for the 
second round.
    Co-Chairman Brown. Thank you, Senator Manchin.
    Congressman Schweikert?
    Representative Schweikert. Thank you, Mr. Chairman.
    Isn't it fun reaching over and calling you chairman?
    Co-Chairman Brown. Yes, sure. I might get used to this. 
[Laughter.]
    Representative Schweikert. All right.
    Mr. Blackman, a couple of moments ago, you actually 
mentioned the desire to leave.
    Mr. Blackman. Well, I should specify I would like to make 
new contributions in a defined contribution plan, and no more 
new contributions to the defined benefit. I am perfectly 
willing to pay my existing obligations to the defined benefit.
    Representative Schweikert. Okay. So there you led me to--so 
what is the existing obligation? For many of us, when we have 
actually been looking at the math, we think--actually we will 
call it the severance mechanism is not actually properly 
calculated for the true liability.
    Mr. Blackman. I would agree with you.
    Representative Schweikert. Okay. In that case, you are my 
new best friend. You just made it easy.
    Ms. Wong, if I came to you and said, okay, in my 
understanding, the Chamber prefers sort of a loan mechanism.
    Ms. Wong. Yes. We see that as an important part of a 
resolution.
    Representative Schweikert. Okay. So as we heard another 
member of the panel a little while ago saying, you know, 
protecting taxpayers, those things, do you think all the 
businesses would be prepared to also sign a promissory note so 
they also carried some liability for that loan?
    Ms. Wong. I think the businesses feel like they already 
have a promissory note.
    Representative Schweikert. But if we were going to do a 
loan document to make it very clear that they carry the actual 
liability----
    Ms. Wong. Yes; I will take that back to my membership. I 
don't----
    Representative Schweikert. How about a mechanism where, if 
they file bankruptcy, this is a top-tier obligation, you know, 
coequal to other bonds. Because this is, you know, their 
pension liability, and now it is a loan obligation to the U.S. 
Government, if it were done mechanically as some of the 
proposals here. Can we make it a top-tier bankruptcy----
    Mr. Langan. Could I speak to that? I think----
    Representative Schweikert. I wanted the Chamber to respond, 
partially because, at one level, if you are asking to socialize 
the risk, okay, but if you are saying you want to socialize the 
risk at the same time because it is going to protect taxpayers, 
let us protect taxpayers.
    Ms. Wong. No, I appreciate the concern. I am not sure if 
that is allowed under bankruptcy law, but----
    Representative Schweikert. But we can always rewrite the 
law. That is what we are here talking about.
    Ms. Wong. I agree with that. And I am happy to take that 
back to our membership and discuss that with them.
    Representative Schweikert. Okay. But don't you think that, 
in some ways, if we are going to talk about everyone having 
skin in the game and we are doing it fairly and we are all 
taking obligations, because I know there seems to be an attempt 
here to sort of--you know, we are all dancing with a hot potato 
and pushing and trying to socialize the risk, but not take it 
ourselves.
    Ms. Wong. Employers are taking the risk. I mean, they are 
the ones paying into the plans today, and they are the ones 
with the risk of going bankrupt if there is not a solution.
    Representative Schweikert. Well, but if you actually think 
about what we were just talking about before with Mr. Blackman, 
okay, so if I leave, I am probably not paying my full actuarial 
value for my stranded lives, and that is both a concern and 
then my obligation if a participant were to go bankrupt. Even 
though we had created this loan mechanism, we need to make sure 
that those obligations--so you can actually see, just from a 
credit management----
    And, Mr. Blackman, before, I had interrupted you.
    Mr. Blackman. I am sorry. It sounded like you were talking 
about changing the bankruptcy hierarchy of creditors.
    Representative Schweikert. Well, it is an honest 
discussion. If we are all having--one of the reasons we see 
such high levels of underfundedness is concentrations within 
those industries. We saw cascades of reorganizations and 
bankruptcies and, within those, a movement away from these 
obligations because they were discharged through bankruptcy.
    Mr. Blackman. Right.
    Representative Schweikert. How do we move that up so, as a 
society, we make pension obligations a top tier?
    Mr. Blackman. I understand. You have to keep in mind that 
the way the bankruptcy hierarchy is structured today, that is 
what allows my bank to essentially not hold me accountable for 
that withdrawal liability today and still grant me credit 
today.
    If we reverse that and pensions come ahead of banks, we are 
done. I mean, we are out of business.
    Representative Schweikert. But there we are back where the 
socialization of the obligation for your business is back on 
everyone else. And look, I am not thrilled with this, but all 
of us are trying to have intellectually honest conversations of 
how many levers do we actually have.
    And the more I read, the more I realize a lot of my levers 
do not produce a lot of resources. So, as we are going to 
actually continue the conversation of some type of financing 
instrument, who is going to help us guarantee that, other than 
the rest of the taxpayers?
    Ms. Moorkamp. Representative Schweikert, can I just inject 
very quickly, please?
    Representative Schweikert. Very quickly.
    Ms. Moorkamp. Changing the bankruptcy laws is not going to 
solve the problem of the 130 plans that are facing insolvency.
    Representative Schweikert. We did not say it would, but----
    Ms. Moorkamp. I know, but----
    Representative Schweikert. Actually, no, no, stop. But once 
again, if you are asking to shift it onto the rest of the 
taxpayers, shouldn't the rest of the taxpayers also have you 
take on some of that obligation?
    With that, I am sorry; I am beyond time. I yield back, Mr. 
Chairman.
    Co-Chairman Brown. Certainly.
    Finish your answer, Ms. Moorkamp. We treat witnesses well 
in this committee, so go ahead.
    Ms. Moorkamp. So I was just going to say, I would be very 
careful, to your point, of changing the bankruptcy laws because 
that could make it much more difficult for us, other employers 
to get credit.
    Representative Schweikert. Well, if the chairman would let 
me reclaim time then. But also so would signing a promissory 
note, because you would be carrying that on your books.
    Co-Chairman Brown. Ms. Moorkamp, please finish.
    Representative Schweikert. She just did.
    Co-Chairman Brown. Okay. Okay. I could not tell.
    Representative Schweikert. Thank you, Mr. Chairman.
    Co-Chairman Brown. Okay; sure.
    Senator Heitkamp?
    Senator Heitkamp. Thank you, Mr. Chairman.
    I think every person testified as a given that benefit cuts 
would have to be part of this.
    I just want to put on the table that we have in fact 
advanced a plan. And I think both the Chamber and UPS have 
suggested that a long-term loan program could actually be part 
of this solution.
    I think it is really, really important that we set a ground 
rule that we are really committed to fixing this problem for 
our small businesses and workers and retirees. I do not accept 
right out of the chute that we will have to lead with a benefit 
cut to solve this problem.
    And so, you know, we are going to continue to look for 
solutions, but I think it is really important that we recognize 
the need for shared sacrifice, but that we try to lay down a 
marker.
    I would like to mainly address the question of withdrawal 
liability. We have heard compelling testimony, I think, today 
about the cost of doing nothing, especially for Main Street 
businesses.
    In the Central States Pension Fund, pretty much the only 
businesses that are left are in fact small businesses, but 90 
percent of contributing employers have less than 50 employees.
    I will tell you a story of one of those employers based in 
Fargo, which recently celebrated its 100th anniversary, has 
been important to people in my State for 100 years. For 100 
years, the business has played by the rules, contributed to the 
economic prosperity of our community and our State, and 
provided that employment opportunity. And for over 60 years, it 
has made contributions to the Central States Pension Fund.
    Yet for 2017, the owners tell me that their withdrawal 
liability number is about $7.4 million. That is up from $5 
million in 2015, and that is to cover 21 people. It is 
overwhelming and it is frightening, and it is terrifying small 
businesses all across my State that are still part of this 
program.
    So can you walk me through--and I will throw this out to 
anyone who wants to answer--can you walk me through how this 
withdrawal liability might affect access to credit and capital, 
employer hiring decisions, and business investment for any 
firm? And what are the risks to employers participating in 
critical and declining plans such as Central States if 
accounting rules require contingent withdrawal liability to be 
required on the balance sheet?
    So right away, we go back to access to capital. You put 
that on your balance sheet, and I do not know who is going to 
give you money. And that goes back to the question I think Mr. 
Schweikert is getting at, which is, this is very complicated 
and it affects not only solving this problem, but bankruptcy, 
access to capital, and small-business development.
    So, Mr. Langan?
    Mr. Langan. Yes, thank you. From a withdrawal liability 
standpoint, there is one thing we have to keep in mind. 
Withdrawal liability occurs when you are going to withdraw in 
the simplest form. Your obligation to the plans is what you 
collectively bargain, so that your per se liability that goes 
through your----
    Senator Heitkamp. Mr. Blackman wants to get out, so let us 
just--he wants to withdraw, but he cannot afford to.
    Mr. Langan. I understand that. And we have withdrawn from a 
couple of plans ourselves, and we did pay the amount of the 
withdrawal liability that was required under the calculation. 
It is a financial decision for the company.
    But to your point, it is disclosed in the footnotes of the 
company today, so it is out there. And then once you ultimately 
do withdraw, you do have to book that on your balance sheet.
    Senator Heitkamp. But how do I, as a Senator from North 
Dakota, tell this small business that has 21 employees that it 
is reasonable to assume their withdrawal liability is over $7 
million?
    Mr. Langan. Unfortunately, the way the law is written 
today, that is how it is calculated. I can give you an example 
of a plan we were in. We had two employees, and the liability 
was $5 million. So it is a function of how the math works and 
the way the law is today. It is spelled out very clearly how 
the withdrawal liability calculations are determined, 
unfortunately.
    Senator Heitkamp. I want to make this point. So responsible 
employers who have provided this defined benefit plan and who 
have not taken advantage of the bankruptcy exit now are holding 
the bag. I think that is a fair characterization of what is 
going on.
    So, you know, when you say, do not change the bankruptcy 
laws, I agree that that will create a huge amount of disruption 
in changing the queue on who gets paid first. But it also means 
that everybody who is the last man standing, or the last person 
at the end of that ladder, ends up with all the liability. And 
that fundamentally--just as it is not fair to these workers who 
played by the rules and did everything right that they are 
getting cut, it is not fair to these employers and these small 
businesses to be stuck here in this position.
    And I understand that we have to balance this and we have 
to realize or think about what the government's role should be. 
And so, I wanted to just make the point that the employees are 
incredibly sympathetic, but so are my small businesses who are 
challenged with this problem. And we have to come up with a 
solution that solves this for everyone.
    Mr. Langan. If I could add just one quick thing, I will not 
take long. I think one way to look at this is, the employers 
that have remained in the plans, we have actually acted as the 
PBGC in these plans because we absorb the liability.
    Co-Chairman Brown. Senator Portman?
    Senator Portman. Thank you, Mr. Chairman.
    I am going to first talk about something general, which is 
that there has been discussion here when I was here earlier, 
and I understand even in my absence--I went to vote--about who 
is for what and are you for loan programs or not. And I just 
hope we do not take things on and off the table. I think we 
need to keep everything on the table at this point. We have a 
huge problem ahead of us.
    And I know there has been discussion about having a hearing 
here where we talk about solutions. I am for that, but I want 
to be sure we have the data to be able to do it. So I would 
hope that if we have a hearing about solutions, that we have 
the data and information that we need, particularly an analysis 
from PBGC and from CBO on the options.
    So a lot of us have requested that for the last several 
months, and we still do not have the numbers that we need to be 
able to, I think, make important, informed decisions.
    Ms. Wong, I want to ask about some of the rules here and 
one particular one that troubles me, which is the convoluted 
rule that could actually result in hundreds, maybe even 
thousands of employers, particularly small employers, going 
bankrupt if this is not addressed. And that is what you talked 
about a little in your testimony: the uncertainty regarding 
minimum funding considerations.
    We talked in the last hearing about this. And we talked 
about the fact that employers in healthy plans have to meet 
their minimum required contributions every year based on new 
promises they have made to new employees, promises they make to 
current workers, and in addition any accrued deficiencies they 
have in the plan's funding standard account.
    But once that plan goes into critical status, that changes, 
doesn't it? And I think it is something to focus on in terms of 
the law and maybe an inadvertent, but a potentially negative 
consequence, because then the trustees are required to come up 
with this rehabilitation plan which can include exempting them 
from needing to contribute the required contributions, at least 
under normal accounting standards. And additionally, employers 
have the excise tax liability enforcing payment of these 
minimum required contributions waived as well.
    So once you go into that status, it changes. And for 
employers in Central States, my understanding is that employers 
are currently paying less than half of what their minimum 
required contributions are, as an example, and at least what 
they would be doing under normal accounting standards. And once 
that plan becomes insolvent, it might no longer technically be 
in critical status, right?
    Ms. Wong. Right. That is the uncertainty, exactly: how the 
rules work together.
    Senator Portman. So what happens there? I mean, it is 
unclear to me, looking at the legal part of this, the extra 
statutory language, what happens with the excise tax then.
    We asked the Joint Tax Committee about this in anticipation 
of this hearing. We have heard that Treasury has never issued 
guidance on this issue; the statute is ambiguous.
    And you know, I think it is an enormous uncertainty and a 
potential for a catastrophe for a lot of businesses.
    So you noted that a multiemployer plan must satisfy certain 
code provisions, the rehabilitation plan. And you said that if 
a multiemployer plan fails to make scheduled progress under the 
rehabilitation plan for 3 consecutive plan years or fails to 
meet the requirements applicable to plans in critical status in 
the rehabilitation period, the excise tax for such a plan is 
treated as having a funding deficiency.
    Let us translate this a little bit just for our purposes 
today. It looks to me like once an insolvent plan cannot show 
improvement or meet rehabilitation plan requirements--when 
Central States becomes insolvent, doesn't that mean that 
employers would have to meet their minimum-contribution 
requirements and possibly pay excise taxes?
    Ms. Wong. And that is what the law says. So let me take 
that.
    Senator Portman. How does that make sense?
    Ms. Wong. The purpose of the rehabilitation plan is to 
allow and to give plans time and employers time to make those 
plans whole again and make them solvent.
    The concern is that--again, we were involved with PPA and 
making that happen--we did not foresee what would happen in the 
time before that. And so the thought was not given, what would 
happen if there was an insolvency at the PBGC? What would 
happen if there was a major plan insolvency that would impact 
those rehabilitation plans or the entire system, like we are 
facing now? And so I think it was an oversight in terms of how 
those rules work together.
    In the report we issued today, that is what we point out, 
that legally there is the ability for the IRS and the PBGC to 
come in and reimpose those minimum funding standards and the 
excise tax. If it will happen, we do not know, because----
    Senator Portman. Aren't you really saying that you are 
hoping that the IRS does not enforce the law, that they do not 
read the letter of the law, which would require massive 
contributions and the potential insolvency of hundreds of 
businesses, just in the Central States example?
    Ms. Wong. We think it is unclear and that they definitely 
can come in and assess it, but it is unclear about how and when 
or if they could do that.
    Senator Portman. Mr. Langan, how would uncertainty 
regarding a possible funding deficiency crisis affect the mass 
withdrawal possibility?
    Mr. Langan. A mass withdrawal is defined. It is not 
insolvency that creates a mass withdrawal, it is when all the 
employers leave, or substantially all of the employers leave, 
or it can be triggered by the trustees making that decision.
    Senator Portman. But this could be resolved, right?
    Mr. Langan. Yes, it could. What will happen, in essence, 
that a lot of folks are concerned about is, people will start 
leaving. They will see that there is no benefit for their 
participants who are in the plan, they will see that there is 
no hope, this plan is going under, and they will start heading 
to the exits at that point.
    Senator Portman. Yes, which would lead to the meltdown of 
the entire multiemployer system probably.
    Mr. Langan. Yes.
    Senator Portman. Yes. Anyway, I think it is something we 
are going to have to address as part of whatever solution we 
come up with, certainly at least adding clarification to it.
    Thank you, Mr. Chairman.
    Co-Chairman Brown. Thank you, Senator Portman.
    This is a sort of ``what happens if we do nothing'' 
hearing. And I think the four of you have done a good job 
explaining that.
    I want to kind of step back and ask you sort of, generally, 
where you think your member companies or individual companies 
go--start with that and go into this in greater depth.
    Ms. Wong, describe the impact on member businesses if 
Congress does nothing. And describe what happens, in your view, 
in the economy. Quantify as much as you can the impact inaction 
would have on businesses and the general economy.
    Ms. Wong. So first, I want to emphasize that there are 
already impacts being felt today. As we have discussed with the 
withdrawal liability estimates, you know, companies are already 
feeling impact from that in terms of their credit lines and 
creditworthiness. You are seeing problems with employee 
retention because of the high contribution rates and because 
those employees are not getting the accruals that are 
commensurate with the contribution rates.
    So we are already in a process of seeing an impact. And as 
we go forward with this and as the crisis worsens, these issues 
will worsen.
    So we can see, as we have talked about, if people try to 
withdraw from plans, their withdrawal liability is going to be 
even greater. There could be mass withdrawals that they have to 
contend with so that those liabilities are even greater. The 
minimum funding rules and excise taxes could also be an issue.
    Any one of these things, all of these things, could cause 
employers to go bankrupt and definitely impact their business 
in terms of their ability to expand their businesses, provide 
jobs, and to continue working in the most efficient way.
    Co-Chairman Brown. Mr. Langan, I understand--I just spoke 
with Senator Isakson a moment ago between votes on the floor 
about your testimony. And we were just talking about what you 
did a decade-plus ago. And your company did the right thing, 
but your liability, some of it obviously still stands. What 
would be the impact on UPS, on the plans that it is still a 
part of, and other businesses that participate in these plans, 
if Congress does nothing?
    Mr. Langan. Our concern is that the pressure that will be 
put on these plans for raised contributions, not only on us, 
but the remaining employers, the small employers, will start 
driving them out of business. And we are in these plans 
together. They can only go out of business once. And our 
ownership of these plans will just continue to grow.
    And there is the last man standing rule out there, and we 
could eventually be the last man standing in some of these 
plans. And the contribution rates that we are putting in are 
very, very high, north of $20,000 per participant in every 
plan, and they are not getting the benefits of those monies in 
some cases.
    And it is just going to be continued absorbed liability 
that we are facing if we stay in these plans.
    Co-Chairman Brown. Thank you.
    Ms. Moorkamp, what would be the impact on your company if 
this committee fails and Congress does not enact legislation?
    Ms. Moorkamp. Well, I am here today and you are here today 
to ensure that does not happen, because failure is not an 
option.
    Co-Chairman Brown. Well, I agree with that. I have said 
that many times, but I do not know that Congress yet 
understands and the public yet understands what failure would 
mean. So can you dig a little deeper and tell me what would 
happen in your company with your employees and your businesses 
and your suppliers and all?
    Ms. Moorkamp. I have no idea what is going to happen when a 
plan of the size and scope of Central States goes insolvent. I 
do not know how our lenders are going to react; I do not know 
how our auditors are going to react.
    But again, Senator Brown, I for one am not willing to just 
wait and watch it happen.
    Co-Chairman Brown. Okay; thank you. Thanks for being here 
and saying that.
    Mr. Blackman?
    Mr. Blackman. Yes, I think I have some idea of what would 
happen to us specifically. If Congress does nothing, I expect 
the Boilermaker's plan will continue to decline. That is 
because I believe the actuarial assumptions are not reasonable.
    So what I would expect to happen is, our contribution rates 
will continue to climb, our withdrawal liability will continue 
to climb. So as contribution rates go up, we continue to get 
less and less competitive.
    At some point, we are at the point where we may not survive 
the next recession, because under recessions, margins get 
squeezed. If our costs are too high, we lose money. We do not 
know how long it is going to last. Nobody likes to see that 
much red ink with an indefinite end period.
    If the withdrawal liability keeps getting bigger, then I 
think at some point my bank would likely say, you know, up to 
this point we have had confidence in you, but it appears as 
though this is out of control, and we are now concerned that we 
need to start limiting your credit.
    Co-Chairman Brown. Thank you, Mr. Blackman.
    Ms. Wong, last question. There have pretty much been two 
proposals around this. One is the Butch Lewis Act, and there 
has been some bipartisan support in the House on that, not yet 
in the Senate. It is on the table. But as Senator Portman 
suggests, everything should stay on the table as we discuss 
this.
    The other is the plan that Congress should raise PBGC 
premiums, keep the agency afloat, and maintain the insured 
benefit levels for participants. Is that inadequate? And if so, 
why?
    Ms. Wong. It is inadequate as the only solution. Not only 
is it inadequate in not saving the plans, it could also push 
more plans into insolvency or at least into the critical and 
declining status. So we definitely do not see that as a 
solution.
    Co-Chairman Brown. Because of the increase in premiums.
    Ms. Wong. And we would even offer that raising premiums 
should not be looked at until we address really the insolvency 
of the system or these issues in the system to see really the 
impact that changes have and how much those premiums still need 
to be increased.
    Co-Chairman Brown. Thank you.
    Congressman Norcross?
    Representative Norcross. Thank you, Mr. Chairman.
    And I want to thank the employers for trying to do the 
right thing, and that is to provide for the golden years of 
your employees. That is the way you say ``thank you.''
    Bankruptcy has been mentioned a number of times and the 
position of our pension system. Pensions are deferred wages. 
They have been put aside out of the regular paycheck so you 
would have that opportunity to retire with dignity.
    I have a bill, along with Senator Brown and Dick Durbin, to 
address this issue, because years ago it used to be in first 
position with wages. I understand there will have to be a 
transition, but bankruptcy has shifted that responsibility from 
the employer to the employee.
    And quite frankly, the conversation that you are having, 
Mr. Blackman, is, in a defined benefit the risk is with the 
employer. When times are great and you are getting tremendous 
returns, your contribution goes way down. And conversely, when 
times are bad, it goes up.
    When you go to a defined contribution, you have now shifted 
everything away from the experts and made every individual 
employee an investment firm. This is the risk that goes in. And 
that is why Dr. Roe and I have put together a hybrid plan that 
is completely voluntary.
    I want to address a couple of questions here.
    Mr. Langan, when Central States faces their ultimate desire 
to stay in business, but the numbers, because of the pension 
plan which is declining rapidly, come in, I understand there 
are three different options that can take place: insolvency, 
which is PBGC pays in and that $12,870 is the maximum anybody 
can get; mass withdrawal, which you talked about; and to go to 
the question that came up, if we force them to pay, that would 
just drive the employer to bankruptcy, and then they would walk 
away with nothing.
    This is history. And each one of these rules has a reason 
for being there. This is not a red or a blue issue. This is not 
a suburban or urban issue. This is an American issue.
    Every one of us has retirement plans that we look forward 
to one day. Take that away from us--what you earned is what 
they earned. It is not only our job, it is our obligation to 
try to fix this. And the only way it gets fixed is if we come 
together.
    So there is a term that is used to address some of the 
funding issues: pension smoothing. They do it without a loan. 
Would you address that issue and how we turn it into Butch 
Lewis or Butch Lewis number two? Address how that takes away 
the additional income and lets us, quite frankly, invest in 
Americans so it keeps the plan from going under.
    Mr. Langan. Well, the smoothing method I believe that you 
are referring to is an actuarial method that takes the gains 
and losses of a plan and smooths them out over time so that you 
do not have spikes and valleys in the valuations as you are 
going forward.
    It is used to--because these plans are a long-term view, 
they are not a tomorrow-type view--it is used to stabilize it 
so that the contribution rates based on the assumed returns can 
be met.
    I think one of the points that you made in regards to the 
PBGC and the levels that the PBGC is at--I would like to just 
take one second to address that piece. Because I think the 
thing we have to keep in mind is, as we are addressing the 
PBGC, they have a 65-billion-plus-dollar liability out there as 
well. So the question really is, do we move money over to the 
PBGC or do we get it to these plans so they have the cash flow 
so they can smooth their way out of this into the future?
    Representative Norcross. Absolutely. When we look at the 
underfunding for Central States, it is, what are they, $38.9 
billion. The 10 plans or the 9 plans behind them takes it up to 
$76 billion.
    So this is the issue that we are dealing with.
    Mr. Langan. If I could add one other thing. I do not mean 
to interrupt, sir, but I wanted to add one other thing.
    If we just look at the PBGC levels in regards to Central 
States, they are going to go insolvent in 2025, 2026. They have 
publicly said that.
    The PBGC levels, in order to come in and step in and 
provide that benefit, it is going to require about $700 million 
to $800 million worth of cash from PBGC just to help with that 
lower benefit.
    Representative Norcross. How much would you have to raise 
the premiums in order to cover that?
    Mr. Langan. Over 800 percent at a minimum in order to solve 
that.
    Representative Norcross. Eight hundred percent.
    Mr. Langan. Eight hundred percent in regards to what we are 
paying. It is not sustainable. It is just not really a viable 
option.
    Representative Norcross. So the cost of doing nothing to 
our great country far exceeds what we need to do.
    I yield back.
    Co-Chairman Brown. Senator Smith?
    Senator Smith. Thank you, Mr. Chairman. And thank you so 
much to all of our testifiers today.
    You know, I probably have met with hundreds of Teamsters in 
Minnesota and North Dakota with my colleague Senator Heitkamp. 
And I have also talked with a lot employers.
    And you know, just last week I met with a Minnesota 
employer. It is a family business, close to a 100-year-old 
business. Maybe some of you can relate to this. And they are 
looking at the shadow of all of this on their balance sheet. 
They are ready to pass the business on to the next generation, 
and they cannot figure out what to do. And this is a really 
proud family business. They are proud of what they have done as 
responsible employers, and also they are proud of their family 
legacy.
    And I am here to say that I have talked to a lot of 
employers and a lot of employees, and I have never heard 
employers cast blame on the employees or vice-versa. There is a 
lack of blame in that conversation. And I think that that ought 
to be a motto for all of us. And I appreciate so much then the 
tone that you are bringing here.
    There has been a conversation here about the risks of 
inaction, which I am very attuned to. And so I want to just ask 
you, there has also been some discussion that some would argue 
that the idea of a loan strategy that some of us on this panel 
have proposed is too risky--too risky to the taxpayers, does 
not share the risk.
    Would anybody just like to comment on that? How would you 
respond to somebody who says that the loan strategy is too 
risky?
    Mr. Langan. Well, I think that when you are looking at a 
loan strategy, you have to look at mechanisms; first, how it is 
going to be paid back. Because the definition of a loan--
obviously it has to be paid back. So that is step number one.
    But there is also another thing that we can do if we draw 
these loans down over time. We can create what we have referred 
to as a risk reserve pool. This risk reserve pool is money put 
aside over time. It can be housed either at the DOL or the 
PBGC. And it can step in when the loan repayments start 
occurring down the road and help backfill that if any of these 
plans have a hiccup due to the markets or whatever.
    So if we do both--have a lower insurance pool over to the 
side to ensure these loans are paid back and have the proper 
mechanism, whatever that may be be in the end, to ensure it is 
paid back--I think loans are very viable.
    Senator Smith. So that is a way of mitigating the risk.
    Does anyone else want to comment on that?
    Ms. Wong?
    Ms. Wong. Yes. We have not come up with a specific 
proposal.
    Senator Smith. I appreciate that.
    Ms. Wong. But we do appreciate the effort that UPS has 
done, obviously, and are looking for something that can also be 
paid back and is fair to the taxpayer.
    Senator Smith. Yes. So related to that, there are some who 
argue basically that, though this is maybe not anybody's fault, 
this is essentially the problem of the businesses and the 
employers that are in this situation, and they are kind of 
questioning what is the stake of the public in solving this 
problem.
    How would you respond to that? I mean, what are the risks 
if the public does not engage here?
    Ms. Wong. So, as we are talking about employers, I think 
one of the things we have left out is that a number of 
employers that are participating in the multiemployer system do 
not just have union employees, they also have nonunion 
employees. And so the jobs we are talking about impact all 
employees; it is not just one or the other.
    Also, a lot of these employers also participate in single-
employer plans and 401(k) plans. So if these employers are 
going bankrupt or they are having cash shortages, it can be 
impacting the retirement security of those workers as well, 
even outside of the multiemployer system.
    And then we do have the catastrophic instances where, if 
you have businesses or companies going out of business, that 
impacts the economy in local communities, obviously impacts 
that business itself and the jobs it creates.
    Senator Smith. So there is this ripple effect that is 
partly this contagion effect that we are talking about: impacts 
on other pensions plans, but also the impact on local 
communities.
    Ms. Moorkamp, would you like to comment on this at all? I 
think about your family business, the company that you run, and 
what you think would be the impact to the community that you 
operate in if we were not able to fix this problem.
    Ms. Moorkamp. Senator Smith, I would first like to focus on 
the role this contagion effect has to your question.
    Senator Smith. Right.
    Ms. Moorkamp. We are in eight multiemployer plans. In three 
of those plans, we are at least 25 percent of the contribution 
base. Two of those three are critical and declining plans. And 
as Central States goes, those certainly are going to be 
impacted as well--and think about the different people that 
those represent.
    We also are part of the Food Association. And the 15 Food 
Association members contribute to 84 plans, of which 34, or 40 
percent, are critical and red. And the concern is, as Central 
States goes, so too will those critical and declining plans.
    And as an integral member of all the communities in which 
we operate, I mean, just the thought of this catastrophe, what 
that is going to do not only to our teammates, but to our 
communities as well----
    Senator Smith. The number of people who are impacted 
ultimately has a big impact on all of us. I mean certainly 
morally it does, but financially it does as well because people 
still need to have a way to pay the rent and buy their 
groceries.
    Thank you, Mr. Chairman.
    Co-Chairman Brown. Congressman Dingell?
    Representative Dingell. Thank you, Mr. Chairman.
    Before I ask questions, I want to make a comment. Several 
people here, members of Congress, have observed that taxpayers 
have no interest in this issue. And I want to strongly 
disagree.
    I think first, retirees and employees are taxpayers; at 
least last time I checked they were.
    And we have heard much testimony about the impact the 
failure of a large plan could have on the economy. I would 
respectfully submit that every taxpayer has an interest in what 
this committee is going to do, what the outcome is going to be, 
and what the impact will be on the economy. So I want to make 
that point.
    I secondly would like to thank my colleague Representative 
Buchanan for saying that I think that Republicans and Democrats 
need to start talking more between themselves, because failure 
is not an option. It is not an option for the retirees who are 
counting on us. It is not an option for the employers who are 
struggling and facing issues. And it is not an option for this 
economy.
    When Senator Portman emphasized that all options should be 
on the table, I hope we are all taking that to heart.
    So having said that, I think I am the last questioner.
    I want to start with a series of quick ``yes'' or ``no'' 
questions so I ensure that we are all on the same page, having 
had a lot of back-and-forth as we finish this. I want to get 
this on the record.
    So these questions are for Ms. Wong, Ms. Moorkamp, and Mr. 
Langan.
    Do you believe that there would be negative impacts on the 
economy if we stick with the status quo and do nothing to help 
declining multiemployer plans? ``Yes'' or ``no''?
    Mr. Langan. Yes.
    Ms. Wong. Yes.
    Ms. Moorkamp. Yes.
    Representative Dingell. Mr. Blackman?
    Mr. Blackman. Yes.
    Representative Dingell. Thank you. Do you support Congress 
doing something this year and not kicking the can down the road 
any longer? ``Yes'' or ``no''?
    Mr. Langan. Yes.
    Ms. Wong. Yes.
    Ms. Moorkamp. Yes.
    Mr. Blackman. Yes.
    Representative Dingell. And do you support the concept of a 
loan program for critical and declining multiemployer plans? 
``Yes'' or ``no''?
    Mr. Langan. Yes.
    Ms. Wong. Yes.
    Ms. Moorkamp. Yes.
    Mr. Blackbman. Not without structural changes.
    Representative Dingell. Okay, thank you.
    Now, these questions are for Mr. Langan of UPS. Who 
administers multiemployer pension plans? And what role do 
employers play in this process?
    Mr. Langan. Multiemployer plans are administered by a board 
of trustees. A lot of them that we participate in are 
jurisdictional in nature. So if you contribute in that area, 
that is where you put your monies.
    We are in 27 different plans. There is employer and 
employee representation on those boards. And on those boards, 
they have support from attorneys, investment advisers, 
actuaries--and those are the folks who run the plan day to day.
    Representative Dingell. So what concerns me is that--I am 
going to ask you another question, and I am probably going to 
run out of time, so I may submit some questions for the record.
    Mr. Blackman said he had no input into the administration 
of that plan, did not know who was doing it. That worries me. 
And I think that there has been--well, can you help me? Who 
helps the governing board of trustees carry out their duties, 
such as determining the plan investment strategies, investing 
plan assets, and determining accrual levels that are supported 
by contributions?
    Mr. Langan. Yes. There is an investment adviser on every 
board that I sit on, for example, and they help you set the 
allocation based on what----
    Representative Dingell. Has UPS participated in those? Have 
they picked the person who does it? How do people get picked 
for those?
    Mr. Langan. How do people get picked to be on boards?
    Representative Dingell. Did you feel that you had a 
fiduciary responsibility there?
    Mr. Langan. When you become a member on a board of 
trustees, by law you are held at the highest standard of 
fiduciary responsibility. The entire board vets out and 
determines who is the best investment adviser. We look at that 
on a regular basis to make sure we have the right people, the 
right----
    Representative Dingell. So UPS did that as a company.
    Mr. Langan. As a trustee sitting on the board, as a 
representative on the board, yes, I have participated in that.
    Representative Dingell. So, building off that, you 
mentioned in your testimony that changing the actuarial 
assumptions for multiemployer pension plans would only 
exacerbate, not address, the underlying problem. Can you 
elaborate on this point further? Why would this be so harmful?
    Mr. Langan. Well, as far as the actuarial assumptions, what 
I was referring to, as far as the interest rate or the discount 
rate, all that does is lift up the amount of the liability. The 
contributions do not support it.
    It is kind of like a three-legged stool. If you raise the 
liability, you either have to reduce benefits or bring in more 
contributions. That pressure just continues on the remaining 
employers. And if they cannot afford it today, they will not be 
able to afford it tomorrow.
    As a way of a quick example, every plan has to fill out a 
5500 report. And on that 5500 report, their liabilities as far 
as the current liability, which is the lower discount rate that 
folks are referring to, is on there. In Central States alone, 
that added over $15 billion of additional liability to the 
obligation.
    You have to double the contribution on the remaining 
employers to even take a shot at reducing that liability. It is 
just not feasible.
    Representative Dingell. I am out of time, Mr. Chairman, but 
with more questions.
    Co-Chairman Brown. Thank you. Okay, thank you, 
Congresswoman Dingell.
    Thank you to those of you who sat through this on both 
sides for this entire couple-of-hours hearing.
    Thank you to the witnesses.
    Members of this panel will have 1 week to submit questions 
through Senator Hatch and me that we will get to the four 
panelists.
    Anybody in the public who is watching or interested in this 
audience or anybody watching this live-streamed, feel free in 
the next 2 weeks to submit questions to Senator Hatch and me. 
And we will then forward those to the four of you. And please, 
respond as quickly as you can to those questions.
    This was very illuminating today. Thank you so much to all 
of you.
    Representative Scott. Mr. Chairman?
    Co-Chairman Brown. Congressman Scott?
    Representative Scott. I have a unanimous consent request to 
introduce a letter from several bipartisan members of the House 
encouraging us to get a solution quickly for fear of 
devastating consequences.
    Co-Chairman Brown. Okay. Without objection, so ordered.
    [The letter appears in the appendix on p. 57.]
    Co-Chairman Brown. The committee is adjourned. Thank you.
    [Whereupon, at 4:10 p.m., the hearing was concluded.]

                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              


                 Prepared Statement of Burke Blackman, 
                     President, Egger Steel Company
    Good afternoon, Co-Chairman Hatch, Co-Chairman Brown, and members 
of the Joint Select Committee on Solvency of Multiemployer Pension 
Plans.

    Thank you for the opportunity to speak with you today about a topic 
that has significantly impacted my business. I am the president of 
Egger Steel Company, a third-generation family-owned business located 
in Sioux Falls, SD. We are a structural steel fabricator that services 
markets in the upper Midwest. We purchase raw material from steel mills 
and transform it into assemblies that are shipped to job sites to 
become the structural framework for bridges and buildings.

    We currently have 51 employees, 34 of whom are hourly shop workers 
who belong to the International Brotherhood of Boilermakers, Iron Ship 
Builders, Blacksmiths, Forgers, and Helpers. On their behalf, we 
contribute to the Boilermaker-Blacksmith National Pension Trust. We 
have been contributing to this pension since 1971.
                     historical pension performance
    We first became aware that the Boilermaker-Blacksmith pension had 
an unfunded liability when we were notified that our company's 2002 
withdrawal liability was over $900,000. Prior to that notification, we 
had never heard the term ``withdrawal liability,'' much less understood 
that it could apply to us. Since 2002, our withdrawal liability has 
fluctuated due to variations in overall contributions to the pension, 
investment returns and actuarial assumptions, but the overall trend of 
our withdrawal liability has been upward and the largest increase in a 
single year was over 300 percent coinciding with the stock market crash 
of 2008-2009 (see Figure 1 below). The stock market has since 
recovered, but our withdrawal liability has not returned to pre-crash 
levels. Our most recent valuation indicates a withdrawal liability of 
approximately $2.1 million, or over $60,000 per active eligible 
employee.

    The pension trustees have made multiple changes since 2002 to 
reduce the plan's unfunded liability, implementing a Funding 
Improvement Plan, a Rehabilitation Plan and various Amendments. They 
have imposed increased contribution rates, reduced benefit accrual 
rates and eliminated some future benefits for active employees. They 
have not cut retiree benefits. Our company's total contribution is now 
2.4 times higher than the rate we negotiated with our bargaining unit. 
Despite these changes, the plan's funding status has continued to 
decline (see Figure 2 below).
---------------------------------------------------------------------------
    \1\ Boilermaker-Blacksmith National Pension Trust, ``Withdrawal 
Liability Estimate'' letters to Egger Steel Company (2003-2017).

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    There is an uptick in the funding status for 2018, but I don't take 
much comfort from that because I don't believe that the pension's 
accounting reflects its true liability. The Boilermaker-Blacksmith 
pension makes two actuarial assumptions that I question. First, it 
projects an actuarial rate of return on its investments of 7.5 percent 
net of investment expenses.\3\ During the latest bull market, its 
actuarial returns have averaged only 6.0 percent (see Figure 3 below), 
so in my opinion the pension should be assuming an actuarial rate of 
return lower than 6.0 percent in order to account for the inevitable 
losses during a bear market.
---------------------------------------------------------------------------
    \2\ Boilermaker-Blacksmith National Pension Trust, ``Annual Funding 
Notice for Boilermaker-Blacksmith National Pension Trust'' (2010-2018).
    \3\ Segal Consulting, ``Actuarial Status Certification as of 
January 1, 2016 Under IRC Section 432'' (Boilermaker-Blacksmith 
National Pension Trust Form 5500, 2016), 9.

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Second, the pension assumes that hours worked by active 
participants will continue at current levels.\5\ This assumption 
ignores the historical trend of declining numbers of active 
participants and declining numbers of employers who are contributing to 
the plan (see Figures 4 and 5 below). Moreover, the pension recently 
disclosed that hours worked in 2017 were estimated to be 4 million 
hours lower than projected.\6\
---------------------------------------------------------------------------
    \4\ Boilermaker-Blacksmith National Pension Trust, ``Form 5500, 
Schedule MB'' (2010-2016), 3.
    \5\ Segal Consulting, 9.
    \6\ Boilermaker-Blacksmith National Pension Trust, ``Important 
Notice Regarding Amendment 5 to the 13th Restatement of the Pension 
Plan'' (December 2017).

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     impact on egger steel company
    What impact does this have on my company? The short-term impact of 
the multiemployer pension crisis is that it increases my shop labor 
costs. In order to attract and retain employees, I have to offer 
competitive take-home wages. Younger employees are cynical about the 
value of their pension benefits, so they will leave my company for a 
non-union competitor if their paychecks aren't equivalent to what they 
could receive somewhere else. The problem is that while my non-union 
competitors are offering between 3 percent and 6 percent 401(k) 
contributions, the equivalent rate for my company's total pension 
contribution is 14 percent. My shop labor costs are therefore 8 percent 
to 11 percent higher than my non-union competitors because of the 
underfunded pension. Every time the pension imposes higher contribution 
rates to make up for its funding shortfall, my costs rise, it becomes 
more difficult for me to compete in the marketplace and I grow more 
concerned about whether or not my company will be able to survive the 
next recession.
---------------------------------------------------------------------------
    \7\ Boilermaker-Blacksmith National Pension Trust, ``Form 5500'' 
(2009-2016), 2.
    \8\ Ibid. Note that the 2010 Form 5500 indicates that 1,170 
employers were obligated to contribute. This data point appears to be 
an error and was omitted from the chart.

    The long-term impact of this crisis is related to my company's 
withdrawal liability. Because I don't intend to withdraw from the 
pension, it is considered a contingent liability for now, and it is 
disclosed in the notes to my financial statements rather than appearing 
on the balance sheet. Nevertheless, my bank is aware of this 
liability--which is why I can speak about it publicly today--and I make 
management decisions as if this liability does appear on my balance 
sheet. While my competitors are purchasing expensive new technology to 
improve their productivity, I am limited to fixing or replacing broken 
equipment because at any time my withdrawal liability could skyrocket 
like it did in 2008, the pension could impose steep increases in 
contribution rates or if too many employers withdraw from the pension 
it could fold and assess withdrawal liabilities on whichever 
participating employers are left to absorb its losses. I don't know how 
likely any of these scenarios is, but if this crisis is not addressed I 
am assuming that at least one of them will occur during my tenure as 
---------------------------------------------------------------------------
president.

    While it is true that if a withdrawal liability were to be assessed 
I could pay the liability at the same annual rate that I had been 
making contributions, in reality I would incur the additional cost of 
contributing to a new 401(k) account for those employees who would no 
longer be earning a pension benefit and would otherwise leave my 
company for a competitor that does offer retirement benefits. Instead 
of my labor costs being 8 percent to 11 percent higher than my 
competitors, they would now be 13 percent to 16 percent higher.
                            recommendations
    The multiemployer pension crisis is serious, and it is getting 
worse every day because the pension plans are still making new defined 
benefit commitments without collecting enough contributions to cover 
their true costs. Before we do anything else, we must recalculate the 
true extent of the problem using realistic actuarial assumptions. I'm 
not suggesting that all multiemployer pension plans should immediately 
recast their projections. Doing so risks a cascading failure in which 
weaker companies will fold under the pressure of higher contributions 
or higher withdrawal liabilities and will dump their obligations onto a 
shrinking number of survivors. This committee, however, should 
independently determine the realistic funding status of these plans to 
ensure that any solutions offered do more than just kick the can down 
the road for a future Congress to address.

    My second recommendation is to transition ``orphaned'' 
beneficiaries to the Pension Benefit Guaranty Corporation (PBGC). The 
``last man standing'' provision of multiemployer pension legislation 
was a mistake and correcting it would eliminate the risk of cascading 
failure. The PBGC would require additional funding to support these 
orphans which could come from higher premiums or from transferring 
proportional assets from the orphans' former pension funds to the PBGC. 
In either case, the PBGC should consider the funding status of the 
affected pension plans and vary the premiums or funds collected to 
avoid harming significantly underfunded plans.

    My third and final recommendation is to stop making new defined 
benefit commitments. In my company's example, instead of paying 14 
percent of wages to the pension, I would propose to redirect 5 percent 
to a defined contribution plan for all new hours worked and continue 
contributing the remaining 9 percent to the pension until its unfunded 
liabilities are paid off. The pension may require Federal loans to 
satisfy its short term cashflow needs, but if it stops making new 
commitments while continuing to collect contributions it will 
eventually be able to pay back its loans. If it would take the pension 
fifty years under this scenario to pay off its liability then perhaps 
we need to consider current retiree benefit cuts or direct taxpayer 
assistance, but before we do either of those things we need to admit 
that the era of defined benefit retirement plans is over.

    Thank you for giving me the opportunity to testify.

                                 ______
                                 
Prepared Statement of Hon. Sherrod Brown, a U.S. Senator From Ohio, Co-
 Chairman, Joint Select Committee on Solvency of Multiemployer Pension 
                                 Plans
WASHINGTON, DC--U.S. Senator Sherrod Brown (D-OH)--co-chair of the 
Joint Select Committee on Solvency of Multiemployer Pension Plans--
released the following opening statement at today's hearing.

    I would like to welcome my colleagues and everyone in attendance to 
the third hearing of the Joint Select Committee on Multiemployer 
Pension Reform.

    We know our job on this committee: to find a bipartisan solution to 
the crisis threatening 1.3 million Americans and thousands of small 
businesses across this country.

    This is what Chairman Hatch and I have set out to do, and I want to 
thank him for all of his work so far, and all of the members on this 
committee for the seriousness with which everyone is approaching this.

    Chairman Hatch and I decided from the outset to use this initial 
period to educate ourselves and our colleagues about this complicated 
issue and its broad impact on the people we serve.

    We've made real progress already. This will be our third meeting, 
and we have three more hearings scheduled. In addition, we have 
assembled a committee staff made up of top people from the Pension 
Benefit Guarantee Corporation and the Department of Labor.

    The staff are working to provide us with the critical technical 
information the members of this committee require, and deepening and 
broadening their expertise on the subject. In June alone we are 
convening a dozen staff briefings, half of which have already taken 
place.

    We've received hundreds of comments online at pensions.senate.gov. 
In fact, one of our witnesses today came to our attention when he wrote 
in to the committee.

    As I said, we will hold two more hearings here in DC, and one more 
in the field, where the workers and businesspeople and retirees will 
have the chance to weigh in.

    And then by the end of July, it will be time to take what we have 
learned through this process, and get serious about negotiating a 
bipartisan solution.

    That is what it will take to address the problem. We all have to 
put our talking points and biases aside and take what we are learning 
to craft a bipartisan solution. Senator Hatch and I intend to do just 
that.

    Because, as we will hear today, not passing a solution to this 
crisis is simply not an option.

    It's not an option for the millions of Americans who are part of 
these multiemployer pensions, it's not an option for the millions more 
who will still be affected if the system falls apart, and it's not an 
option for the thousands of employers whose entire business is at 
stake.

    We've heard a lot over the past year about the very real threat to 
the retirees who paid into these pensions over a lifetime of work. Many 
of us have talked with them and heard their stories. It's because of 
their activism and their refusal to give up that we created this 
committee in the first place.

    But the threat to current workers and to small businesses--and to 
our economy as a whole--is equally real. If the multiemployer pension 
system collapses, it won't just be retirees who will feel the pain.

    Current workers will be stuck paying into pensions they'll never 
receive. Small businesses will be left drowning in pension liability 
they can't afford to pay.

    And that will have ripple effects throughout our economy.

    Small businesses that have been in the family for generations could 
face bankruptcy. Workers will lose jobs at businesses forced to close 
up shop. These businesses are already feeling the effects of this 
crisis. Uncertainty surrounding their future threatens their access to 
credit, their ability invest in the business, and their decisions as to 
whether to expand and create jobs.

    That's why this issue cuts across party lines, across ideological 
lines, and through every region of the country.

    One of the reasons we have heard more from workers than from 
businesses is that retirees are more free to speak their minds.

    But we need to think about the plight of these small business 
owners. If they speak publicly about fearing their business could go 
bankrupt, they'll alarm their customers, their employees, and their 
creditors.

    So I want to thank the witnesses here today for speaking for the 
thousands of small business people who can't.

    You represent businesses that have, by and large, done everything 
right.

    They joined multiemployer pension plans to do right by their 
employees--they thought they were guaranteeing their workers a secure 
retirement, making their business an attractive place to work.

    They followed the rules set by Congress. They kept doing the work 
to make their business thrive. They kept contributing to the pension 
plan. Now, these employers are being punished for succeeding where 
their competitors failed, and for living up to their obligations when 
so many have walked away.

    Meanwhile, it was Congress that passed upside-down tax incentives 
and required insufficient premium levels. Congress allowed inadequate 
tools and financing for the PBGC.

    It was that government regulation that allowed this crisis to 
fester, and it's our responsibility to clean up the mess Congress 
helped make.

    And that means more than increasing PBGC premiums and marginally 
improving the minuscule PBGC guarantee.

    Businesses and the groups that represent them all agree, saving the 
PBGC alone does not help anyone--retirees will still see dramatic cuts 
to their pensions, workers will still pay into a retirement they may 
never see, and businesses will face increased PBGC premiums, while a 
crippling liability still hangs over their heads.

    I'm confident we can find a bipartisan solution that will both 
solve this current crisis, and improve and strengthen the system so 
that it never happens again.

    I'm willing to consider any idea that meets those goals, and I 
believe Chairman Hatch agrees. And with that, I yield to my co-
chairman, Senator Hatch, for his opening statement.

                                 ______
                                 
 Prepared Statement of Hon. Orrin G. Hatch, a U.S. Senator From Utah, 
   Co-Chairman, Joint Select Committee on Solvency of Multiemployer 
                             Pension Plans
WASHINGTON--Joint Select Committee on Solvency of Multiemployer Pension 
Plans Co-Chairman Orrin Hatch (R-Utah) today delivered the following 
opening statement at a hearing examining employer perspectives on 
multiemployer pension plans.

    We have brought in business representatives to provide their 
perspectives on issues with the defined benefit system in order to 
better understand the realities employers face participating in the 
multiemployer system.

    We will delve into some fundamental questions, including why 
employers entered into collective bargaining contracts to participate 
in these plans; how participation affects a business's ability to 
operate as a going concern; and how the financial condition of these 
plans affect their ability to access credit, invest in new facilities, 
equipment, expand operations, and hire new employees.

    Before I proceed, I want to provide a brief update on the 
activities of the Joint Select Committee. The committee is operating on 
several tracks.

    We have the outward-facing process of the hearings, which have been 
useful to better understand the issues confronting the committee. 
Committee staff have also held a number of briefings on a wide variety 
of technical issues in the multiemployer area, including topics that 
will be touched upon today, such as the impact of withdrawal liability 
and the operation of the bankruptcy laws in the multiemployer space.

    The committee is also working on a range of possible policy options 
for review. And we continue to develop and evaluate these options, 
working with the PBGC, our in-house experts, and other agency officials 
to put some flesh on the bones of these ideas.

    I remain open as to what the committee may consider later this 
year, and my co-chair, Senator Brown, has similarly expressed openness. 
I also know that there are members of this committee who are actively 
working on proposals, which they may put forward after fully analyzing 
their ideas.

    But with all of that said, there remains a lot of work to do. And I 
think I should be clear that I do not see our choices as being limited 
to a referendum on some sort of loan program.

    I bring this up because some prior comments have indicated to me 
that some of my friends have become convinced that we are stuck with a 
loan or nothing choice. I have a few thoughts about that.

    First, some of us have genuine concerns and questions about the 
nature of the proposed loan programs, which have yet to be fully 
analyzed. And a major question remains: what is the limiting principle 
on risk to the American taxpayer? Multiemployer plans are private 
arrangements between employers and unions, covering wage compensation 
and fringe benefits.

    Yes, they are shaped to some degree by the tax and pension laws, 
but so are defined contribution plans and other pension arrangements, 
as well as a whole host of other financial arrangements in the private 
sector.

    It is clear that the employer and union participants entered into 
these contracts with an understanding of the terms and conditions that 
should have allowed them to manage these obligations in a way that 
would ensure their financial viability.

    And although Federal actions over the last 50 years have helped 
shaped where these plans stand today, the arrangements are, at their 
core, privately bargained-for contracts--negotiated without the Federal 
Government's input. And, candidly, the vast majority of Federal 
taxpayers have no financial interest in these plans.

    So let's be diligent and methodical as we approach these issues and 
negotiate solutions. I want to be sure we are mindful of all of the 
consequences of our approach--intended or not--so that we can prevent 
future failures, mismanagement of taxpayer dollars, and the economic 
dangers of moral hazard.

    We need to learn from our mistakes and do better here. Now, none of 
what I am saying is to dismiss the real concerns of participants, 
including active workers and retirees who face real hardship as these 
plans decline and even fail.

    As a former skilled union member, I understand these perspectives, 
and I recognize that the difficult, but necessary choices we have to 
make as this committee will affect real people with real families. But 
I also know that real people, who are currently employed and paying 
taxes, are also affected by the decisions these businesses have to 
make.

    And the difficulty businesses encounter because of the current 
condition of these pension plans is sometimes bizarre, if not 
ludicrous.

    As just one example, it is alarming, as we will hear today, to 
learn that the estimates of withdrawal liability frequently exceed the 
book value of the sponsoring companies. And as some companies will 
testify, there is a real fight to get out from underneath the burdens 
of pension liability for employees who were never even employed, let 
alone received a pay packet.

    It is truly a complicated issue, one that requires us to move 
thoughtfully, instead of jumping to conclusions to score political 
points. That's why I look forward to exploring these issues in depth 
today and beyond, and am pleased by our witnesses today, who will share 
with us their views on these matters.

                                 ______
                                 
               Prepared Statement of Christopher Langan, 
                     Vice President of Finance, UPS
                              introduction
    The multiemployer pension system is in a crisis from which it will 
likely never recover if Congress does not take immediate action. The 
Joint Select Committee on Solvency of Multiemployer Plans is uniquely 
empowered to find a responsible solution to this issue of critical 
importance for more than 10 million Americans who participate in 
multiemployer pension plans, their families, and thousands of employers 
that contribute to the plans to provide their employees with retirement 
income. If Congress does not find a viable solution for plans like 
Central States and the Mineworkers Plan, the claims for financial 
assistance by these plans will quickly bankrupt the PBGC's own 
multiemployer insurance program. Retirees under these plans would then 
see their benefits drop to just a fraction of the already modest 
benefit guarantee under the PBGC's multiemployer insurance program.

    UPS began to contribute to multiemployer pension plans in the 1950s 
and currently contributes nearly $2 billion per year to 27 different 
plans across the country. These plans include some of the largest in 
the country, such as the Western Conference of Teamsters Pension Plan, 
the New England Teamsters and Trucking Industry Pension Fund, and the 
I.A.M. National Pension Fund. The plans to which UPS contributes vary 
in funding status. As of last year, out of the 21 plans to which UPS 
makes the largest contributions, eight were in ``critical status,'' 
three were in ``endangered status,'' and the remaining ten were in the 
``green zone.''

    UPS supports a solution to this problem so that the multiemployer 
pension system remains a viable method of providing retirement benefits 
into the future for all participants and to avoid the catastrophic 
collateral effects on our economy that would necessarily arise from a 
failure of the system.
                         historical background
    The present multiemployer pension crisis did not arise overnight or 
through the fault of employers or employees. The crisis is also not 
generally due to mismanagement by plan trustees, who are subject to the 
strict fiduciary standards outlined below.

    Multiemployer pension plans are governed by a board of trustees 
with equal representation from labor and management. Labor trustees and 
management trustees generally are required by law to have equal voting 
power. If the trustees reach a deadlock on any issue, the issue is 
resolved by arbitration. These trustees have fiduciary responsibility 
for the management and administration of the plans as a whole, 
including the management of the plan assets. The fiduciary standards 
under ERISA require trustees to act prudently, follow plan documents, 
diversify investments and act for the exclusive benefit of participants 
and beneficiaries. Due to these high fiduciary standards, trustees 
typically retain investment managers and delegate to them 
responsibility for the day-to-day investment of plan assets. In 
addition to retaining investment managers, trustees will typically also 
retain investment consultants to assist in the selection and ongoing 
monitoring of investment managers, asset allocation, and similar 
issues. Trustees rarely make day-to-day investment decisions.

    The current crisis is not the result of poor decision-making in 
retaining investment professionals. It is instead the result of a 
perfect storm of events that were never contemplated when the 
multiemployer pension system was first created. In particular, 
multiemployer pension plans have suffered from (i) macro changes to 
many of the established industries in the United States with 
significant multiemployer plan participation, and (ii) the 2008 market 
crash--which happened while many plans were still recovering from the 
earlier burst of the dot-com bubble. These macro changes and 
unprecedented negative market events had a number of derivative effects 
on multiemployer pension plans, including significant investment 
losses, dramatic reductions in the number of contributing employers, 
declines in the number of active participants, increases in the number 
of retirees, an unusually low interest rate environment, and increasing 
employer failures that have prevented plans from fully collecting 
withdrawal liability.
Macro Changes to Established U.S. Industries
    Many multiemployer pension plans primarily cover participants in 
established industries that have significantly changed in the United 
States over the past 30 to 40 years. An example of one of these changes 
that has uniquely impacted a number of Teamster plans is the passage of 
the Motor Carrier Act of 1980, which deregulated the trucking industry 
and gave rise to a new breed of non-unionized trucking company with 
which many established trucking companies could no longer compete. 
Central States reported that out of its 50 largest contributing 
employers in 1980, only three remained contributing employers by 2015, 
and that over 600 of its contributing employers have gone bankrupt 
since 1980.\1\ These pressures also impact non-Teamster funds. As an 
example, the Western States Office and Professional Employees Pension 
Fund was acutely impacted by the decline in contributions due to the 
2002 bankruptcy of one of its largest contributing employers, 
Consolidated Freightways--an established trucking company.\2\
---------------------------------------------------------------------------
    \1\ See, e.g., Central States MPRA Application, page 18.2, 
available at https://www.treasury.
gov/services/AppsExtended/
(Checklist%2018)%20All%20Reasonable%20Measures.pdf.
    \2\ See, e.g., Western States MPRA Application, Checklist 2, page 
9, available at https://www.
treasury.gov/services/KlineMillerApplications/
Checklist%202%208%2013%2015%2017-22%2024
%2030-33%20WSOPE%20MPRA%20Benefit%20Suspension%20Application%20-
%20pages%201-25_Redacted.pdf.

    Employers in these established U.S. industries have also had to 
cope with other market forces, such as increased competition from 
foreign companies and the outsourcing of significant work to other 
companies. For example, furniture imports began to rapidly increase in 
the 1970s, which in turn harshly impacted furniture companies in the 
United States. The United Furniture Workers Pension Fund reported in 
its MPRA application that from 1981 to 2009, 35 of its contributing 
employers alone filed for bankruptcy (or effected an assignment for the 
benefit of creditors) and withdrew from that fund.\3\
---------------------------------------------------------------------------
    \3\ See, e.g., United Furniture Worker Pension Fund A First MPRA 
Application, page 12, available at https://www.treasury.gov/services/
KlineMillerApplications/United-Furniture-Workers-Pension-Fund-A-
Application-for-Benefit-Suspensions-1.pdf.

    These changes have been compounded by the broader decline of unions 
in the United States, increases in labor productivity, the emergence of 
new, non-unionized industries that have begun to dominate the American 
economy, and the increasing numbers of baby boomers who are retiring 
and applying to commence their pension benefits.
Economic Recessions
    In the past 20 years, multiemployer pension plans have suffered 
from two significant economic recessions--first in 2002 with the burst 
of the dot-com bubble and then in 2008 with the burst of the housing 
bubble and the financial crisis that followed. These recessions 
resulted in significant, unprecedented investment losses for 
multiemployer pension plans. Central States experienced $7.5 billion in 
investment losses in 2008 alone.\4\ However, the impact of these 
recessions were not limited to investment losses. The recessions also 
bankrupted many contributing employers and constrained the ability of 
other employers to bear significant increases in contribution rates.
---------------------------------------------------------------------------
    \4\ Government Accountability Office, GAO-18-106, ``Central States 
Pension Fund--Investment Policy Decisions and Challenges Facing the 
Plan,'' page 36 (2018).

    Although these economic recessions followed periods of relative 
prosperity in the United States, multiemployer plans were largely 
unable to fully prepare for the threat of significant downturns. This 
is because the Tax Reform Act of 1986 limited the ability of employers 
to deduct contributions to overfunded multiemployer plans. As a result, 
when plans were projected to become overfunded--particularly in the 
1990s--trustees of many of the plans began to increase benefit levels 
to lower the funding status of their plans and ensure that contributing 
employers could continue to deduct their contributions.\5\ Until 
legislation became effective in 2002 that modified this limitation on 
contribution deductions, plans were effectively unable to preserve 
their investment gains as a hedge against future downturns. It is 
estimated that this issue impacted over 70 percent of multiemployer 
plans.\6\
---------------------------------------------------------------------------
    \5\ W. Thomas Reeder, testimony before the House Committee on 
Education and the Workforce Subcommittee on Health, Employment, Labor, 
and Pensions, November 29, 2017.
    \6\ Randy DeFrehn, testimony before the House Committee on 
Education and the Workforce Subcommittee on Health, Employment, Labor, 
and Pensions, September 22, 2016.
---------------------------------------------------------------------------
Derivative Effects
    The macro changes and economic recessions had a number of 
derivative effects on multiemployer pension plans.

    First, active participation in multiemployer pension plans has 
declined over time. The ratio of retirees and terminated vested 
participants in multiemployer pension plans increased from 48 percent 
to 63 percent from 1995 to 2013 alone.\7\ As PBGC Director Reeder has 
previously testified, today, the ratio of active to inactive 
participants is at its lowest point in history.\8\ As a result, many 
plans receive ongoing contributions for a decreasing number of 
participants.
---------------------------------------------------------------------------
    \7\ Jasmine Ye Han, ``Retiree-Employee Ratios Are Dooming the 
Multiemployer Pension,'' Bloomberg BNA, May 9, 2017, available at 
https://www.bna.com/retireeemployee-ratios-dooming-n73014450632.
    \8\ W. Thomas Reeder, testimony before the House Committee on 
Education and the Workforce Subcommittee on Health, Employment, Labor, 
and Pensions, November 29, 2017.

    Second, many plans have fewer contributing employers than ever 
before due not only to withdrawals by those seeking to limit their 
potential exposure but also due to the failure of contributing 
employers. Specifically, a number of contributing employers have simply 
proven unable to weather these macro changes and economic recessions. 
These employers have ceased contributions to multiemployer pension 
plans altogether--often through bankruptcy--and often failed to fully 
satisfy their withdrawal liability obligations. As a recent example, 
when The Great Atlantic and Pacific Tea Company filed for bankruptcy in 
2015, it was a contributing employer to 12 multiemployer pension 
plans.\9\ Each time a contributing employer to a multiemployer pension 
plan fails, it effectively leaves the plan's remaining contributing 
employers, who may themselves already be damaged from various macro 
events, liable for the unfunded vested benefits of the failed 
employer's participants.
---------------------------------------------------------------------------
    \9\ See ``Motion of Debtors Pursuant to 11 U.S.C. Sec. Sec. 105(A), 
363, and 507(A) for Interim and Final Authority, but Not Direction, to 
(A) Pay Certain Prepetition Wages and Reimbursable Employee Expenses, 
(B) Pay and Honor Employee Medical and Other Benefits, and (C) Continue 
Employee Benefit Programs, and for Related Relief,'' in re The Great 
Atlantic and Pacific Tea Company, Inc., et al. (S.D.N.Y., July 19, 
2015).

    The combined impact of these first two derivative effects--the 
ongoing decline in contribution base and the decline in contributing 
employers--is profound. Because there are fewer contributing employers 
among which to spread risk, these derivative effects make the plans 
more reliant on the financial fortunes of their remaining contributing 
employers. These derivative effects also require the plans to demand 
ever-increasing contribution rates from their remaining contributing 
employers--a vicious cycle that in turn leads to even more employer 
---------------------------------------------------------------------------
withdrawals.

    Third, and related to the foregoing point, because many plans have 
a disproportionate share of retirees relative to active participants, 
these plans often pay more in annual benefits than the plans collect in 
annual contributions. While this may not be financially toxic for 
healthy plans, it has a disastrous effect for underfunded plans that 
have shrinking asset bases from which to generate investment returns. 
Rather than using their current asset base to generate the returns 
needed to bring themselves back to health, these plans are forced to 
sell their investment assets in order to pay benefits.

    Finally, multiemployer pension plans have suffered through an 
unusually low interest rate environment since the 2008 recession that 
is just starting to inch back to normal levels. With yields on 
treasuries and investment grade bonds at nearly historic lows, plans 
have generated smaller returns than usual on their fixed income 
portfolios. This has dragged investment returns for certain troubled 
plans.
                            current problem
    The current problem is that even after the recent improvements in 
the economy, the most troubled underfunded multiemployer pension plans, 
such as Central States, have significantly negative annual cash flow. 
These plans simply pay much more in benefits each year than the plans 
collect from employers and earn through investment returns--and the 
annual disparity between the plans' cash inflows and outflows is only 
growing as more participants retire and start benefit payments, 
contributions for ongoing participants decrease, and plans are left 
with shrinking asset bases from which to generate investment returns.

    If large plans like Central States and the Mineworkers Plan become 
insolvent and turn to the PBGC's multiemployer insurance program, the 
PBGC will not be able to fully satisfy its already modest guarantee for 
the participants in any insolvent plans. As of 2016, the Congressional 
Budget Office estimates that out of the $35 billion in financial 
assistance claims from multiemployer plans that the PBGC is projected 
to receive from 2027 through 2036, the PBGC will only be able to pay $5 
billion.\10\ This should not be an acceptable result to Congress for 
retirees on fixed incomes who need every dollar of their pension 
benefits.
---------------------------------------------------------------------------
    \10\ Congressional Budget Office, ``Options to Improve the 
Financial Condition of the Pension Benefit Guaranty Corporation's 
Multiemployer Program,'' page 2 (2016).
---------------------------------------------------------------------------
                           finding a solution
    The multiemployer pension system is in crisis and the problem 
becomes worse each day. This committee is uniquely empowered with the 
ability to develop a legislative solution that will help ensure that 
multiemployer pension plan participants receive the retirement benefits 
they earned through years of hard work and on which many are relying to 
support themselves and their families after their working years.

    Given that the failure of Central States and the Mineworkers Plan 
will effectively bankrupt the PBGC's multiemployer insurance program, 
UPS respectfully submits that the highest priority should be on 
solutions that will work for the largest, and most critically 
underfunded, multiemployer pension plans, which in turn will help save 
the PBGC's multiemployer insurance program.

    To that end, UPS notes as an initial matter that changing the 
actuarial assumptions for multiemployer pension plans to more closely 
reflect those used by single-employer plans would only exacerbate, not 
address, the underlying problems. At this point, the most troubled 
plans are ``mature'' plans with more retirees than active participants. 
The cash flow needs for these plans are known and quantifiable and, as 
required by law, the plans have generally implemented employer 
contribution schedules that reflect the maximum that the trustees have 
determined that they can collect from employers without impairing their 
ability to remain in business and willingness to continue contributing 
to the plans. Modifying the actuarial assumptions in a manner that 
significantly increases the valuation of the plans' liabilities will 
result in a perceived, but artificial, need for additional 
contributions, but in reality will not result in additional cash flow 
or otherwise solve the pressing problem. Indeed, modifying the 
actuarial assumptions may make the problem worse if the revised 
assumptions result in even higher withdrawal liability calculations for 
employers that would already struggle to pay any withdrawal liability 
assessed in accordance with current law.

    Similarly, there has been much discussion recently regarding the 
GROW Act and a new type of plan known as a ``composite plan.'' While 
UPS does not intend to take a position on composite plans at this time 
(other than to state that any composite plan legislation should be 
crafted in a manner that does not undermine the viability of so-called 
``legacy plans''), it is important to note that the GROW Act simply 
will not fix the most pressing problem at hand for plans like Central 
States and the Mineworkers Plan, and therefore will not save the PBGC 
either. While the committee should determine whether the GROW Act is 
still potentially beneficial for other plans, UPS urges the committee 
to remain focused on the more pressing problem at hand.

    In order to derive a solution to the pressing problem, UPS 
encourages the committee to focus attention on the key factors that 
suggest what will work. While the nuances of multiemployer pension 
funding are complicated, the basic premise is quite simple. Plans' 
finances depend on two things: (i) the plans' cash inflows in the form 
of employer contributions and investment returns, and (ii) the plans' 
cash outflows in the form of benefit payments and administrative 
expenses. Put simply, troubled plans are unable to recover because they 
face significant negative cash flow--an imbalance between these two 
factors, and quickly exhaust their remaining assets.

    For these troubled plans, increased employer contributions will not 
solve the cash inflow problem. Troubled plans have been required since 
the enactment of the Pension Protection Act of 2006 to create 
contribution schedules that are projected to improve their financial 
condition within specified timeframes. These contribution schedules 
have significantly increased the contribution rates for most employers 
to troubled plans. Many employers are now contributing double what they 
contributed per employee before these legal changes were enacted.\11\ 
Troubled plans have found that increases at these levels are simply 
unsustainable for contributing employers--particularly those that are 
increasingly forced to compete with non-union employers in the 
marketplace and that already operate on low margins. These contribution 
increases have already hastened the pace at which employers have 
stopped contributing to troubled plans due to either the inability to 
pay these increased contributions, which further shrinks the plans' 
contribution bases, or due to liquidation or bankruptcy (in which case 
employers also fail to pay their full share of withdrawal liability). 
In addition, employers often contribute to several multiemployer plans. 
If these employers go out of business due to the unsustainable 
contribution increases owed to just one of their plans, they will stop 
contributing to all of their plans. The result is a shrinking 
contribution base, and the financial health of an ever increasing 
number of multiemployer plans is put at risk. There is simply no 
workable fix that can be strictly funded through employer contributions 
for plans like Central States.
---------------------------------------------------------------------------
    \11\ For example, the ``default'' contribution schedule implemented 
by Central States after PPA required 5 years of compounded 8-percent 
annual contribution rate increases, 3 years of 6-
percent annual compounded increases, and then continuous 4-percent 
compounded annual increases (without factoring in any additional 
contribution increases for benefit improvements). See, e.g., Central 
States MPRA Application, page 18.7. At this rate, an employer's 
contribution rate doubles within 12 years after the adoption of the 
schedule.

    In the case of cash outflows, multiemployer pension plans generally 
offer modest retirement benefits to participants who have typically 
worked in blue-collar jobs. Significant benefit reductions for these 
people come at a huge human cost that cannot be overlooked. 
Multiemployer pension participants have planned on this income 
throughout their entire working lives and taken the income into account 
in planning how much, if anything, to separately set aside for 
additional retirement savings. As a practical matter, for many 
participants, their modest pension benefits and Social Security 
benefits are the only available source of income in retirement and they 
have no other meaningful source of savings. Benefit reductions also 
have broader ramifications and costs for the government in the form of 
lost tax revenue on the unpaid benefits and increased demand of other 
government services like SNAP (food stamps) and other welfare and 
social programs. For example, a retiree on a fixed income with a modest 
pension of $600 per month may not be able to absorb an even $100 
reduction to his or her monthly benefit. As a result, similar to the 
notion of increased employer contributions, there is also no workable 
fix that can be funded strictly through benefit reductions for the most 
troubled plans.
                              loan program
    UPS believes that a carefully designed loan program could save the 
most troubled plans without imposing undue hardships on participants, 
contributing employers, the PBGC, the Federal Government, taxpayers, or 
healthy plans. As PBGC Director Reeder testified before this committee, 
the most troubled plans need an infusion of cash as soon as possible to 
stay viable. Each of the loan programs proposed by various parties 
would provide troubled plans with this desperately needed lifeline 
while still ensuring that the plans are projected to repay the loans in 
full.

    As you know, UPS has provided some ideas on how to structure a 
successful loan program about which we are happy to provide additional 
information. Generally, we think long-term, low interest rate loans to 
the most troubled plans would allow them to stop selling assets to pay 
benefits and provide them with the opportunity to regain their 
financial strength and repay the loans in full over time. We think 
there are ways to provide assurances that the loans can be repaid so 
that taxpayers can be protected as well. While these assurances may 
require some level of shared sacrifice among all of a borrowing plan's 
stakeholders--it will avoid the significantly worse, and catastrophic, 
effects of inaction.

    Of course, the committee will ultimately need to decide the right 
balance to strike among the important issues and considerations at 
stake. More important than the specific details of any particular loan 
program at this point is our demonstration as to why--short of a 
government bailout--a loan program is the only solution that has been 
raised to date that would help solve the current crisis. In this 
regard, we note that Central States and the United States Mineworkers 
Plan have confirmed that a loan program could help save the plans, 
avoid insolvency, and therefore avoid the need to turn to the PBGC's 
multiemployer insurance program for assistance.\12\
---------------------------------------------------------------------------
    \12\ See, e.g., letter from Mr. Thomas C. Nyhan, Executive Director 
of the Central States Pension Fund, dated November 13, 2017, to U.S. 
Senator Sherrod Brown and Representative Richard Neal, available at 
https://d3n8a8pro7vhmx.cloudfront.net/teamstersforademocraticunion/
pages/10476/attachments/original/1510782483/Central_States_-
_Letter_to_Sherrod_Brown_
and_Richard_Neal_11132017.pdf?1510782483; United Mine Workers of 
America, press release, American Miners Pension Act (Oct. 3, 2017), 
available at http://umwa.org/news-media/press/american-miners-
protection-act (addressing a prior loan proposal).
---------------------------------------------------------------------------
                               conclusion
    Some have asked why the Federal Government should step in at all to 
help these plans that cover just a subset of the broader American 
population. The fact is that the Federal Government made a promise to 
all participants in private-sector defined benefit plans with the 
creation of ERISA and the PBGC. Over 40 years of literature and 
pronouncements on pension benefits disseminated in the United States 
have included a disclaimer that, in the worst case scenario, the PBGC--
a Federal corporation--would guarantee a certain portion of an 
individual's benefits. As it stands, the PBGC will not be able to do 
that much longer.

    The consequences of the PBGC's failure will be extraordinary. At 
the very least, it is clear that failure will result in, among other 
things, participants receiving small fractions of their benefits, lost 
tax revenue, higher demands on Federal, State and local government 
safety nets, and a loss of confidence in our social institutions.

    The loan solution described above is not intended as a bailout in 
any sense, but would still allow the government to make good on its 
promise. At this point, there is also no other reasonable alternative 
that can save the most critically underfunded plans or our economy from 
the collateral effects of their failure.

    Thank you for the opportunity to testify before the committee and 
to submit this written supplement. UPS stands ready to continue to help 
find a solution to this important problem.

                                 ______
                                 
         Prepared Statement of Mary Moorkamp, Chief Legal and 
            External Affairs Officer, Schnuck Markets, Inc.
    Co-Chairman Hatch, Co-Chairman Brown, and members of the Joint 
Select Committee (``committee''), thank you for the opportunity to 
participate in today's hearing on ``Employer Perspectives on 
Multiemployer Pension Plans.'' I am Mary Moorkamp, chief legal and 
external affairs officer at Schnuck Markets, Inc., in St. Louis, MO. I 
am appearing today on behalf of Schnuck Markets and the Association of 
Food and Dairy Retailers, Wholesalers, and Manufacturers (``Food 
Association''). I also hope to provide a voice to the more than 5,400 
employers who contribute to multiemployer pension plans that are 
projected to be insolvent in 20 years or less.\1\
---------------------------------------------------------------------------
    \1\ NCCMP Multiemployer Pension Facts and the National Economic 
Impact, slide 3 (Jan. 5, 2018).

    My message today is simple. This committee must succeed in its 
mission to solve the funding crisis facing the multiemployer pension 
system. We understand and fully appreciate the enormous challenges 
facing this committee. But the consequences of failure are both real 
and significant--not only to retirees, but to employers, employees, and 
our local communities. To quote from the movie Apollo 13: ``Failure is 
not an option.''
                      i. what is schnuck markets?
    Schnuck Markets is a third-generation family-owned retail grocery 
chain. It was founded in Anna Donovan Schnuck's kitchen in 1939 as a 
way to feed her family and neighbors during the Depression. Back then, 
as today, she was seeking a way to nourish people's lives. From those 
humble beginnings, the company has grown to its current size of more 
than 13,000 teammates serving 100 grocery stores in five States: 
Missouri, Iowa, Indiana, Illinois and Wisconsin. More than 75 percent 
of our workforce is unionized. Our CEO is Todd Schnuck--a proud 
grandson of Anna Schnuck.

    The Schnuck Family believes deeply not only in providing a quality 
and competitive grocery experience, but also in giving back to the 
community--both near and far. Three illustrations highlight this 
commitment. First, we are proud to say that in each community in our 
five-State region, we partner with local food banks and pantries to 
ensure that the hungry in our communities are fed. In St. Louis alone, 
one out of every three meals served by Operation Food Search comes from 
Schnuck Markets. That is annually almost $12 million in food donations. 
Second, when Hurricane Harvey devastated the Texas Gulf Coast last 
year, in one day's time--and at one store alone--our teammates 
collected over $23,000 in cash donations, and we filled six tractor 
trailer loads with supplies, which Teamster drivers took to the Houston 
hurricane victims. Just to be clear, the closest Schnuck store to 
Houston, Texas is in Jefferson City, Missouri--over 750 miles away. 
Finally, we are proud to partner with Folds of Honor to provide 
scholarships to the children and spouses of fallen and wounded service 
members. To date--and the program has only been going since Memorial 
Day week--we are on pace to raise over $1 million by July 4th, which 
translates to over 200 scholarships. From 1939 to present day, our 
mission to nourish people's lives has been unwavering.
         ii. the history of schnuck markets and central states
A. Contribution History
    Schnuck Markets entered the Central States Teamsters Pension Fund 
(``Central States'') in 1958. The date is important, because it was 
many years before Congress enacted ERISA or the withdrawal liability 
rules. There was no ``last man standing'' concept or tax deduction 
limitation when we entered Central States. And there was no PBGC 
multiemployer fund. We did not ``make a bad deal.'' These rules were 
forced upon us after the fact. We simply wanted to provide our drivers, 
mechanics, and grocery warehousemen with a retirement benefit for the 
work they did for Schnuck Markets.

    Since 1958, we have made all of our required pension contributions. 
I want to emphasize this point, because this committee cannot get 
caught in the trap of trying to place blame for the crisis. Just like 
the participants who say--correctly so, I would add--that they are not 
to blame, nor are the contributing employers. Schnuck Markets has done 
everything we were supposed to do. No one is to blame, which is why 
everyone must share in the sacrifice to solve the crisis.

    In 1958, our weekly contribution rate was $3 per week. At the time, 
this contribution was about 3 percent of our Teamster teammates' total 
compensation package (salary, retirement, and health and welfare 
benefits). There was no such thing as ``withdrawal liability,'' and our 
liability was limited to funding our pension obligation for our 
teammates under our Collective Bargaining Agreement.

    Fast forward to our situation today. Our contribution rate to 
Central States for 2018 is $342 per week. This contribution rate 
amounts to between 19 percent and 21 percent of our Teamster teammates' 
total compensation package. This compares to a compensation percentage 
of around 4 percent to 6 percent for our non-Teamster teammates. (In 
our industry, it is typical for a retirement contribution percentage to 
be in a 4 to 6 percent range or less. Anything above that puts a 
company at a significant competitive disadvantage.)

    The $342 per week contribution level is 114 times the contribution 
rate in 1958. For some historical context, in 1958, a gallon of milk 
cost $1, a loaf of bread was 20 cents, and a gallon of gasoline was 25 
cents. What would our customers and your constituents say today if they 
were paying $114 for a gallon of milk, $22.80 for a loaf of bread, and 
$28.50 for a gallon of gas? That is what has happened to our 
contribution rate in a ``penny margin business.''
B. Unfunded Liabilities--the ``Last-Man Standing'' Rule
    A major reason our contribution rate has increased so much is 
because of the unfunded liability rules. In effect, each employer in a 
multiemployer plan is jointly and severally liable for a plan's 
unfunded liabilities. When an employer leaves a plan without paying its 
portion of the plan's unfunded liabilities (or if a plan suffers an 
investment loss following the employer's withdrawal), the 
responsibility for the unfunded liabilities not paid by the exiting 
employer shifts to the remaining employers. This is referred to as the 
``last-man standing'' rule. The shift in unfunded liabilities drives up 
our contribution rates, and employers such as Schnuck Markets are 
forced to fund the retirement of workers who never worked for us--and 
in fact may have worked for our competitors or, more likely, completely 
outside our industry and region in which we operate. What this also 
means is that prudent and responsible employers who followed all the 
rules are the ones left holding the proverbial ``bag.''

    This point is clearly illustrated by Central States. According to 
Central States, 59 percent of the retirees are orphans, meaning that 
their contributing employer is no longer paying into Central States. 
Moreover, 54 percent of our contribution dollars (or $185 of the $342 
we contribute) go to pay for the benefits of participants that never 
worked for Schnuck Markets.

    It is not as though our Teamster teammates will enjoy a retirement 
benefit commensurate with our contribution rate. Given Central States' 
projected insolvency in 2025, our teammates will be fortunate to 
receive the maximum PBGC guarantee of $429 per year of service (or 
$12,870 per year for a teammate with 30 years of service)--which is 
only about one-third of the benefit they otherwise would have received. 
And this is only if the PBGC multiemployer program remains in 
existence--which at this point is projected to be insolvent in 2025. 
When the PBGC program goes insolvent, Central States participants will 
receive next to nothing.

    It is for this reason that in 2017, out of concern that our 
Teamster teammates would have nothing at retirement--despite years of 
our pension contributions to Central States--we established a 401(k) 
plan on their behalf. The 401(k) is a 100-
percent company match up to 4 percent of the teammate's salary. This is 
in addition to the weekly contributions we continue to make to Central 
States. We see this as a way for our Teamster teammates to accumulate 
some type of retirement income, in addition to their own personal 
savings--as there will be little to nothing for them once Central 
States goes insolvent. This is our only bargaining unit that has a 
pension (albeit a potentially insolvent one) and a match feature to 
their 401(k). The Central States situation is unfair to our Teamster 
teammates and to all of our other teammates--and is untenable for 
Schnuck Markets in our highly competitive, penny-margin business.
C. Withdrawal Liability
    The unfunded liabilities not only affect our required contribution 
rate, but also create a staggering withdrawal liability.

    Congress enacted the withdrawal liability rules in 1980. (As a 
reminder, we had been in Central States for 22 years at this point.) 
The withdrawal liability rules require employers that terminate their 
participation in a plan to make payments that cover their share of any 
unfunded benefits. The payments are based on each employer's 
proportional share of a plan's underfunding.\2\
---------------------------------------------------------------------------
    \2\ By way of example, in general, if an employer's contributions 
to a plan comprise 10 percent of the plan's contributions, the 
employer's withdrawal liability is calculated as 10 percent of the 
plan's unfunded benefits.

    According to the latest estimate from Central States, our share of 
the plan's unfunded vested benefits at the end of 2016 was in excess of 
$281 million. We expect that this number is significantly higher today, 
as the amount has nearly doubled in the last 5 years. Bear in mind that 
out of our 13,000 Schnuck Markets teammates, only about 200 are covered 
by Central States. For some context, our total Teamster payroll last 
year was $16.8 million. Yet, the withdrawal liability attributable to 
these 200 Teamster teammates is estimated at $281 million (more than 16 
times last year's Teamster payroll). That averages to $1.4 million per 
Teamster teammate. While we expect to pay less than this amount (the 
liability is limited to 20 annual payments based on a formula that 
takes into account contribution base units and contribution rates 
during the 10 preceding years--referred to as the ``20-year payment 
cap''), we are in unchartered waters given the magnitude of a Central 
States insolvency. From a policy perspective, it makes no sense that an 
employer whose contributions have increased 114-fold and has made all 
of its required contributions could have a withdrawal liability that 
even approaches this amount.
             iii. immediate implications to schnuck markets
    The combination of burdensome contribution requirements, the 
withdrawal liability rules, and the projected insolvency of Central 
States, has created the proverbial ``albatross'' around Schnuck 
Markets' ``neck.'' And we are feeling the effects right now. This is 
not a ``year 2025 problem.'' The Central States crisis already has an 
impact on our current operations and strategic long-term planning 
decisions. Specifically:

        1.  A reluctance to grow our business. If we open a new store, 
        we have to hire a driver to service the store. Per our 
        Collective Bargaining Agreement, that Teamster driver has to 
        become a participant in Central States. This adds to our 
        Central States contribution base, which increases our 
        withdrawal liability. By our calculations, each new Central 
        States participant increases our withdrawal liability amount by 
        approximately $200,000--which is money they will never see at 
        retirement.

        2.  Recruiting problems. The Central States crisis has created 
        recruiting issues for Schnuck Markets. When we inform a 
        prospective Teamster driver that his or her pension will come 
        from Central States, they lose interest in the position. They 
        know what's going on and don't want to depend on a withering 
        fund for their retirement savings.

        3.  Distorting business decisions. Business decisions that 
        otherwise make complete business sense--such as repositioning 
        business assets in a particular market--cannot be made because 
        of the impact of the withdrawal liability rules.

        4.  Impact on our capital structure and cost of capital. The 
        April 18th submission by the NCCMP (at p. 27) notes how ``the 
        insolvency of Central States and the liabilities that would be 
        imputed to employers will be a topic for the accounting 
        profession, including the FASB. Withdrawal liability has been a 
        topic that many accountants have discussed with their employer 
        clients, and those discussions become more real when you 
        actually have a plan insolvency.'' Schnuck Markets has been 
        required to make additional disclosures on our financial 
        statements. And the financial accounting concerns could impact 
        our capital structure. We rely on private placement debt and 
        bank lines of credit to augment our cash flow. As Central 
        States positions itself for insolvency, our lenders are 
        becoming increasingly concerned about the impact of the 
        insolvency on our financial statements. When assessing a 
        company's financial strength, lenders and credit rating 
        agencies factor potential pension withdrawal liabilities into 
        their analysis, which affects our credit rating and our cost of 
        capital. PBGC Director Reeder, in his testimony before this 
        committee, indicated that ``the consensus of the PBGC is that 
        most plans facing insolvency in the near future will not 
        terminate,'' implying that Central States' insolvency will not 
        negatively impact employers. Setting aside that Director 
        Reeder's ``consensus'' assumes employers such as Schnuck 
        Markets will continue contributing over $17,700 per year to an 
        insolvent plan on behalf of an employee who may receive next to 
        nothing, the real story is that we do not know how our lenders 
        and auditors will react when Central States becomes insolvent. 
        But I am not willing to wager the future of Schnuck Markets 
        based on a PBGC ``consensus view.''

    In summary, Schnuck Markets is forced to continue making 
contributions to a plan that is projected to be insolvent within 7 
years, from which our teammates will be fortunate if they receive any 
significant portion of their anticipated benefits. Already, the pending 
Central States insolvency is limiting our ability to expand our 
business and attract new drivers. It is distorting our strategic 
business decisions and impacting our capital structure. This is 
happening right now, not in year 2025.
                    iv. scope of the looming crisis
    What I have described is the Schnuck Markets story. I know each of 
your districts and States have similar compelling employer stories. The 
recently released PBGC Projections Report states that there are about 
130 multiemployer plans that are projected to be insolvent in 20 years 
or less (``Critical and Declining Plans''); and data collected by the 
NCCMP states that about 5,400 employers contribute to these plans. I 
have to think that the future of many of these employers is very 
uncertain if the 130 pension plans go insolvent.

    In quantifying the insolvency impact of Central States and other 
similar plans, it is certainly reasonable to expect there will be a 
``contagion'' effect. Economists and actuaries will have differing 
views as to the magnitude and extent of the effect; I can only speak 
for Schnuck Markets and the Food Association. Schnuck Markets 
contributes to a total of eight multiemployer plans. In three of these 
plans, we account for at least 25 percent of the contribution base. 
More broadly, the Food Association compiled plan information from 15 of 
its companies. The 15 Food Association companies contribute to a total 
of 84 multiemployer plans. Of the 84 plans, 34 plans (40 percent) are 
currently ``Red Zone'' (critical) plans. If Central States goes 
insolvent, no one, including the PBGC, can say with any certainty how 
this will impact other Red Zone plans. I certainly can't. But it won't 
be positive. And even ``Green Zone'' plans are not immune from this 
phenomenon.

    The 2017 PBGC Projections Report begins its overview of the 
multiemployer program with the following statement: ``The current 
multiemployer system, covering approximately 10 million participants in 
about 1,400 plans, remains under severe stress.'' \3\ We agree. And the 
stress is bound to worsen with the insolvency of the Critical and 
Declining Plans.
---------------------------------------------------------------------------
    \3\ At pg. 7.
---------------------------------------------------------------------------
                         v. possible solutions
    A comprehensive reform of the multiemployer system--addressing the 
shortcomings of the current system--offers the greatest opportunity to 
ensure the retirement benefits of participants and the continued 
participation by employers. But this committee has less than 6 months 
to solve the myriad of complicated issues in the multiemployer system. 
In the meantime, plans such as Central States and the Mine Workers 
continue their downward spiral toward insolvency, retirees are reacting 
to fears of losing their retirement benefits, and contributing 
employers are preparing to take desperate measures in an effort to 
stave off what we consider an existential threat to our businesses.

    The Food Association believes that the solution to the 
multiemployer funding crisis will require multiple phases. The 
fundamental rules governing multiemployer plans date back nearly 40 
years and have not kept pace with the new economy, changing 
demographics, and today's mobile workforce. The system needs to be 
overhauled.

    While a new multiemployer system is needed, this committee must 
focus first and foremost on adopting measures to ``stabilize the 
patient'' before undertaking reforms to ``cure the patient.'' The 
committee must address the funding problems of those plans that are 
heading toward insolvency. The retirees, participants and employers in 
these plans face daunting and uncertain futures. These plans have the 
fewest options and the least amount of time to plan for contingencies.

    Immediate action is needed to stave off the funding crisis, and any 
realistic solution must necessarily involve some Federal loan 
structure, coupled with contributions and sacrifices by all other 
stakeholders. Only after this financial crisis is addressed should the 
committee address the systemic problems with the current system.

    As noted by members of this committee, the Critical and Declining 
Plans face a math problem that can only be solved with more assets, 
fewer liabilities, or some combination thereof. On the asset side, the 
contribution rates to plans such as Central States are already 
straining the resources of employers such as Schnuck Markets. As to 
investment returns, Central States would have to earn in excess of 14 
percent per year (every year) to avoid insolvency. No realistic, 
sustainable level of increased employer contributions, investment 
returns, and benefit reductions can solve the funding woes of a plan 
such as Central States. The math simply doesn't work.

    The unavoidable reality is that solving this problem will require 
some form of a long-term, low-interest rate Federal loan. To reduce the 
cost associated with a loan program, it must be accompanied by 
equitable and compassionate reductions in participant benefits and 
increased employer costs (e.g., increased PBGC premiums). The cost of a 
loan program has to be spread among all stakeholders in a fair and 
equitable manner, as none of the stakeholders are to blame. The 
retirees provided years of service in the workforce and did what was 
asked of them. The contributing employers made the contributions 
required by their collective bargaining agreements and the funds' 
rehabilitation plans. Taxpayers had no involvement in these 
arrangements. It is precisely because no one is to blame that all 
stakeholders must share in the financial responsibility in an equitable 
and compassionate manner.

    At the same time, the loan program must be structured in such a 
way, and include the necessary safeguards, as the committee deems 
necessary to ensure that the loan is repaid.

    For those who question the Federal government's participation in 
the loan program, the government has a role inasmuch as the current 
situation is partly the result of well-intentioned, but misguided 
Federal policies. For example, from 1986 until the Pension Protection 
Act of 2006, the Federal tax law deduction limitations to multiemployer 
plans essentially prevented plans from establishing a financial 
``cushion.'' Because these contributions were required, plans that 
realized significant investment gains in the 1990s were forced to 
increase benefits in order to avoid triggering an excise tax on 
contributing employers. There was no mechanism to claw back the added 
benefits in subsequent years following a market downturn. The tax law 
never contemplated the consequences of these limitations on plans that 
suffered significant declines. Moreover, the withdrawal liability rules 
have discouraged new employers from entering these plans and have 
motivated companies to leave the plans early without paying their full 
withdrawal liability.

    While we are not endorsing any specific loan program, we urge the 
Joint Select Committee to develop a program that (i) allows Critical 
and Declining Status plans to recover, (ii) can be implemented quickly, 
(iii) ensures the continued viability of the employers that contribute 
to these plans, (iv) shares the cost and sacrifice among all 
stakeholders in a fair and equitable manner, and (v) includes adequate 
safeguards to ensure their repayment.

    Time is of the essence, I cannot stress that enough. November 30th 
is less than 6 months from now, and designing and implementing a sound, 
workable, and affordable loan program will take time.

    The Joint Select Committee faces some very difficult challenges. 
Developing a solution won't be easy, the process won't be pretty, and 
if structured fairly, all of the stakeholders will dislike parts of it. 
But keep in mind that failure is not an option.

    Schnuck Markets and the Food Association stand ready to work with 
you and do whatever we can to assist the committee. Thank you again for 
the opportunity to share our views with the committee.

                                 ______
                                 
                  Submitted by Hon. Richard E. Neal, 
                a U.S. Representative From Massachusetts

              Multiemployer Pension Reform Principles 2018

        In 2015, the multiemployer system provided $2.2 trillion in 
        economic activity to the U.S. economy, generated $158 billion 
        in Federal taxes, $82 billion in State and local taxes, 
        supported 13.6 million American jobs, and contributed more than 
        $1 trillion to U.S. GDP. This includes $41 billion in pension 
        payments and $203 billion in wages to active employees.

Why a Solution Is Necessary. Over 1 million retirees in multiemployer 
plans are in danger of losing benefits because the plans that pay them 
will go insolvent. In addition, the Federal agency that acts as a 
backstop--the Pension Benefit Guaranty Corporation--is also in danger 
of insolvency. Without a resolution to this crisis, there will be 
billions lost in retirement benefits.

The Multiemployer Pension Reform Act of 2014 (``MPRA'') provided 
pension plan trustees with a powerful solvency restoration tool that 
enabled them to ensure solvency of the plan. This was specifically 
designed to protect retirees from the even larger benefit reductions 
that they will see when their plans go insolvent and subject to the 
Pension Benefit Guaranty Corporation (``PBGC'') guarantee. Treasury was 
provided approval authority over MPRA applications. Unfortunately, 
Treasury rejected the largest, most systemically important plan, 
Central States Teamsters Pension Fund (``Central States''). The 
insolvency of Central States threatens not only the employers in the 
fund, but the PBGC and the entire multiemployer system itself.

Rescue Legislation Is Urgently Needed. Some multiemployer plans are in 
imminent financial danger. Legislation to save them must be passed as 
soon as possible. While these are difficult issues and we encourage 
thorough consideration of the legislation, it is critical to have a 
program that restores the solvency of critical and declining status 
plans while protecting the U.S. economy as soon as possible.

Financial Assistance Through Loans Is a Necessary Part of Multiemployer 
Reform. The financial and demographic circumstances of certain plans 
will not allow them to survive without cash infusions. The loan program 
should optimize solvency of the plan and provide the taxpayer with 
confidence that the Federal loan will be repaid.

All Parties Should Contribute to the Resolution. It is unfair for only 
one party to bear the brunt of the reform efforts. Employer 
contributions and PBGC premiums have increased exponentially, while 
workers have suffered reductions in accrual rates and the loss of 
ancillary benefits, all in a proactive attempt to address the financial 
distress of many plans. We encourage Congress to consider options that 
put ``skin in the game for all.'' This may be in the form of benefit 
modifications or other provisions. At the same time, these options 
should provide flexibility for plans.

PBGC Premium Increases Should Be Evaluated After the Solvency 
Restoration Tools Are Implemented. We understand that the proper 
funding of the PBGC is important to the viability of the multiemployer 
system and to ensuring that the PBGC can meet its statutory 
obligations. However, this cannot be the only--or even the primary--
solution to this crisis. Premiums should be raised only as part of a 
comprehensive reform plan. The PBGC's net deficit in its multiemployer 
program is currently $65 billion. An effective implementation of MPRA 
and the loan proposal are tools that would restore the solvency of 
plans that comprise the PBGC's net deficit. These tools need to be 
allowed to work in order to understand what exactly the unresolvable 
net deficit at the PBGC is, which should serve as the basis for any 
future premium increases inclusive of those that are already in current 
law.

Composite Plan Legislation Is Necessary to Ensure Continued Viability 
of Certain Plans. While the crisis focuses on plans in the critical and 
declining stages, there are healthy plans that also need tools to 
remain viable. Composite plans are a voluntary tool to help those 
plans.

For background information on the multiemployer system, please refer to 
the following references: ``The Multiemployer Pension Plan Crisis: The 
History, Legislation, and What's Next?''; ``Multiemployer Pension Facts 
and the National Economic Impact.''

FOR ADDITIONAL INFORMATION, PLEASE CONTACT:

Aliya Wong                          Michael D. Scott
Executive Director, Retirement 
Policy                              Executive Director
U.S. Chamber of Commerce            National Coordinating Committee for 
                                    Multiemployer Plans
[email protected]                 [email protected]

                                 ______
                                 
   Submitted by Hon. Bobby Scott, a U.S. Representative From Virginia

                     Congress of the United States

                          Washington, DC 20515

                              May 31, 2018

The Honorable Orrin Hatch           The Honorable Sherrod Brown
Co-Chairman                         Co-Chairman
Joint Select Committee on 
Multiemployer Pension Solvency      Joint Select Committee on 
                                    Multiemployer Pension Solvency
104 Hart Senate Office Building     713 Hart Senate Office Building
Washington, DC 20510                Washington, DC 20510

Dear Co-Chairmen Hatch and Brown,

Thank you for your leadership of the Joint Select Committee on 
Multiemployer Pension Solvency. We are encouraged by the progress that 
has already been made to advance this issue and we remain committed to 
helping the Committee work toward a solution that will provide solvency 
and fairness to the millions of beneficiaries and thousands of 
employers impacted by underfunded plans.

As you know, those most affected are in need of a solution soon. 
According to recent estimates, of the approximately 1,400 multiemployer 
pension plans covered by the Pension Benefit Guaranty Corporation 
(PBGC), 114 of them are categorized as severely underfunded and face 
significant budget shortfalls. These 114 plans cover approximately 1.3 
million Americans and are expected to go insolvent within the next 5 to 
20 years without congressional intervention.Some plans have already had 
to take the step of sharp benefit cuts to maintain plan solvency.

The declining fiscal condition of these benefit plans creates 
tremendous uncertainty for plan participants and also threatens the 
solvency of the PBGC. Systemwide, over 10 million Americans nationwide 
participate in plans covered by the PBGC. An unfortunate domino effect 
might be triggered should these plans become insolvent, which could 
lead to devastating consequences for beneficiaries and the overall 
economy.

Thank you for your commitment to a legislative solution that will 
provide fairness to the millions of Americans participating in these 
plans. Congress must demonstrate leadership and resolve on this issue--
the American people are counting on us.

Sincerely,

Rep. Paul Tonko                     Rep. Bill Johnson
Member of Congress                  Member of Congress

Rep. Peter King                     Rep. Jacky Rosen
Member of Congress                  Member of Congress

Rep. Jim Banks                      Rep. Lisa Blunt Rochester
Member of Congress                  Member of Congress

Rep. David A. Joyce                 Rep. Glenn Grothman
Member of Congress                  Member of Congress

Rep. Bradley S. Schneider           Rep. Jeff Fortenberry
Member of Congress                  Member of Congress

Rep. Daniel M. Donovan Jr.          Rep. Rodney Davis
Member of Congress                  Member of Congress

Rep. Lucille Roybal-Allard          Rep. Bobby L. Rush
Member of Congress                  Member of Congress

Rep. Adam Kinzinger                 Rep. Betty McCollum
Member of Congress                  Member of Congress

Rep. Daniel W. Lipinski             Rep. William Keating
Member of Congress                  Member of Congress

Rep. Michael R. Turner              Rep. Bob Gibbs
Member of Congress                  Member of Congress

Rep. Robert E. Latta                Rep. Mike Quigley
Member of Congress                  Member of Congress

Rep. John Katko                     Rep. Susan W. Brooks
Member of Congress                  Member of Congress

                                 ______
                                 
         Prepared Statement of Aliya Wong, Executive Director 
             of Retirement Policy, U.S. Chamber of Commerce
    The U.S. Chamber of Commerce would like to thank the Co-Chairs, 
Senators Hatch and Brown, and all members of the Joint Select Committee 
on Multiemployer Plans for the opportunity to participate in today's 
hearing on ``Employer Perspectives on Multiemployer Pension Plans.'' I 
am Aliya Wong, executive director of retirement policy for the U.S. 
Chamber of Commerce. The Chamber is the world's largest business 
federation, representing more than 3 million businesses and 
organizations of every size, sector, and region. More than 96 percent 
of the Chamber members are small businesses with fewer than 100 
employees. With members that include sponsors of multiemployer pension 
plans, the U.S. Chamber has been concerned about the multiemployer 
system for several decades and worked with Congress on the Pension 
Protection Act of 2006, the Preservation of Access to Care for Medicare 
Beneficiaries and Pension Relief Act of 2010, and, most recently, the 
Multiemployer Pension Reform Act of 2014. Despite the intentions of 
these pieces of legislation, the multiemployer pension system remains 
in crisis, and indeed, the crisis is growing worse.
                               background
    At the end of 2017, the Chamber issued a report entitled, ``The 
Multiemployer Pension Plan Crisis: The History, Legislation, and What's 
Next?'', which provides an overview of the current multiemployer 
crisis, an in-depth analysis of the events leading up to it, attempts 
to fix it, and the current reform proposals to address the crisis.

    Although many multiemployer plans were fully funded in the 1980s 
and 1990s, this period of financial stability came to an end in 2000 
when the price of technology stocks fell drastically. Many 
multiemployer plans had ridden the wave of dot-com companies to achieve 
record high asset levels, but when the market crashed, investment 
returns fell precipitously. Multiemployer plans were hit twice as hard 
as other investors because of declines in the contribution base due to 
demographic issues. Less than a decade later, the 2008 global recession 
led to further dramatic declines in funding levels. For those plans 
that had not sufficiently recovered from the bursting of the dot-com 
bubble, the 2008 recession proved catastrophic. National and global 
events exacerbated the financial troubles of multiemployer plans that 
already faced significant demographic and financial pressures.

    Shrinking industries and declining union participation further 
eroded the contribution base of many plans. Between 1983 and 2016, the 
number of unionized workers dropped by almost half. Moreover, there has 
been increased competition facing contributing employers and their 
employees. Due to competition and fewer unionized workers, untenable 
ratios of inactive-to-active participants were created. Many plans now 
see ratios of one active worker for every two, three, or even five 
retirees. As expected, industries with high inactive-to-active retiree 
ratios experience the lowest average funding levels.

    Due to all of these factors, certain plans will enter a ``death 
spiral'' where there is no realistic chance of recovery. And although 
the introduction of withdrawal liability was supposed to prevent 
withdrawing employers from shifting pension obligations to remaining 
employers, a major problem now is that many employers lack the 
financial means to satisfy that liability.

    While it is important to understand the context leading to the 
current crisis, the Chamber does not believe that continuing to dwell 
on the causes of the crisis are helpful. Contributing employers are 
currently facing enormous burdens--and these burdens will only 
increase.
                   the threat to businesses and jobs
    This week, the Chamber is issuing a report entitled, ``The 
Multiemployer Pension Plan Crisis: Businesses and Jobs at Risk.'' This 
report underscores the risk to contributing employers and the economy 
if a resolution to this crisis is not found.

Withdrawal Liability and High Contribution Rates Are a Current Threat 
to Business.
    There is understandable focus on plan insolvencies but even without 
plans reaching insolvency, there is cause for concern. There are 
several issues that employers are currently facing that are impacting 
their ability to remain viable. As multiemployer plan liabilities have 
expanded, employers are experiencing an ever-increasing threat of 
withdrawal liability and continual hikes in contribution rates.

    Fear of Future Withdrawal Liability Assessment Jeopardizes Current 
Business Opportunities. Withdrawal liability is not ``booked'' until 
there is a termination (or partial termination) of the plan. However, 
as the depth of the multiemployer pension crisis is increasing, 
employers are finding that ordinary business activities are being 
impacted by the potential for withdrawal liability. Employers are 
starting to see banks and lenders question their creditworthiness, 
leading to less optimal lending rates, or even denial of credit. 
Employers have lost the opportunity to expand their business operations 
through mergers because other companies do not want to be associated 
with the potential withdrawal liability. Furthermore, small, family 
businesses are deciding not to pass the business down to heirs for fear 
of leaving them to pay a future withdrawal liability. Instead of 
continuing these family businesses, owners are shutting down the 
businesses and selling the assets--which is a preferable outcome to 
paying a withdrawal liability that could bankrupt the business. All of 
these events result in lost business opportunities and fewer jobs.

    Employers Are Already Impacted by Partial Withdrawal Liability 
Assessments. Due to the declining number of union workers, there are 
businesses that may have only one or two employees left in a business 
unit. If those employees decide to leave or retire, the employer is 
assessed with a partial withdrawal liability estimate. Because of the 
unfunded liabilities, the partial withdrawal liability can be several 
times the amount of the employee's actual benefit. Such liabilities 
clearly constrain the ability of an employer to efficiently run a 
business and immediately impact a business's cash flow.

    High Contribution Rates Make it Difficult to Retain Employees and 
Remain Competitive. As unfunded liabilities have increased, the 
contributions made by remaining employers have increased. There are 
some employers paying $15.00 per hour (or more) to plans for every hour 
an employee works. Because of these unfunded liabilities, employees 
understand that they are never going to receive a benefit that is 
commensurate with the contribution rate the employer is paying. This 
provides a disincentive for the employee to stay with the employer, and 
this retention problem threatens an employer's competitiveness.

Plan Insolvency Will Devastate Contributing Employers.
    Contributing employers face a very uncertain future. Whether 
insolvent plans officially terminate or not, the consequences for 
contributing employers can be dire.

    Ongoing Contribution to Insolvent Plans Is Not Viable for Business. 
In testimony before the Joint Select Committee, the Director of the 
PBGC stated that it was the opinion of the PBGC that plans would not 
terminate, but would instead continue indefinitely with employers 
making ongoing contributions. However, even if this scenario is 
plausible, there are still significant concerns for employers.

    The contribution rates that many employers are currently paying 
into multiemployer plans are exorbitantly high because the contribution 
rates for the last several years have been imposed by the plan's 
trustees via rehabilitation plans. While most employers would rather 
absorb the higher contribution rates than incur withdrawal liability in 
the near-term, the long-term effect of the high rates is that they make 
the employer less competitive. For example, higher pension costs are 
ultimately passed on to customers, who might look elsewhere to do 
business. In addition, high contribution rates paid into an insolvent 
plan exacerbates the inability to retain employees. As discussed above, 
active employees already are concerned about future benefit accruals. 
Once a plan is insolvent, the maximum benefit the worker can receive is 
the PBGC guaranteed benefit so employees will receive even less 
compared to what is being paid on their behalf, so there is no 
incentive for the employee to stay with the employer.

    Furthermore, while continuing to pay contributions into an 
insolvent plan may save an employer from short-term economic disaster, 
it is doubtful that employers can endure such high pension contribution 
rates over the long-term. It is likely that plan insolvency could lead 
to employers going out of business, filing for bankruptcy, or both.

    Plan Termination Can Lead to Unplanned Withdrawal Liability 
Assessments. There is a very real concern for employers that plans will 
terminate. When that happens, employers will face withdrawal liability 
assessments, minimum funding requirements, and possible excise taxes.

    While continuing to contribute to an insolvent plan will generally 
allow an employer to avoid the imposition of withdrawal liability, 
there are scenarios where withdrawal liability can be imposed despite 
the employer's intention to remain a contributing employer to the plan. 
The issue is problematic for employers because in many cases they have 
no control over the withdrawal.

    One such instance could occur if an employer tries to negotiate 
lower contribution rates--to avoid bankruptcy or to shift cash to 
active employees. Attempting to negotiate lower contribution rates 
could lead to unplanned withdrawal liability assessments if either the 
plan trustees or the PBGC object to the decreased contribution rate. If 
the trustees reject the lower contribution rate, the employer must 
either continue contributing at the higher rehabilitation plan rate or 
risk the plan's trustees rejecting the employer's continued 
participation in the plan, which will lead to full withdrawal 
liability. As a secured party in all assets of an insolvent plan, the 
PBGC could take the position that a reduction in the contribution rate 
constitutes a diminution in the collateral in which it is secured. 
Additionally, PBGC has the authority under the insolvency provisions of 
ERISA to provide financial assistance under conditions the PBGC 
determines are ``equitable and are appropriate to prevent unreasonable 
loss to'' the [PBGC] with respect to the Plan.\1\ While the PBGC has 
not yet opined on a post-insolvency employer contribution rate 
decrease, the statutory language gives the PBGC the authority to do so.
---------------------------------------------------------------------------
    \1\ ERISA section 4261(b)(1).

    Even if an employer makes the decision to withdraw, it could see an 
unexpected spike in withdrawal liability if there is a mass withdrawal. 
A ``mass withdrawal'' occurs upon withdrawal of every employer from the 
plan, the cessation of the obligation of all employers to contribute to 
the plan,\2\ or the withdrawal of substantially all employers pursuant 
to an agreement or arrangement to withdraw from the plan.\3\ If 
substantially all employers withdraw during a period of three 
consecutive years, the employers are assumed to have withdrawn due to 
an agreement or arrangement.\4\ This means that an employer that 
intentionally withdraws from a plan and intends to pay its calculated 
withdrawal liability could become part of a mass withdrawal if 
substantially all of the other employers that contribute to the plan 
withdraw within the 3-year period after the employer withdraws. The 
employer that intends to withdraw has no control over what the other 
employers do.
---------------------------------------------------------------------------
    \2\ ERISA section 4041A(a)(1)(2).
    \3\ 29 CFR Sec. 4001.2.
    \4\ The presumption can be rebutted by the employer.

    The danger of being part of a mass withdrawal is that it can 
require an employer to pay much more in withdrawal liability than it 
would under a standard withdrawal. Certain employers are subject to 
reallocation liability. Reallocation liability means that plan's full 
costs of all unfunded vested benefits are allocated among all 
withdrawing employers. In a mass withdrawal, the withdrawal liability 
is calculated using PBGC interest rates that are often lower than the 
rates used by the plan in a standard withdrawal. Reallocation liability 
can significantly increase the amount of the plan's unfunded liability 
that is allocated to an employer. In addition, the 20-year cap 
applicable in a standard withdrawal does not apply to mass withdrawal 
liability. This results in some employers having to pay withdrawal 
liability for a period longer than 20 years. This unexpected and 
expanded withdrawal liability could cause a business to end up in 
---------------------------------------------------------------------------
bankruptcy.

    Uncertainty Concerning Minimum Funding Considerations Is a 
Significant Risk for Contributing Employers. Multiemployer plans are 
generally subject to minimum funding standards; however, the Pension 
Protection Act of 2006 (``PPA'') allowed necessary changes to these 
general funding rules for multiemployer plans in critical status.\5\ 
Trustees of plans in critical status are required to adopt a 
rehabilitation plan that is expected to put the plan on track for 
making scheduled progress toward emerging from critical status. One of 
the advantages of a plan's critical status designation is that if the 
trustees adopt and comply with the terms of a rehabilitation plan, then 
the plan is not required to satisfy the minimum funding rules.
---------------------------------------------------------------------------
    \5\ A plan is in critical status if the plan: (1) is less than 65-
percent funded and will either have a minimum funding deficiency in 5 
years or be insolvent in 7 years; or (2) will have a funding deficiency 
in 4 years; or (3) will be insolvent within 5 years; or (4) liabilities 
for inactive participants is greater than the liability for active 
participants, and contributions are less than the plan's normal cost, 
and there is an expected funding deficiency in 5 years.

    Thus far, plans that have become insolvent have not been 
terminated, and, because employers continue to contribute to the plan 
in accordance with the rehabilitation plan, the minimum funding rules 
do not appear to automatically apply just because a plan becomes 
insolvent. However, there are situations where it appears a 
contributing employer to an insolvent plan could be required to make up 
a plan's minimum funding deficiency and/or be assessed an excise tax. 
Although this has not happened yet, the risk of it happening increases 
---------------------------------------------------------------------------
as the insolvency date of the PBGC gets closer.

    One scenario that poses a risk to employers as plans and the PBGC 
go insolvent is the requirement that a plan's rehabilitation plan must 
satisfy certain code provisions. If a multiemployer plan fails to make 
scheduled progress under the rehabilitation plan for three consecutive 
plan years or fails to meet the requirements applicable to plans in 
critical status by the end of the rehabilitation period, for excise tax 
purposes, the plan is treated as having a funding deficiency equal to 
(1) the amount of the contributions necessary to leave critical status 
or make scheduled progress or (2) the plan's actual funding deficiency, 
if any.\6\
---------------------------------------------------------------------------
    \6\ Plans may apply for a waiver if the failure is due to 
reasonable cause and not willful neglect.

    It is possible that the IRS could take a more aggressive approach 
in assessing excise taxes when the PBGC can no longer provide a 
backstop for insolvent plans. Such an outcome would be troubling 
because employers have no control over whether the rehabilitation plan 
satisfies the requirements of the Code, nor do they have any control 
over the actuarial certification. This means that an employer that 
continues to make contributions in accordance with its rehabilitation 
plan post-insolvency can still be required to make up a funding 
deficiency and pay an assessed excise tax. Because the funding 
deficiencies of most insolvent plans would be expected to be large, 
---------------------------------------------------------------------------
this would effectively put the employer out of business.

    Another complication for employers is the broad authority the PBGC 
wields over an insolvent plan. As noted previously, the PBGC has the 
authority under the insolvency provisions of ERISA to provide financial 
assistance under conditions the PBGC determines are ``equitable and are 
appropriate to prevent unreasonable loss to'' the [PBGC] with respect 
to the plan. Accordingly, if the PBGC determines that the continued 
operation of the plan somehow poses a financial risk to itself, the 
PBGC may impose as a condition of providing financial assistance that 
the plan be terminated. While ERISA states that minimum funding does 
not apply to a plan that terminates by mass withdrawal, there is no 
such provision relating to termination by plan amendment. Though the 
PBGC has opined that insolvent plans will continue to operate, there 
does appear to be at least a statutory mechanism through which a plan 
can be terminated without consent of the employer or even the trustees. 
If such a scenario were to arise, many employers would be forced out of 
business.

    The Contagion Effect Is a Serious Threat Due to the Number of 
Employers That Contribute to Numerous Plans. Many employers contribute 
to more than one multiemployer plan. There is a valid concern that the 
failure of a multiemployer plan (particularly a large plan) could cause 
other plans to go insolvent. For example, if employers were assessed 
withdrawal liability, a minimum funding deficiency and/or an excise 
tax, it could cause the employer to go out of business. If such an 
employer contributes to one or more other plans, then it would likely 
be unable to continue contributing to the other plans. If the employer 
is the major contributing employer to these plans, all the plans to 
which the employer contributes would be in jeopardy. While to date no 
extremely large plan has gone insolvent, there are several that are 
projected to go insolvent within the next 5 to 10 years.

    Additionally, many Critical and Declining Status plans are 
dependent on a very small number of employers to provide a 
disproportionate share of the contributions being made to the plans. 
For example, in the UMW 1974 Pension Plan, currently there are 10 
contributing employers with approximately 97 percent of the 
contributions derived from two controlled groups of signatory 
companies. For the New York State Teamsters Conference Pension and 
Retirement Fund, there are 156 contributing employers with 
approximately 83 percent of the contributions derived from two 
companies. For the Local 707 Teamster Pension Fund, there are 8 
remaining contributing entities with 84 percent of the contributions 
coming from 2 companies. For the Tri-State Pension Plan, there are 9 
contributing employers with one controlled group entity accounting for 
95 percent of the contributions.

    Taken together, these factors pose a dual risk. If a large, 
``systemically important,'' plan was to become insolvent, it has the 
potential to adversely impact the contributing employers and their 
participation in other plans. Conversely, if one of the large employers 
were to exit one of the above mentioned plans, it would significantly 
and negatively impact the plan, the remaining contributing employers, 
and ultimately the beneficiaries.
                          resolving the crisis
    We admit that there are no easy solutions and that finding a 
comprehensive solution will be difficult. The Chamber worked with the 
National Coordinating Committee on Multiemployer Plans to issue joint 
principles to provide direction in reaching a solution. We have shared 
these principles with the committee to aid in your work and reiterate 
them here.

          First, all members of the committee must recognize that 
        rescue legislation is urgently needed. Congress can no longer 
        kick the can down the road.

          Second, struggling plans will need financial assistance. Our 
        recommendation is for long-term, low-interest loans that will 
        protect taxpayers from financial liability.

          Third, all parties will have to be part of the solution, 
        including plan beneficiaries and participating employers.

          Fourth, while the PBGC may ultimately need more money, in 
        the form of increased premiums paid by employers, these 
        increases must be evaluated after tools to restore the solvency 
        of these plans are put in place.

          Finally, composite plans must be authorized so that healthy 
        multi-employer plans can stay that way. Composite plans are a 
        hybrid between traditional pension plans and individual 
        accounts plans that can bridge the gap between current existing 
        options.

    We realize these principles are a start, and we look forward to 
working with the committee and the administration on finding specific 
and comprehensive solutions.
                               conclusion
    These are difficult issues. The answers will not be easy. However, 
the problem is not going away, and only grows worse with inaction. Put 
simply, something that cannot go on forever, will not. And if we do not 
find a comprehensive solution, there will be a devastating impact on 
the entire multiemployer system when the day of reckoning arrives.

    The Chamber is here to represent the employer voice. At the same 
time, we are keenly aware that all parties are inextricably connected 
in this scenario. Within the multiemployer system, businesses are 
already being impacted by high contributions and potential withdrawal 
liability; active workers are seeing fewer and fewer benefit accruals; 
and some retirees are already experiencing reduced benefits. As the 
crisis grows, the impact will be felt beyond the multiemployer system 
through a significant drag on the economy, decreased tax revenues, and 
possible increased reliance on social programs. A definitive solution 
is needed to address a looming crisis that will affect us all.

                                 ______
                                 

                The Multiemployer Pension Plan Crisis: 
               The History, Legislation, and What's Next?

                        U.S. Chamber of Commerce

                             December 2017

                           EXECUTIVE SUMMARY

There is a looming pension crisis in the U.S. that unless addressed 
quickly by the federal government could jeopardize the retirement 
security of hundreds of thousands--if not millions--of Americans. 
Multiemployer pension plans provide pension benefits to over 10 million 
Americans in industries as diverse as construction, mining, trucking, 
and retail and a significant number of these plans find themselves in 
seriously distressed financial condition. If these funds become 
insolvent--and the timeframe for that insolvency ranges from 2 to 8 
years--the results could be devastating for retirees, for current 
employees, for the companies that contribute to the plans, and for the 
communities in which companies and beneficiaries reside.

The financial crisis is not limited to one region or industry. It 
potentially will affect companies, workers, retirees, and communities 
throughout the U. S. and would include states as diverse as Ohio, 
Texas, New York, Wisconsin, Kentucky, West Virginia, Kansas, and North 
Carolina.

The narrative is bleak. A recent report found that 114 multiemployer 
defined benefit plans (out of approximately 1,400 nationally), covering 
1.3 million workers, are underfunded by $36.4 billion. Without a 
solution, most of these plans will be bankrupt within the next 5 to 20 
years. Moreover, the federal agency that backstops pension benefits--
the Pension Benefit Guaranty Corporation (PBGC)--is itself in financial 
distress. It is projected that the PBGC could be insolvent in a mere 
five years and, if that occurs, the retirement security of 
multiemployer plan beneficiaries could be wiped out entirely. Action is 
needed now to avert this pending crisis.

This report chronicles how the multiemployer pension plan system 
arrived at this point. It provides a history of the multiemployer plan 
system, the demographic issues that have plagued it, and attempts to 
fix it. Additionally, the report identifies several initiatives to 
resolve the crisis. Ultimately, however, the report presents a strong 
case for why Congress and the Administration need to act now.

Although many multiemployer plans were fully funded in the 1980s and 
1990s, this euphoria came to an end in 2000, when the price of 
technology stocks fell drastically. Many multiemployer plans had ridden 
the wave of these dot-com companies to historic highs in asset levels, 
but when the market crashed and investment returns were disastrous, 
plans were hit twice as hard because of their declining contribution 
bases. Moreover, the 2008 global recession led funding levels in most 
plans to plummet. For those plans that had not sufficiently recovered 
from the bursting of the dot-com bubble, 2008 proved catastrophic.

National and global financial events exacerbated the financial troubles 
of multiemployer plans that already faced significant demographic and 
financial pressures. Shrinking industries and declining union 
participation eroded the contribution base of many plans. Between 1983 
and 2016, the number of unionized workers dropped by almost half. 
Moreover, there has been increased competition facing contributing 
employers and their employees. Due to competition and fewer unionized 
workers, untenable ratios of inactive-to-active participants were 
created. Many plans now see ratios of one active worker for every two, 
three, or even five retirees. As expected, industries with high 
inactive-to-active retiree ratios experience the lowest average funding 
levels. Due to all of these factors, certain plans will enter a ``death 
spiral'' where there is no realistic chance of recovery.

There have been several attempts to address the multiemployer pension 
funding problem. In 1980, Congress passed the Multiemployer Pension 
Plan Amendments Act (MPPAA), which was designed to discourage employers 
from leaving financially troubled multiemployer plans by implementing a 
withdrawal liability. Although the introduction of withdrawal liability 
was supposed to prevent withdrawing employers from shifting pension 
obligations to remaining employers, the biggest problem is that many 
withdrawing employers do not have the financial means to satisfy their 
withdrawal liability.

In 2006, Congress passed the Pension Protection Act (PPA). The purpose 
of the PPA is to give plan trustees more flexibility in dealing with 
funding while at the same time forcing them to identify and correct 
existing and potential funding issues in time to prevent further 
funding level deterioration and stabilize the plans' finances. While 
PPA did provide additional tools, it was not enough for those 
underfunded plans with a declining active population base and severe 
negative cash-flow problems.

Recognizing that some plans could not avoid insolvency without drastic 
changes in the law, Congress passed the Multiemployer Pension Reform 
Act (MPRA) in 2014. MPRA created three new tools to help plans stave 
off insolvency: plan mergers, plan partitioning, and benefit 
suspensions. Most notably, for the first time under the Employee 
Retirement Income Security Act of 1974 (ERISA), Congress allowed plans 
that were in severe financial distress to reduce benefits that had 
already accrued, including benefits that were in pay status.

In addition, plan trustees have also implemented strategies to solve 
plans' funding issues. These strategies include; reductions to future 
benefit accruals, increased employer contributions, new funding 
policies, and a ``two-pool withdrawal liability method.''

While the legislation has provided benefit to some plans and some of 
these strategies have been helpful, the funding issues for the most 
underfunded plans remain. If these plans fail, the impact will affect 
individuals, businesses, the retirement system and entire communities. 
If the largest underfunded plans become insolvent, they will bankrupt 
the PBGC. The subsequent benefit cuts that follow will also have deep 
impacts on the communities where participants live. Retirees will see 
their standard of living reduced. In addition, the insolvencies could 
bankrupt employers, potentially leaving workers without income.

Reduced spending by workers and retirees will be felt by businesses, 
and less money will be paid to local government in sales and other 
taxes. While tax revenue decreases, the demand for social programs will 
increase, because many retirees and workers could lose their homes and/
or have difficulty paying for medical costs. This will cause many to 
become reliant on social programs that have to be funded by taxpayers 
at a time when tax revenue will decline.

Consequently, new ideas and proposals are being discussed. Some are 
purely legislative proposals, whereas others deal with new pension plan 
designs. Solutions will not be easy, but they are necessary to address 
the looming crisis that will affect us all.

                   OVERVIEW OF CURRENT MULTIEMPLOYER

                      PENSION PLAN FUNDING PROBLEM

Since the beginning of the last decade, many multiemployer defined 
benefit pension plans have seen their funding level erode to the point 
that their ability to pay pension benefits into the future is severely 
threatened. While the majority of multiemployer plans are sufficiently 
funded, several distressed plans are facing insolvency within the next 
5 to 15 years. Some of the most underfunded plans cover hundreds of 
thousands of participants. If they fail, the economic impact will be 
disastrous for the U.S. economy as a whole and for certain industries. 
In addition to the direct impact to contributing employer companies, 
many secondary businesses will fail and retirees living on a fixed 
income will see their benefits significantly reduced, resulting in 
additional stresses on already strapped social service programs and 
reduced revenues to state and local governments.

There are several reasons for this pending funding crisis. There have 
been shifts in U.S. regulatory and trade policies over the years, which 
have resulted in increased competition for businesses in certain 
industries. The number of employees covered by collective bargaining 
agreements (CBA) in these industries has declined precipitously. This 
has resulted in a change in demographics, where many plans have two or 
more retired participants receiving pension benefits for every one 
active participant on whose behalf the plan is receiving contributions.

The increased ratio of retirees to active employees has led to negative 
cash flow; many plans are paying significantly more in pension benefits 
than they are receiving in employer contributions. This negative cash 
flow can only be made up through investment returns. However, not only 
can market returns not be predicted, but taking an overly aggressive 
approach in investing pension plan assets in the hope that outsized 
investment gains will be realized is risky and raises other potential 
legal concerns.

Severe market downturns at the beginning of this century and in 2008 
exacerbated the problem for many plans because they compounded the 
effect of the already existing negative cash flow. Many plans have seen 
their contribution base further eroded by contributing employers that 
left the plan due to bankruptcy with little or no remaining assets to 
pay their share of the plan's unfunded liability. The employees of 
these employers are referred to as ``orphans,'' and the cost for 
funding their benefits was placed on those employers who remained 
behind.

Historically, there were only three ways for multiemployer pension 
plans to improve their funding: (1) reduce future benefit accruals, 
thus saving costs; (2) increase employer contributions; and (3) obtain 
investment returns above the rate assumed by the plan actuary.

While many plans have reduced future benefit accruals, the savings 
yielded from doing so have generally not been sufficient to materially 
improve funding. This is because the liabilities that jeopardize 
pension plans mostly relate to past service (i.e., benefits that have 
already accrued and in many cases are already being paid to retirees). 
Until recently, there has been a blanket prohibition against reducing 
benefits already accrued, so plans reduced future accruals. Plans have 
also consistently increased employer contributions. However, plans in 
some industries have increased employer contribution rates to the point 
that employers cannot be competitive or are on the brink of bankruptcy. 
Investment returns cannot be predicted, and historically have not 
provided the type of returns that would be needed to cure most plans' 
underfunding.

Despite changes in the law designed to provide multiemployer plans with 
greater flexibility in dealing with funding problems, there is nothing 
that exists under current law that will save the multiemployer system's 
most underfunded plans. The risk is not theoretical; some projections 
show the Pension Benefit Guaranty Corporation (PBGC), the government 
entity designed to be a backstop for multiemployer pension plans that 
need financial assistance, will itself become insolvent by 2025. It has 
become increasingly clear that additional legislative solutions are 
necessary if the largest and most underfunded plans are to be saved. If 
these plans become insolvent, the negative repercussions will be felt 
throughout the U.S. economy.

                           Current Statistics

As of 2014, there were a total of 1,403 multiemployer defined benefit 
plans, covering 10.1 million participants.\1\ Approximately 4 million 
were active participants, while a little over 6 million were retired 
participants. It is estimated that more than 1 million defined benefit 
plan participants are in plans that have serious funding issues.\2\ The 
gap between plans with severe funding issues (known as ``critical-
status plans'') and those that are not in critical status continues to 
widen.\3\
---------------------------------------------------------------------------
    \1\ Multiemployer Defined Benefit (DB) Pension Plans: A Primer and 
Analysis of Policy, Congressional Research Service report prepared for 
members and committees of Congress, John J. Topoleski, November 3, 
2016.
    \2\ Alicia H. Munnell and Jean-Pierre Aubry, ``The Financial Status 
of Private Sector Multiemployer Pension Plans,'' Center for Retirement 
Research at Boston College, September 2014, Number 14-14, 3, http://
crr.bc.edu/briefs/the-financial-status-of-private-sector-multiemployer-
pension-plans/.
    \3\ Kevin Campe, Rex Barker, Bob Behar, Tim Connor, Nina Lantz, and 
Ladd Preppernau, Milliman Multiemployer Pension Funding Study, 
Milliman, Fall 2017, http://www.milliman
.com/uploadedFiles/insight/Periodicals/multiemployer-pfs/multiemployer-
pension-funding-fall-2017.pdf.

According to an August 2017 analysis conducted by the actuarial firm 
Cheiron, 114 multiemployer defined benefit plans (out of approximately 
1,400 nationally), covering 1.3 million workers, are underfunded by 
$36.4 billion. Participants covered by plans in the coal, trucking, 
manufacturing, service, retail, and food industries are, and will 
continue to be, at the center of the funding crisis. Unless a solution 
is found, most of these plans will go insolvent during the next 5 to 20 
years.\4\
---------------------------------------------------------------------------
    \4\ ``Cheiron Study Finds 114 Multiemployer Pension Plans Projected 
to Fail Within 20 Years, More Than a Million Participants Could Lose 
Benefits,'' August 27, 2017, https://cheiron.us/articles/
Cheiron%20Analysis%20Critical%20and%20Declining%20Plans.pdf.

In 2016, 167 multiemployer plans filed notices with the Department of 
Labor (DOL) advising that they were in ``critical status'' (critical-
status plans are sometimes referred to as being in the ``red 
zone'').\5\ As of 2012, the funding ratio for plans in critical status 
was 37.1% based on the market value of assets and 62.5% based on the 
actuarial value of assets. The aggregate underfunding on a market value 
basis was $166 billion, and on an actuarial basis $65 billion.\6\ The 
difference between market value and actuarial value is explained in the 
``Funding Rules'' section of this paper.
---------------------------------------------------------------------------
    \5\ Critical, Critical and Declining, Endangered and WRERA Status 
Notices, Department of Labor, public disclosure, https://www.dol.gov/
agencies/ebsa/about-ebsa/our-activities/public-disclosure/critical-
status-notices.
    \6\ Alicia H. Munnell and Jean-Pierre Aubry, ``The Financial Status 
of Private Sector Multiemployer Pension Plans,'' Center for Retirement 
Research at Boston College, September 2014, Number 14-14, 3 http://
crr.bc.edu/briefs/the-financial-status-of-private-sector-multiemployer-
pension-plans/.

In 2016, an additional 83 multiemployer plans filed notices with the 
DOL advising they were in critical and declining status. Critical and 
declining status plans are plans in critical status, but, which, have 
been certified as facing impending insolvency. These plans generally 
have the highest ratios of inactive-to-active participants and the most 
---------------------------------------------------------------------------
severe negative cash flow.

As assets decline and money continues to flow out of these plans, 
investment income is insufficient to offset the negative cash flow. 
Since the market crash of 2008, plans that find themselves in critical 
and declining status have not only failed to improve their funded 
percentage, but have seen their funded percentage continue to decline 
to the point that their only hope of survival is to reduce benefits to 
retirees who are already receiving benefits (referred to as benefits in 
``pay status'').

For some plans, even reductions in benefits to retirees are not enough 
to stave off insolvency. Plans such as Central States, Southeast and 
Southwest Areas Pension Fund (Central States) and the United Mine 
Workers of America 1974 Pension Plan (UMWA Plan) are nearing the point 
of no return. Sometimes referred to as the ``death spiral,'' these 
plans' negative cash flow is so severe that they will have to shift 
their assets away from investments that can provide long-term growth to 
investments that preserve cash to pay benefits.

When this happens, insolvency is no longer a matter of ``if'' but of 
``when,'' and by most accounts, ``when'' is before the end of the next 
decade. Therefore, without a viable resolution, in less than 10 years 
there will be significant benefit cuts for current retirees, active 
participants without retirement benefits, and employers bankrupted 
because of pension obligations.

                   The PBGC ``Backstop'' Is in Danger

The funding crisis for multiemployer plans is exacerbated because the 
Pension Benefit Guaranty Corporation's multiemployer program is itself 
in crisis. The PBGC is a federal agency created by Employee Retirement 
Income Security Act of 1974 (ERISA) to protect the benefits of 
participants in private-sector defined benefit plans. PBGC insures both 
single-employer and multiemployer defined benefit plans, but under two 
separate programs.

The PBGC's multiemployer program is funded from premiums paid by 
multiemployer pension plans and interest income on U.S. Department of 
the Treasury (Treasury) debt. There is no taxpayer funding.\7\
---------------------------------------------------------------------------
    \7\ John J. Topoleski, ``Multiemployer Defined Benefit (DB) Pension 
Plans: A Primer and Analysis of Policy,'' July 24, 2015, Congressional 
Research Service, 1, http://digitalcommons.ilr.
cornell.edu/key_workplace/1436/.

ERISA Section 4002 reads, in part, ``The U. S. is not liable for any 
obligation or liability incurred by the corporation [PBGC].'' Unlike 
public-sector plans that are completely financed by American taxpayers, 
multiemployer plans have always paid their own way, with U.S. 
businesses bearing the bulk of the cost.\8\
---------------------------------------------------------------------------
    \8\ As noted in John J. Topoleski's November 3, 2016 paper, some in 
Congress have expressed reluctance to even consider providing financial 
assistance to the PBGC. See U.S. Congress, House Committee on Education 
and the Workforce, Subcommittee on Health, Employment, Labor, and 
Pensions, ``Examining the Challenges Facing the PBGC and Defined 
Benefit Pension Plans,'' 112th Cong. 2nd sess., February 2, 2012, 112-
50 (Washington: GPO, 2012); and U.S. Congress, House Committee on 
Education and the Workforce, Subcommittee on Health, Employment, Labor, 
and Pensions, ``Strengthening the Multiemployer Pension System: What 
Reforms Should Policymakers Consider?'', 113th Cong. 1st sess., June 
12, 2013.

The crisis in the PBGC multiemployer program has been recent and swift. 
Until 2003, the PBGC multiemployer program operated with a surplus. As 
of 2017, the multiemployer program has a $65 billion deficit.\9\ This 
drastic increase in liabilities is directly due to the insolvency and 
projected insolvency of plans in industries that have been adversely 
affected by regulatory and trade policies. PBGC noted that in 2017 
there were 19 plans newly classified as probable claims against the 
insurance program as they either terminated or are expected to run out 
of money within the next decade. The liabilities represent the present 
value of $141 million in financial assistance to 72 insolvent 
multiemployer plans, up from the previous year's payments of $113 
million to 65 plans.\10\
---------------------------------------------------------------------------
    \9\ Annual Report 2017, Pension Benefit Guaranty Corporation, 
November 16, 2017, https://www.pbgc.gov/sites/default/files/pbgc-
annual-report-2017.pdf.
    \10\ Id.

In addition, employers have seen a steady increase in premiums. In the 
10 years starting in plan year 2007, premiums have increased $20 per 
participant and are now set at $28 per participant for plan year 2018. 
Despite these increases, the PBGC maximum benefit payout has remained 
---------------------------------------------------------------------------
relatively low and is currently $1,251 per year.

As contributing employers to these plans failed, funding levels 
plummeted. Remaining employers see their long-term viability threatened 
by ever-increasing pension liability brought on by employers that went 
bankrupt, liquidated, or otherwise went out of business. When employers 
stop contributing to a pension fund, all remaining employers are 
required to pick up the slack and assume proportionate liability for 
the payments owed to the exited employer's ``orphan'' employees. As 
employers leave the pool of contributors, each remaining employer's 
percentage of the growing funding deficit gets larger. This is known as 
the ``last man standing'' rule and was established to protect plan 
participants from the consequences of employer withdrawals. The ``last 
man standing'' rule has rendered multiemployer plans unstable as nobody 
wants to be the last man standing. This provides incentive for even 
healthy employers to leave, and puts the PBGC in the role of the 
ultimate ``last man.'' \11\
---------------------------------------------------------------------------
    \11\ Carl Horowitz, ``New Report Shows Severe Shortfalls in 
Multiemployer Union Pensions,'' National Legal and Policy Center, July 
3, 2013, http://nlpc.org/2013/07/03/new-reports-show-severe-shortfalls-
multiemployer-union-pensions/.

Given the deficit between total assets and the present value of 
liabilities, PBGC projects that there is a greater than 50% chance that 
the multiemployer plan program will run out of money by 2025, and a 
greater than 90% chance that it will run out of money by the end of 
2035.\12\ Absent a dramatic increase in premiums that multiemployer 
plans pay (which would further undermine many plans' funding levels and 
is thus likely not feasible), or a change in how the PBGC is funded, 
pension plans facing impending insolvency (or even those that are 
already insolvent and receiving PBGC financial assistance) cannot rely 
on assistance from PBGC beyond the next 10 years.
---------------------------------------------------------------------------
    \12\ PBGC FY 2016 Annual Report, 61.

The pressure the projected plan insolvencies will place on the PBGC 
will be catastrophic, absent congressional action. In 2014, the Center 
for Retirement Research in Boston College delivered an ominous 
---------------------------------------------------------------------------
assessment of the situation:

        The actuarial model projects that it is more likely than not 
        that the program [PBGC] will be insolvent by 2022, with a 90-
        percent chance of insolvency by 2025. Once the fund is 
        exhausted, the PBGC would have to rely on annual premium 
        receipts and would be forced to pay only a fraction of its 
        paltry guaranteed benefit. One estimate is that a retiree who 
        once received a monthly benefit of $2,000 and whose benefit was 
        reduced to $1,251 under the PBGC guarantee would see the 
        monthly benefit decline to $125. The exhaustion of the 
        multiemployer insurance fund could also undermine confidence in 
        the entire system.\13\
---------------------------------------------------------------------------
    \13\ Alicia H. Munnell and Jean-Pierre Aubry, ``Can PBGC Save 
Multiemployer Plans?,'' Center for Retirement Research at Boston 
College, September 2014, Number 14-16, 5, http://crr.bc.edu/
uncategorized/can-pbgc-save-multiemployer-plans/.
---------------------------------------------------------------------------

           MULTIEMPLOYER DEFINED BENEFIT PENSION PLAN BASICS

Private-sector multiemployer defined benefit pension plans are plans 
jointly sponsored by a labor union(s) and a group of employers. Such 
plans usually cover employees working in a common industry such as, for 
example, coal, construction, food, maritime, textile, trucking, etc. 
Many multiemployer plans cover employees working at a particular craft 
within an industry, such as electricians, bricklayers, and truck 
drivers. While most plans are ``local plans'' and cover employees 
working in a specific geographical area, there are also ``national 
plans,'' which cover employees working in crafts or trades throughout 
the U.S. Many of the industries in which multiemployer plans prevail 
have high worker mobility and/or seasonal employment.

Due to the migratory nature of the work, employees frequently work for 
more than one employer during their careers. Oftentimes, employees 
would not work long enough for one employer to vest in a benefit under 
that specific employer's pension plan; however, multiemployer plans 
allow employees to move from employer to employer and still earn 
service credit under the multiemployer plan, provided the employers for 
which the employee works participate in the multiemployer plan.

Multiemployer plans are established via collective bargaining between a 
union and two or more employers. Ordinarily, the union and the 
employers will enter into a collective bargaining agreement which is 
negotiated between local, regional, or national unions and individual 
employers or an association of employers bargaining as a group. The 
collective bargaining agreement establishes the employer's obligation 
to contribute to the plan, identifies the bargaining unit to which the 
collective bargaining agreement applies, and sets the rate and basis on 
which employers pay contributions to the plan. The contribution rate is 
usually a specific sum per hour or unit of time worked by or paid to 
the employee.

Negotiations over pension contribution rates are not done in a vacuum. 
The union and employers also must negotiate contribution rates to other 
multiemployer benefit plans (health and welfare, vacation, defined 
contribution pension, etc.) as well as wages. The combination of wages 
and benefit plan contributions is commonly referred to as the ``wage 
and benefit package'' or the ``total package.'' Thus while pension plan 
funding is a factor that bargaining parties must take into account 
during negotiations, they also must be cognizant of ever-increasing 
medical inflation and its impact on medical costs as well as employees' 
desire to receive increases in their hourly wage. As many employers 
operate on thin profit margins, addressing these competing factors can 
be complex. Compounding the complexity is that, once negotiated, the 
pension contribution rate is often subject to review and approval by 
the plan's trustees.

             STATUTES GOVERNING MULTIEMPLOYER PENSION PLANS

                     Labor Management Relations Act

The Labor Management Relations Act (LMRA), commonly known as the Taft-
Hartley Act, requires employers to pay contributions into a trust fund 
that must be jointly administered by an equal number of union and 
employer representatives. The obligation to contribute must be set 
forth in a written document (usually a collective bargaining 
agreement), and the contributions must be used for the sole purpose of 
providing benefits to employees.\14\
---------------------------------------------------------------------------
    \14\ LMRA section 302 (c)(5).
---------------------------------------------------------------------------

                Employee Retirement Income Security Act

The union and employer representatives who manage the pension plan and 
administer the trust are called trustees. As trustees of the monies 
deposited into the trust, the trustees are fiduciaries to the 
participants (both active employees and retirees) covered by the 
pension plan. The fiduciary duties to which the trustees must adhere 
are established under the Employee Retirement Income Security Act of 
1974 \15\ and are enforced by the U.S. Department of Labor's Employee 
Benefits Security Administration. ERISA requires the trustees to act 
with the ``care, skill, prudence, and diligence under the circumstances 
then prevailing that a prudent man acting in like capacity and familiar 
with such matters would use in the conduct of an enterprise of a like 
character and with a like aim.'' \16\ This is known as the ``prudent 
expert'' rule and is the standard to which all fiduciary decisions are 
held.
---------------------------------------------------------------------------
    \15\ ERISA section 1001, et seq.
    \16\ ERISA section 404(a)(1)(B).
---------------------------------------------------------------------------

                         Internal Revenue Code

While a plan's trustees generally have the discretion to determine the 
amount of benefits a plan will provide, there are other plan features 
that must comply with the requirements of the Internal Revenue Code of 
1986 (Code).\17\ One such requirement is that, in general, a plan 
cannot be amended to reduce accrued benefits, optional forms of 
payment, early retirement benefits, and retirement-type subsidies.\18\ 
This is known as the anti-cutback rule, which until recently was the 
lynchpin of the federal pension system. Amendments are generally 
allowed to reduce future benefit accruals, as well as optional forms of 
payment, early retirement benefits, and retirement- type subsidies that 
accrue after the date of the amendment.\19\
---------------------------------------------------------------------------
    \17\ Some Code requirements are also found in ERISA.
    \18\ Code section 411(d)(6) and ERISA section 204(g).
    \19\ ``Present Law, Data, and Selected Proposals Relating to 
Multiemployer Defined Benefit Plans,'' The Joint Committee on Taxation, 
February 26, 2016, https://www.jct.gov/
publications.html?func=startdown&id=4872.

The anti-cutback rule, which has been a backbone of federal pension law 
since ERISA's inception in 1976, has been considerably weakened by 
passage of the Pension Protection Act of 2006 (PPA) and the 
Multiemployer Pension Reform Act of 2014 (MPRA). The weakening of the 
anti-cutback rule has been in direct response to the pending funding 
crisis of certain multiemployer plans and has been helpful to many 
plans trying to avoid insolvency. However, MPRA has not been entirely 
successful, as there are many severely underfunded plans that are going 
to need additional help from Congress to survive.

                             Funding Rules

ERISA's and the Code's minimum funding rules require multiemployer 
plans to maintain a funding standard account. The funding standard 
account gets debited for charges related to benefit accruals, 
investment losses, and other negative plan experience. Credits are 
given for employer contributions, investment gains, and other positive 
plan experience. The minimum required contribution to a multiemployer 
plan is the amount needed, if any, to balance the accumulated credits 
and accumulated debits to the funding standard account. If the debits 
exceed the credits, there is a negative balance, and contributing 
employers must pay the amount necessary to balance the account. The 
liability is allocated to all of the plan's contributing employers.

If participating employers do not make the contribution necessary to 
balance the funding standard account, the plan has a minimum funding 
deficiency and contributing employers can be assessed excise taxes on 
top of having to make up the deficiency. On the other hand, if the plan 
was overfunded, it would have to increase benefits in order to prevent 
paying an excise tax on the overfunding.

The calculations related to determining the amount in a multiemployer 
plan's funding standard account are performed by an actuary. The plan 
must use a specific funding method to determine the elements included 
in its funding standard account for a given year. Such elements include 
the plan's normal cost and the supplemental cost. Normal cost is the 
cost of future benefits allocated to the year under the plan's funding 
method. Supplemental cost is generally the costs attributable to past 
service liability or to investment returns that were less than those 
assumed by the actuary. The supplemental costs are amortized over a 
specified period of years by debiting the funding standard account over 
that period. If experience is good, there can also be actuarial gains 
that result in credits being made to the funding standard account.\20\ 
When calculating debits and credits to the funding standard account, 
the plan actuary must use reasonable actuarial assumptions.
---------------------------------------------------------------------------
    \20\ Id.

Actuaries calculate plan funding using both actuarial values and market 
values. Actuarial values are computed by the plan's actuary to predict 
how much money a plan needs to set aside to pay future retirees. 
Actuaries cannot use market values for this prediction, because market 
values fluctuate from day to day as the stock market rises and falls. 
An actuary predicts the long-term performance of the plan's investments 
by using mathematics to smooth out year-to-year market variations. This 
means that when investment performance is bad for a given year, the 
actuary will not recognize the entire loss in the year it occurs, but 
rather will ``smooth'' the loss by recognizing a portion each year for 
---------------------------------------------------------------------------
a period of years. Investment gains are treated similarly.

The actuary uses this smoothing method to create an actuarial value of 
the plan's assets, which is the likely value of the investments based 
on typical long-term investment results. Market value is the actual 
value of the plan's assets on any given day without regard to any 
smoothing and provides a more realistic view of a plan's financial 
condition.

As of 2012, the funding ratio for plans in critical status was 62.5% 
based on the actuarial value of plan assets. Under normal 
circumstances, such a ratio would not be disastrous; if the plan's 
investment earnings matched or exceeded its actuarial assumed rate of 
return and if the trustees made changes to benefits, a plan in critical 
status could be expected to right itself. The actuarial assumed rate of 
return is the rate the actuary assumes the plan's investment will earn 
annually, and generally ranges from 7% to 8%. Unfortunately, many plans 
have seen their contribution bases erode to the point where their cash 
flow is so negative they cannot earn their way out of critical status. 
As of June 30, 2017, the aggregate funding percentage of plans in 
critical status fell to 60%, whereas the funded percentage of non-
critical status plans was almost 90%.\21\
---------------------------------------------------------------------------
    \21\ Kevin Campe, Rex Barker, Bob Behar, Tim Connor, Nina Lantz, 
and Ladd Preppernau, Milliman Multiemployer Pension Funding Study, 
Milliman, Fall 2017, http://www.milliman.
com/uploadedFiles/insight/Periodicals/multiemployer-pfs/multiemployer-
pension-funding-fall-2017.pdf.
---------------------------------------------------------------------------

  THE CURRENT FUNDING CRISIS IS BEING DRIVEN BY A SMALL PERCENTAGE OF 
                   PLANS WITH COMMON CHARACTERISTICS

Multiemployer defined benefit pension plans are not a monolith. The 
most recent surveys illustrate that, as of today, many plans are 
structurally stable and well managed. In fact, a Milliman study 
recently reported that ``in the first six months of 2017, the aggregate 
funding percentage for all multiemployer pensions climbed from 77% to 
81%, reducing the system's shortfall by $21 billion--an improvement 
driven largely by favorable investment returns.'' \22\ According to the 
study, the estimated investment returns have outpaced actuarial 
assumptions, reflecting the strong performance of the U.S. stock 
market.
---------------------------------------------------------------------------
    \22\ Id.

During the 1980s and 1990s, many plans were fully funded.\23\ This was 
primarily due to a soaring stock market. While most multiemployer 
plans' actuaries assume that annual investment returns will be in the 
7% to 8% range, investment returns were well above those percentages 
for many plans in the 1990s. The surging stock market seemed like a 
blessing at the time. However, the outsized investment returns masked a 
significant problem.
---------------------------------------------------------------------------
    \23\ Alicia H. Munnell and Jean-Pierre Aubry, ``Private Sector 
Multiemployer Pension Plans--A Primer,'' Center for Retirement Research 
at Boston College, August 2014, No. 14-13, http://crr.bc.edu/briefs/
private-sector-multiemployer-pension-plans-a-primer/.

While pension assets increased at historical rates, union membership 
nationally was in a steady decline. Private-sector union membership in 
1983 was 12 million. By 2015, that number had fallen to 7.6 
million.\24\ Thus, while pension plans assets were increasing thanks to 
the stock market, many plans' contribution bases were declining. With 
fewer contributions coming in, plans relied more heavily on investment 
returns to keep assets growing.
---------------------------------------------------------------------------
    \24\ Megan Dunn and James Walker, ``Union Membership in the United 
States,'' Bureau of Labor Statistics, September 2016, https://
www.bls.gov/spotlight/2016/union-membership-in-the-united-states/
home.htm.

Today, almost half of all union members are between 45 and 64 years 
old.\25\ As these workers age into retirement, there are not enough 
younger union workers to replace them. This exacerbates negative cash 
flow and essentially requires some plans to earn annual investment 
returns that are likely unrealistic based on the investment markets' 
cyclical nature. Moreover, as mentioned above, funds were not able to 
``bank'' these extra returns because they would be subject to an excise 
tax.
---------------------------------------------------------------------------
    \25\ Id.

The euphoria of the 1990s came to an end in 2000, when the price of 
technology stocks fell drastically. Many multiemployer plans had ridden 
the wave of these dot-com companies to historic highs in asset levels, 
but when the market crashed and investment returns were disastrous, 
plans were hit twice as hard because of their declining contribution 
bases. By the mid-2000s, most plans had recovered, but several plans 
remained in dire straits. While very few industries were immune from 
funding issues, certain plans in industries that had seen a significant 
decline in active participants, such as trucking, or in industries with 
cyclical work, like construction, did not recover. In 2008, a global 
recession rocked the investment markets, causing funding levels in most 
plans to plummet. For those plans that had not sufficiently recovered 
from the dot-com bubble burst a few years earlier, 2008 was 
---------------------------------------------------------------------------
catastrophic.

Although the investment markets have had favorable returns in recent 
years, many plans' funding levels have continued to deteriorate. Since 
passage of MPRA in December 2014, 15 multiemployer defined benefit 
plans have filed applications with the Treasury Department to reduce 
benefits to avoid insolvency. As of December 2017, Treasury has 
approved only 4 of the 15 applications. These 15 applicants currently 
account for only 1.35% of multiemployer defined benefits plans, but 
cover roughly 5% of all multiemployer defined benefits plan 
participants. These plans represent a segment of multiemployer pension 
plans that are failing and that, although in the minority, could cause 
the entire multiemployer pension system to crumble if additional 
legislative action is not taken.

What does a plan facing impending solvency look like? By looking 
broadly at the plans and industries they are in we can identify many of 
the conditions and events that lead a plan down the path to critical 
and declining status, and eventual insolvency.

             Shrinking Industries and Declining Union Roles

The Bureau of Labor Statistics (BLS) reports that in 1983, there were 
approximately 12 million American workers covered by a collective 
bargaining agreement, which represented 16.8% of the American 
workforce. By 2016, the number had fallen to about 7.6 million, or 6.4% 
of the workforce.\26\
---------------------------------------------------------------------------
    \26\ Id.

From 2000 to 2015, union membership in the transportation sector, 
alone, declined by 6.7 percentage points. Union membership rates in 
construction, manufacturing, and wholesale and retail trade also 
declined over that period.\27\
---------------------------------------------------------------------------
    \27\ Id.

Unionized workers on average are older than nonunion workers. In 2015, 
nearly half of union members were between 45 and 64 years old, but only 
about one-third of nonunion members belonged in this age group. Workers 
aged 45 to 64 were heavily represented in the manufacturing and 
transportation industries, which also had relatively high unionization 
rates. Furthermore, the lowest union membership rate is among workers 
aged 16 to 24 (4.4 %), which makes the systemic replacement of older 
union members with younger members impracticable.\28\
---------------------------------------------------------------------------
    \28\ Id.
---------------------------------------------------------------------------

   Competition and Economic Factors Impacting Contributing Employers

Increased competition facing contributing employers and their employees 
is another factor leading to declining pension plan funding levels. 
There has been an onslaught of new competition in the last half century 
caused in part by changes in U.S. regulatory and trade policy. These 
policy changes have contributed to the hollowing out of entire 
industries and their associated retirement plans.

For example, the United Furniture Workers Pension Fund A (Furniture 
Workers Fund) was crippled by an influx of imported goods. In 1999, the 
furniture and related products industry had 537,000 workers. By 2010, 
the industry had only 251,000 workers.\29\ Some of this attrition was 
caused by the 2008 financial crisis, but not all of it. Between 1981 
and 2009, a period that coincides with significant increases in 
importation by foreign manufacturers, 35 contributing employers to the 
Furniture Workers Fund filed for bankruptcy protection and withdrew 
from the plan.
---------------------------------------------------------------------------
    \29\ United Furniture Workers Pension Fund A--Second Application 
for Approval of Suspension of Benefits (File 1), 12.

In the trucking industry, the competition was domestic in origin, but 
similarly dramatic. In 1980, Congress deregulated the trucking 
industry, allowing companies to compete in a free and open market. 
While the deregulation of the trucking industry has been beneficial for 
economy and the American consumer, deregulation has significantly 
---------------------------------------------------------------------------
impacted trucking companies that participate in multiemployer plans.

Researchers at the Center of Retirement Research at Boston College 
summarized the effects, noting ``of the 50 largest employers that 
participated in the Central States Fund in 1980, only four remain in 
business today. More than 600 trucking companies have gone bankrupt and 
thousands have gone out of business without filing for bankruptcy. As a 
result, roughly 50 cents of every benefit dollar goes to pay benefits 
to `orphaned' participants, those left behind when employers exit.'' 
\30\ Even though an employer leaves, the fund--meaning the remaining 
employers--is still responsible for paying the benefits due to all 
participants in the plan. The orphan participants constitute a 
significant share of total multiemployer participants and are much 
likelier to participate in severely underfunded plans.
---------------------------------------------------------------------------
    \30\ Alicia H. Munnell, Jean-Pierre Aubry, Wenliang Hou, and 
Anthony Webb, ``Multiemployer Plans--A Proposal to Spread the Pain,'' 
Center for Retirement Research at Boston College, October 2014, 8, 
http://crr.bc.edu/wp-content/uploads/2014/10/IB_14-17.pdf.
---------------------------------------------------------------------------

      Plan Demographics--The Inactive-to-Active Participant Ratio

As competition and demographic shifts reduced the participant 
populations in plans, untenable ratios of inactive-to-active 
participants were created. New York State Teamsters Conference Pension 
and Retirement Fund (New York State Fund) provides a vivid 
illustration.

In 1990, the New York State Fund had 23,883 active participants and 
10,150 retired participants, for a ratio of more than two active 
participants for every one retired participant. By 2000, the ratio was 
reduced to almost one to one, as the number of active participants 
declined to 16,827, and the number of retired participants increased to 
14,198. As of January 1, 2016, there were 11,576 active participants, 
compared to 15,936 retired participants, reversing the ratio of active 
to retired participants in a single career span.\31\
---------------------------------------------------------------------------
    \31\ New York State Teamsters Conference Pension and Retirement 
Fund Treasury Application, 24.

According to a survey of multiemployer plans, 87% of beneficiaries in 
critical and declining plans were inactive (either already retired or 
entitled to a benefit at some time in the future but are no longer 
working), compared with 63% in non-critical and declining plans.\32\
---------------------------------------------------------------------------
    \32\ Summer 2017 Survey of Plans' Zone Status, Segal Consulting, 
Summer 2017, 4.

The survey also found some correlation between average plan funding 
levels by industry and inactive-to-active retiree ratios. Plans from 
the manufacturing sector had the lowest average funding levels at 79% 
and the highest inactive-to-active ratio at 5.8 retirees per active 
employee. Transportation sector plans fared a little better with 
funding levels averaging 81% but with a much more manageable inactive 
to retiree ratio of 2.9:1. Compared to those plans, construction sector 
plans are 89% funded on average and have an average ratio of 1.6:1.\33\ 
As ratios worsen, and the rate of negative cash flow grows, employer 
contribution rate increases have little overall effect on plan funding. 
Instead plans must rely more heavily on investment returns.
---------------------------------------------------------------------------
    \33\ Id., 6.
---------------------------------------------------------------------------

                           Financial Pressure

Plans with negative cash flow can survive only if the investment return 
outpaces the benefit payments. During the 1980s and 1990s many 
multiemployer pension plans rode the bull market gains, thereby masking 
ominous trends in the growing retiree population. When the tech bubble 
burst in 2000, many plans, which had been relying on investment returns 
to cover negative cash flows, had to pay benefits directly from plan 
assets. As they did so, plan funding levels dropped, and plans had a 
lower asset base with which to invest. Since the negative cash flow 
problems for many plans did not improve, they were forced to seek 
higher investment returns to bridge the gap between the amount of money 
coming into the plan and the amount going out.

As a plan's assets dwindle, however, trustees are forced to shift 
investments out of equities and into more conservative investment 
vehicles to preserve cash to pay benefits for as long as possible. Such 
investments generally provide for little growth, so there is no 
opportunity for the asset base to grow. If the trustees were to 
continue to leave assets invested in equities, a sharp downturn in 
equity markets could cause a plan to go insolvent much sooner than 
anticipated and to provide trustees with little time for corrective 
action or to request the PBGC's assistance. In such circumstances, 
trustees are at risk of a fiduciary breach claim for imprudently 
investing the assets of the plan. Accordingly, trustees will almost 
always err on the side of making assets last longer to avoid potential 
legal liability. This approach generally leads a plan to enter the 
death spiral where there is no realistic chance of recovery.

The 2008 financial crisis was a disaster for multiemployer plans. Just 
prior to 2008, 80% of plans had funding levels in excess of 80% 
(referred to as the ``green zone''), whereas only 9% of plans were in 
critical status, or the ``red zone.'' By 2009, in the wake of the 
market collapse, the percentage of green zone plans plummeted to 38%, 
while the percentage of plans in the red zone increased to 30%. Over 
time, as the investment markets rebounded, many plans were able to claw 
their way back into the green zone. While some plans are just now 
returning to their pre-2008 funding levels, virtually all funding 
improvements have come exclusively from positive investment 
performance. This suggests that nothing has changed demographically, 
and that these plans will remain vulnerable to investment market 
conditions, which are unpredictable.

     ATTEMPTS TO FIX THE MULTIEMPLOYER PENSION PLAN FUNDING PROBLEM

Given the negative cash flow and diminishing contribution bases of 
plans that are facing impending insolvency and the PBGC's precarious 
financial condition, finding a solution to the funding woes of many 
plans will not be easy. Congress and trustees of pension plans have 
attempted to address multiemployer funding issues in the past, 
especially within the last several years. These attempts have helped 
some plans, but additional measures will be needed to save some of the 
most underfunded plans.

                Multiemployer Pension Plan Amendment Act

In 1980, Congress passed the Multiemployer Pension Plan Amendments Act 
(MPPAA).\34\ MPPAA amended ERISA and was designed to discourage 
employers from exiting financially troubled multiemployer plans. 
Congress recognized that when a contributing employer stopped 
contributing to an underfunded multiemployer plan, the unfunded 
liability related to the departing employer was absorbed by the plan's 
remaining contributing employers. Although in 1980 most multiemployer 
pension plans were not facing funding issues as severe as those today, 
withdrawing employers increased pension costs for employers that 
remained, and in many cases threatened their financial viability. 
Withdrawing employers also caused multiemployer plans' contribution 
bases to erode.
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    \34\ See ERISA sections 4201-4225.

Prior to MPPAA, an employer that withdrew from a multiemployer plan did 
not have to pay anything to the plan unless the plan was terminated 
within 5 years of the employer's withdrawal. Even then, the employer's 
liability was limited to no more than 30% of the employer's net worth. 
Under MPPAA, an employer that totally or partially withdraws from a 
multiemployer pension plan must pay ``withdrawal liability.'' \35\ An 
employer's withdrawal liability is the amount of the employer's 
proportionate share of the plan's unfunded vested benefits or 
liabilities, or UVBs (i.e., the withdrawing employer's proportionate 
share of the deficit between the amount of the plan's vested benefits 
and the plan's assets).
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    \35\ Not only is the contributing employer to the plan responsible 
for paying withdrawal liability, but also MPPAA provides that all 
trades or businesses under common control (as defined in section 414 of 
the Code) are jointly and severally liable for a withdrawing employer's 
withdrawal liability. See ERISA section 4001(b)(1).

When an employer withdraws from an underfunded multiemployer plan, 
MPPAA requires the plan's trustees to (1) determine the amount of 
withdrawal liability, (2) notify the employer of the amount of that 
liability, and (3) collect that liability. Generally, in order to 
determine an employer's withdrawal liability, a portion of the plan's 
UVBs is first allocated to the employer, generally in proportion to the 
employer's share of plan contributions for a previous period. The 
amount of UVBs allocable to the employer is then subject to various 
---------------------------------------------------------------------------
reductions and adjustments.

ERISA sets forth the amount of annual withdrawal liability payments the 
employer must make directly to the plan. Generally speaking, ERISA 
calls for annual payments to continue until the employer pays the 
liability in full, but caps the annual payments at 20 years. Thus, it 
is possible for an employer that does pay withdrawal liability for 20 
years to still not pay off all of its unfunded liability. When this 
happens, other employers must make up the difference.

An employer's annual withdrawal liability payment amount is generally 
structured to approximate the employer's annual contributions to the 
plan. The amount is equal to the employer's highest recent average 
number of contribution base units, or CBUs (essentially, the amount of 
contribution paid to the plan) multiplied by the employer's highest 
contribution rate in the past 10 years. An employer can prepay its 
liability or attempt to negotiate the amount with the plan. There are 
additional withdrawal liability rules applicable to certain industries, 
exemptions for certain sales of assets, employer and plan disputes, and 
plan terminations following mass employer withdrawals.

Although the introduction of withdrawal liability was supposed to 
prevent withdrawing employers from shifting pension obligations to the 
remaining employers, MPPAA has not always worked as intended. The 
biggest problem is that many withdrawing employers do not have the 
financial means to satisfy their withdrawal liability. Employers often 
withdraw when they are going out of business or when they file for 
bankruptcy. When this happens, it is difficult, if not impossible, for 
the plan to collect the employer's withdrawal liability. As a result, 
some plan participants with vested benefits may have worked for an 
employer that no longer participates in the plan. The liability for 
these ``orphaned'' participants has devastating effects on plan funding 
and is a major contributor to the funding issues that many plans face 
today.

                     Pension Protection Act of 2006

In 2006, Congress passed the Pension Protection Act. The PPA amended 
ERISA and the Code to make certain changes to multiemployer funding 
rules. These changes were designed to give plan trustees more 
flexibility in dealing with funding while at the same time forcing them 
to identify and correct existing and potential funding issues in time 
to prevent further funding level deterioration and stabilize the plans' 
finances.\36\ The PPA requires a multiemployer plan's actuary to 
provide an annual certification to the Internal Revenue Service of the 
plan's funded status. The certification specifies that the plan falls 
into one of three categories: endangered status, critical status, or 
neither.
---------------------------------------------------------------------------
    \36\ Segal Consulting, Segal Bulletin, August 2006.
---------------------------------------------------------------------------

                        Endangered-Status Plans

A plan is generally in endangered status, also known as the ``yellow 
zone,'' if the plan's funded percentage is less than 80%, or the plan 
has an accumulated funding deficiency for the plan year or is projected 
to have an accumulated funding deficiency in any of the six succeeding 
plan years. A plan's funded percentage for purposes of the PPA 
certification is determined by dividing the value of plan assets by the 
accrued liability of the plan. The trustees of a plan in endangered 
status are required to adopt a funding improvement plan.

A funding improvement plan consists of a list of options, or range of 
options, for the trustees to propose to the union and the employers 
(the bargaining parties). The funding improvement plan is formulated to 
provide, based on anticipated experience and reasonable actuarial 
assumptions, for the plan to attain ``applicable benchmarks'' by the 
end of the funding improvement period. The range of options generally 
is a combination of contribution rate increases or reductions in future 
benefit accruals that would allow the plan to obtain a statutorily 
specified increase in the funded percentage and not have an accumulated 
funded percentage by the end of the funding improvement period, which 
is generally 10 years.

Many plans certified as endangered in the early years of the PPA were 
able to fix their funding problems and now are in neither endangered 
nor critical status (known as the ``green zone''). Other plans were not 
so fortunate, and their status deteriorated from endangered to 
critical. It should be noted that the PPA did not allow plans in 
endangered status to make any changes to benefits that were not already 
allowed under pre-PPA rules. In other words, trustees of endangered 
plans are not allowed to violate the anti-cutback rule of ERISA and the 
Code, and can only reduce future accruals and eliminate other protected 
benefits on a prospective basis. This led some trustees to take the 
counterintuitive action of allowing their plans to fall into critical 
status, because there was more statutory flexibility under the critical 
status rules to address funding problems.

Critical-Status Plans

A plan is in critical status if the plan:

(1)  Is less than 65% funded and will either have a minimum funding 
deficiency in 5 years or be insolvent in 7 years; or
(2)  Will have a funding deficiency in 4 years; or
(3)  Will be insolvent within 5 years; or
(4)  The liability for inactive participants is greater than the 
liability for active participants, and contributions are less than the 
plan's normal cost, and there is an expected funding deficiency in 5 
years.

Trustees of plans in critical status are required to adopt a 
rehabilitation plan. Unlike endangered plans, critical-status plans 
whose trustees adopt and follow a rehabilitation plan generally do not 
have to meet the minimum funding rules of ERISA and the Code.

A rehabilitation plan is a plan that consists of a range of options for 
the trustees to propose to the bargaining parties, formulated to 
provide (based on anticipated experience and reasonable actuarial 
assumptions) for the plan to cease to be in critical status by the end 
of the rehabilitation period, which is generally 10 years. Options 
include reductions in plan expenditures, reductions in future benefit 
accruals, increases in contributions, or any combination of such 
actions. The rehabilitation plan must be updated annually, and the plan 
must show that it is making scheduled progress toward emerging from 
critical status.

If the trustees determine that, based on reasonable actuarial 
assumptions, the plan cannot reasonably be expected to emerge from 
critical status by the end of the rehabilitation period, the plan must 
include reasonable measures to emerge from critical status at a later 
time or to forestall possible insolvency. If a multiemployer plan fails 
to make scheduled progress under the rehabilitation plan for three 
consecutive plan years or fails to meet the requirements applicable to 
plans in critical status by the end of the rehabilitation period, for 
excise tax purposes the plan is treated as having a funding deficiency 
equal either to the amount of the contributions necessary to leave 
critical status or make scheduled progress or to the plan's actual 
funding deficiency, if any. Plans may apply for a funding waiver if the 
case failure is due to reasonable cause and not willful neglect.

The PPA allows trustees of critical-status plans to make changes to 
benefits that endangered-plan trustees cannot. They are allowed to 
reduce or eliminate benefits that were previously protected by the 
anti-cutback rule. Critical-status plans can be amended to reduce or 
eliminate certain adjustable benefits, including post-retirement 
benefits, subsidized optional forms of payment, disability benefits not 
yet in pay status, early retirement benefits or retirement subsidies 
and benefit increases adopted less than 60 months before the plan 
entered critical status. In addition, critical-status plans that 
provide for payment of benefits in the form of a lump sum are required 
to cease paying lump-sum benefits on the date they enter critical 
status.

The ability to eliminate or reduce previously protected benefits was 
heretofore unprecedented, and many plans in critical status have taken 
advantage of these new rules and are projected to emerge from critical 
status or to forestall possible insolvency because of them. However, 
for those underfunded plans with a declining active population base and 
severe negative cash-flow problems, the savings generated by 
eliminating these adjustable benefits were not great enough to improve 
the plans' funded percentages.

Compounding the problem is that after cutting benefits to the maximum 
extent possible, there was little else that could be done to reduce 
costs. That left employer contribution rate increases as the only 
viable option to improve funding. Over the years, however, many plans 
have found that annual increases in employer contribution rates are not 
so viable because employers cannot absorb the costs. Out-of-
control pension costs threaten employers' very survival.

                Multiemployer Pension Reform Act of 2014

Although the investment markets have had favorable returns in recent 
years, many plans' funding levels continue to deteriorate. Under the 
PPA, a prohibition against reducing accrued benefits on a retroactive 
basis remained. Recognizing that some plans could not avoid insolvency 
without drastic changes in the law, Congress passed the Multiemployer 
Pension Reform Act in 2014.\37\ MPRA changed the multiemployer defined 
benefit plan landscape.
---------------------------------------------------------------------------
    \37\ The Multiemployer Pension Reform Act of 2014, Pub. L. No. 113-
235, Division O (2014).

The law created three new tools to help plans stave off insolvency. 
Most notably, for the first time under ERISA, Congress allowed plans 
that were in severe financial distress to reduce benefits that had 
already accrued, including benefits that were in pay status (these 
reductions are referred to as ``benefit suspensions'' under MPRA). This 
was a landmark change and a radical departure from what was previously 
allowed. MPRA also revised ERISA's existing merger and partition rules.

Critical and Declining Status

MPRA created a new funding status called ``critical and declining'' for 
those plans that were the most deeply troubled. A ``critical and 
declining'' plan is one that meets one of the statutory requirements 
for critical status and is actuarially projected to become insolvent 
within 14 years (or within 19 years if more than two-thirds of its 
participants are inactive or retired). A plan that is in ``critical and 
declining'' status can file an application with Treasury to reduce or 
suspend benefits that have already accrued and that are in pay status 
(i.e., are already being paid to retirees and beneficiaries). MPRA 
provides for the following three mechanisms to help critical and 
declining plans avoid insolvency:
PBGC-Facilitated Plan Mergers
Mergers can improve a financially troubled plan's funding issues. By 
transferring its assets to a more financially stable plan, the weaker 
plan can lessen or eliminate the effect of negative cash flow while 
gaining a larger asset base with which to invest. Generally, however, a 
trustee's decision to merge is subject to the fiduciary duty provisions 
of ERISA.\38\ These fiduciary duties are applied to the trustees of 
both plans involved in a contemplated merger. The trustees of both 
plans have to determine that a merger would be in the best interest of 
their respective participants. Both plans' trustees have to examine the 
financial condition of their respective plans before and after the 
merger, as well as the viability of the surviving plan post-merger.
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    \38\ Merging a plan is arguably a settlor function that would not 
be subject to ERISA's fiduciary rules. The DOL has offered the opinion 
that certain actions taken by trustees of multiemployer plans that 
would ordinarily be settlor functions will be treated as fiduciary 
functions if the plan's trust agreement provides that the trustees act 
as fiduciaries when engaging in what otherwise would be settlor 
functions. If the governing plan documents are silent, activities 
generally considered settlor functions in a non-multiemployer setting 
will be considered as settlor functions with respect to the 
multiemployer plan. DOL Field Assistance Bulletin 2002-2.

Because generally one of the plans in the proposed merger is in worse 
financial condition than the other, finding a good merger partner was 
and is sometimes difficult. For example, the trustees of a financially 
sound plan will likely not want to merge with a plan that is projected 
to become insolvent because of the affect the poorly funded plan would 
have on the funded level of the financially sound plan. Traditionally, 
a merger between a stronger plan and a weaker plan--but not one facing 
insolvency--would have the benefit of a larger asset base in which to 
---------------------------------------------------------------------------
obtain investment gains.

Under MPRA, the PBGC can facilitate mergers between two or more plans, 
including providing financial assistance. By providing financial 
assistance, the PBGC can alleviate the healthier plan's financial/
fiduciary concerns, which might make the healthier plans more willing 
to merge. Upon a plan's request, the PBGC may facilitate a merger if 
PBGC determines the merger is in the interests of the participants and 
beneficiaries of at least one of the plans, and the merger is not 
reasonably expected to be adverse to the overall interests of the 
participants and beneficiaries of any of the plans. The PBGC may 
provide assistance to a plan such as training, technical assistance, 
mediation, communication with stakeholders, and support with related 
requests to other governmental agencies. MPRA allows trustees of plans 
in ``critical and declining'' status to apply for both a facilitated 
merger and a benefit suspension.

The PBGC may also provide financial assistance to facilitate a merger 
if one or more of the plans in the merger is in ``critical and 
declining status''; the PBGC reasonably expects that financial 
assistance will reduce it's expected long-term loss with respect to the 
plans involved and, the PBGC reasonably expects that the financial 
assistance is necessary for the merged plan to become or remain 
solvent; the PBGC certifies its ability to meet existing financial 
obligations will not be impaired by providing the financial assistance; 
and the assistance is paid from the PBGC's fund for basic benefits 
guaranteed for multiemployer plans.
PBGC Plan Partitions
MPRA also expanded ERISA's partition rules, which previously allowed 
only the PBGC to partition plans that suffered significant contribution 
losses as a result of employer bankruptcies. In a partition, PBGC gives 
approval to divide a severely underfunded plan into two plans. 
Generally, the liability for orphaned participants is transferred to a 
new plan, which is technically insolvent from inception. The PBGC pays 
the orphan benefits up to the PBGC guaranteed amount. The original plan 
remains as is, and the goal is to restore its financial health.

A plan in critical and declining status may submit coordinated 
applications to the PBGC for a partition and to Treasury for a benefit 
suspension.

The PBGC may order a partition if the following conditions are 
satisfied:

(1)  The plan is in critical and declining status;
(2)  The PBGC determines that the plan has taken all reasonable 
measures to avoid insolvency, including the maximum benefit suspensions 
as discussed above;
(3)  The PBGC reasonably expects that the partition will reduce its 
expected long-term loss with respect to the plan and partition is 
necessary for the plan to remain solvent;
(4)  The PBGC certifies to Congress that its ability to meet existing 
financial assistance obligations to other plans will not be impaired by 
such partition; and
(5)  The cost arising from such partition is paid exclusively from the 
PBGC's fund for basic benefits guaranteed for multiemployer plans.
Suspension of Benefits
MPRA allows trustees of plans in critical and declining status to apply 
to Treasury to suspend (temporarily or permanently) participants' 
accrued pension benefits, including those already in pay status. MPRA 
defines ``suspension of benefits'' as the ``the temporary or permanent 
reduction of any current or future payment obligation of the plan to 
any participant or beneficiary under the plan, whether or not in pay 
status at the time of the suspension of benefits.''

A plan may suspend benefits only if the plan's actuary certifies that 
the plan is projected to avoid insolvency if the benefit suspensions 
are implemented.

Benefit suspensions are subject to the following limitations:

(1)  A participant or beneficiary's monthly benefit cannot be reduced 
below 110% of the PBGC-guaranteed amount;
(2)  Participants and beneficiaries aged 75 and older at the date of 
suspension have limitations on the suspension;
(3)  Participants and beneficiaries aged 80 and older at the date of 
suspension are exempt from suspensions;
(4)  Disability pensions are exempt from suspensions; and
(5)  Benefit suspensions must be reasonably implemented to avoid plan 
insolvency.

MPRA also includes a list of factors the plan may consider to ensure 
the benefit suspensions are equitably distributed among the 
participants and beneficiaries, including age, number of years to 
retirement, and the participants' benefit history.

MPRA requires plans with 10,000 or more participants to select a 
retiree representative to act as an advocate for the interests of the 
retirees and inactive participants during the suspension application 
process. The plan must pay for all reasonable legal, actuarial, and 
other costs the representative incurs.

Benefit Suspension Application Rules

In order to suspend benefits, the trustees must submit a detailed 
application to Treasury and demonstrate that the plan meets the 
statutory requirements. Once Treasury accepts the application for 
review, it has 225 days to render a decision or the application is 
automatically deemed approved. Treasury will generally request 
additional information and pose questions to the plan's attorneys and 
actuaries regarding the application.

If Treasury rejects a plan's application, the plan may challenge the 
denial in court. If Treasury approves a plan's application, the 
suspension is subject to a participant and beneficiary vote within 30 
days of the approval. If a majority of all participants and 
beneficiaries (not simply a majority of those who vote) do not actively 
vote to reject the suspensions, the suspensions are approved. 
Suspensions may not take effect until after the vote, and Treasury 
issues final authorization. If the participants and beneficiaries vote 
to reject the suspensions, Treasury, in consultation with the DOL and 
PBGC, must determine whether the plan is ``systemically important.'' A 
plan is ``systemically important'' if the plan's insolvency will result 
in $1 billion or more in projected PBGC liabilities. If a plan is 
deemed systemically important and suspensions were not approved by the 
participants, Treasury has the discretion either to accept the terms of 
the proposal or to modify the benefit suspensions in some other manner 
projected to avoid plan insolvency.

Since the passage of MPRA, 15 multiemployer defined benefit plans have 
filed applications with the Treasury Department to reduce benefits to 
avoid insolvency. As of December 2017, Treasury has approved only 4 of 
the 15 applications. These 15 applicants currently account for only 
1.35% of multiemployer defined benefits plans, but cover roughly 5% of 
all multiemployer defined benefits plan participants. These plans 
represent a segment of failing multiemployer pension plans that, 
although in the minority, could cause the entire multiemployer pension 
system to crumble if additional legislative action is not taken. 
Details on these applications are provided in ``MPRA Suspension 
Applications to Date'' in this paper.

                      Individual Plan Initiatives

Over the past 15 years, trustees of financially troubled plans have 
employed numerous strategies to solve plans' funding issues. While some 
of these strategies have been helpful, most of these plans' funding 
issues remain.

Reductions to Future Benefit Accruals and Increased Employer 
Contributions

The PPA requires trustees to take an active and forward-looking 
approach in managing their plans. Plans in critical and endangered 
status have to take corrective action. As part of that corrective 
action, plans can continue to reduce future benefit accruals and 
increase contributions. Critical-status plans can also reduce and 
eliminate adjustable benefits for those participants that have not 
retired.

Prior to the PPA, trustees had limited options to combat underfunding 
issues. Most plans had to solve funding problems by: (1) reducing the 
future benefit accruals of the active participants; and/or (2) 
requiring employers to increase their contributions.\39\ While these 
strategies were sometimes successful, for employers in industries like 
coal, trucking, manufacturing, and bakery, continued contribution 
increases became unsustainable.
---------------------------------------------------------------------------
    \39\ In general terms, a participant's accrued benefit represents 
the benefit that the participant has earned or ``accrued'' under the 
plan as of a given time. For example, if a participant terminated 
covered employment before reaching normal retirement age under a plan's 
rules, the benefit to which the participant is entitled to receive on 
reaching normal retirement age is the accrued benefit. The plan usually 
specifies the accrual method used to determine a participant's accrued 
benefit.

Many trustees now recognize that they can no longer feasibly cut 
benefits for active employees and raise employer contributions. 
Employers and bargaining unit groups have left plans at alarming rates 
over the last decade as contribution rates have steadily increased and 
plans have repeatedly reduced benefits for active participants. 
Additional contribution increases are not sustainable in many 
industries, and threaten the employers' competitiveness, and in some 
cases, their existence. Losing employers would further erode the stream 
of contribution revenue on which a plan relies and exacerbate the 
---------------------------------------------------------------------------
negative cash flow problem for severely underfunded plans.

For example, in 1980 the Central States Pension Fund had approximately 
12,000 employers; by July 2015 the number was down to 1,800.\40\ 
Between 2010 and 2014, Central States experienced approximately 260 
involuntary employer withdrawals as a result of employer bankruptcies. 
During this same period, the New York State Fund also had a significant 
number of employers leave, negatively affecting its funding level.\41\ 
In December 2013, the New England Teamsters and Trucking Industry 
Pension Fund (New England Teamsters Fund) reported that in order to 
avoid filing bankruptcy, one of its 10 largest employers negotiated an 
agreement with the International Brotherhood of Teamsters to 
temporarily cease pension contributions, with a subsequent resumption 
at a significantly reduced level. Another large employer emerged from 
bankruptcy and notified the Fund that it was unable to pay its current 
contributions.\42\
---------------------------------------------------------------------------
    \40\ Central States, Southeast and Southwest Areas Pension Fund's 
MPRA Suspension of Benefits Application, dated September 25, 2015, 
section 19.8.4.
    \41\ New York State Teamsters Conference Pension and Retirement 
Fund's MPRA suspension of benefits application, dated May 15, 2017, 
section 5.
    \42\ New England Teamsters and Trucking Industry Pension Fund 2013 
Review of the Rehabilitation Plan.
---------------------------------------------------------------------------

Funding Policies

Some trustees have adopted policies with strict rules on the acceptance 
of employer contributions to ensure that the bargaining parties, i.e., 
the union and the employer, do not negotiate a CBA containing pension 
provisions that would adversely affect plan funding. These trustees 
have drafted policies or included rules in the plans' governing 
documents explicitly reserving sole discretion to reject a particular 
CBA if it is not in compliance with the policy or if it is deemed 
economically bad for the plan. While some plans have had such policies 
for many years, others are now just implementing them.

For example, the Board of Trustees of the Western Conference of 
Teamsters Pension Trust Fund does not allow CBAs that permit or require 
pension contributions for non-bargaining unit members or CBAs that 
limit the employees on whose behalf contributions are to be made.

The Trustees of the Central States Pension Fund have taken a similar 
but more aggressive position. They reserved discretion in the Fund's 
trust agreement to reject any CBA it determines to be unlawful or would 
``threaten to cause economic harm to, and/or impairment of the 
actuarial soundness of, the Fund, and/or that continued participation 
by the Employer is not in the best interest of the Fund.'' \43\
---------------------------------------------------------------------------
    \43\ ``Trust Agreement of the Central States, Southeast and 
Southwest Areas Pension Fund as amended through April 1, 2016,'' 9, 
https://mycentralstatespension.org/-/media/Pension/PDFs/Legal/
pension_fund_trust_agreement_as_amended_april_2016.pdf?la=en&hash=1A7964
61
E51C6BB84ED3111B62C59A326D881686.
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Two-Pool Withdrawal Liability Method

Some trustees have requested approval from the PBGC to adopt an 
alternative method to calculate withdrawal liability called the ``two-
pool withdrawal liability method'' (the two-pool method). Under the 
two-pool method, the plan maintains two withdrawal liability pools for 
contributing employers: one new pool for new employers and current 
employers that elect to pay off their existing withdrawal liability and 
transition over; and a second old pool for existing employers who, for 
a variety of reasons, decide not to trigger a withdrawal and remain in 
the plan.

Usually, an employer that is not contributing or does not owe 
withdrawal liability to the plan can qualify to be in the new pool. If 
a new employer enters the plan, it would automatically enter the new 
pool. When an already contributing employer moves from the old pool to 
the new pool, it generally agrees to withdraw from the existing 
withdrawal liability pool, to adhere to a withdrawal liability payment 
schedule, and to reenter the plan through the new pool for 
contributions made and benefits earned after that date.

Over the past few years, PBGC has received a number of requests from 
plans looking to implement the two-pool method.\44\ The Central States 
Pension Fund, the New England Teamsters Fund, the New York State Fund, 
and the Bakery and Confectionery Union and Industry International 
Pension Fund have received PBGC approval to use the two-pool method. In 
order to encourage employer participation in the new pool, the trustees 
offer favorable settlement terms to satisfy withdrawal liability, but 
the extent of the relief is related to the employer's sustained 
commitment and continued contributions to the Fund.
---------------------------------------------------------------------------
    \44\ ``Retirement Matters, Request for Information: Two Pool 
Withdrawal Liability,'' PBGC Blog, January 4, 2017, https://
www.pbgc.gov/about-pbgc/who-we-are/retirement-matters/request-
information-two-pool-withdrawal-liability.
    The Western Pennsylvania Teamsters and Employers Pension Fund has 
implemented the two-pool method but is still waiting for the PBGC's 
official approval. See Plan Document of the Western Pennsylvania 
Teamsters and Employers Pension Fund.

The two-pool method has the potential to provide significant benefits 
to some plans. Trustees that have implemented the two-pool method 
believe it helps retain contributing employers that might otherwise 
withdraw.\45\ A plan's long-term funding is affected by the strength of 
its base of contributing employers. Often times, a plan's more 
financially stable employers become frustrated as other employers 
withdraw from the plan. These withdrawals transfer costs and liability 
to the remaining employers over time in the form of higher 
contributions and increased reallocated withdrawal liability. This 
trend encourages healthy employers to withdraw before additional 
financial responsibility shifts to them, which ultimately places 
financial stress on the plan. The two-pool method offers an opportunity 
for healthy employers to remain in a plan while insulating them from 
the less financially stable employers.\46\
---------------------------------------------------------------------------
    \45\ ``Response to Request for Information on Alternative Two-Pool 
Withdrawal Liability Methods,'' American Academy of Actuaries, February 
21, 2017; see also PBGC letter to the Bakery Confectionery Union and 
Industry International Pension Fund, January 19, 2017.
    \46\ ``Response to Request for Information on Alternative Two-Pool 
Withdrawal Liability Methods,'' American Academy of Actuaries, February 
21, 2017.

Despite its potential benefits, to date the two-pool method has not 
attracted new employers. It is a relatively new concept, however, and 
may be helpful in conjunction with other strategies, such as mergers 
and partitions.

    DEVELOPMENTS UNDER THE MULTIEMPLOYER PENSION REFORM ACT OF 2014

Since its passage almost three years ago, MPRA has been criticized in 
part because of the manner in which it was enacted but more 
substantively because of the law's allowance for reductions to accrued 
benefits, including benefits already in pay status. Additionally, 
critics claim that implementation of MPRA failed to provide relief to 
the one plan that arguably was the primary focus of Congressional 
concern: the Central States Fund. Supporters assert, however, that 
absent benefit reductions, there are some plans that cannot avoid 
insolvency and thus will result in benefit reductions for most 
participants far greater than proposed under the rescue plan, since 
participants' benefits will be reduced to the PBGC guarantees. That the 
PBGC itself is projected to become insolvent only complicates things.

                  MPRA Suspension Applications to Date

As of December 2017, 15 plans covering a variety of industries, 
including transportation, furniture, machinery, and bricklaying, have 
applied to Treasury to suspend benefits, while four of those same plans 
submitted coordinating partition applications to the PBGC.\47\
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    \47\ Applications for Benefit Suspension, U.S. Department of the 
Treasury, October 26, 2017, https://www.treasury.gov/services/Pages/
Plan-Applications.aspx.
    See also Partition Requests, Pension Benefit Guaranty Corporation, 
October 26, 2017, https://www.pbgc.gov/prac/pg/mpra/multiemployer-
plans-and-partition.

---------------------------------------------------------------------------
Treasury has denied the following MPRA applications:

      Automotive Industries Pension Plan;
      Central States, Southeast and Southwest Areas Pension Fund 
(Central States);
      Iron Workers Local Union 16 Pension Fund;
      Road Carriers Local 707 Pension Fund (Local 707 Pension Fund); 
and
      Teamsters Local 469 Pension Plan.

The following plans withdrew their applications prior to Treasury's 
issuance of a ruling:

      Alaska Ironworkers Pension Plan;
      Bricklayers and Allied Craftsmen Local No. 7 Pension Plan;
      Bricklayers and Allied Craftsmen Local No. 5 Pension Plan 
(Bricklayers Local 5 Pension Plan);
      Local 805 Pension and Retirement Plan (Local 805 Pension Fund); 
and
      Southwest Ohio Regional Council of Carpenters Pension Plan.

The following application is under review:

      Western States Office and Professional Employees Pension Fund.

Treasury has approved the following applications:

      Iron Workers Local 17 Pension Fund;
      United Furniture Workers Pension Fund A (Furniture Workers 
Fund);
      New York State Teamsters Conference Pension & Retirement Fund 
(New York State Fund); and
      International Association of Machinists Motor City Pension Fund 
(Motor City Fund).

                        MPRA Application Denials

Central States Pension Fund

Treasury denied Central States Pension Fund's suspension application in 
May 2016. The Central States Pension Fund's application was the first 
application submitted under MPRA. Central States, the largest 
multiemployer pension plan in the country with close to 400,000 total 
participants, roughly half of whom currently receive annual benefits 
totaling close to $3 billion,\48\ has been reeling from investment 
losses stemming from the 2008 financial crisis. When Central States 
submitted its MPRA application, it had $16.8 billion in assets against 
$35 billion in liabilities. In 2015, the Fund was certified to be in 
critical and declining status, at 47.7% funded and projected to go 
insolvent by 2026.
---------------------------------------------------------------------------
    \48\ Central States, Southeast and Southwest Areas Pension Fund's 
MPRA suspension of benefits application, September 25, 2015, section 
5.1.9, https://www.treasury.gov/services/AppsExtended/
(Checklist%205)%20Critical%20and%20Declining%20Status%20Certification.pd
f.

Decades ago, the Fund had four active workers for every retiree or 
inactive member. But, like many other Teamster plans, that ratio 
reversed to approximately five retirees for every one active worker, as 
a decline in membership due to the deregulation of the trucking 
industry and two economic catastrophes in the 2000s resulted in far 
fewer active workers paying into the plan than receiving benefits. The 
Fund's retirees currently earn $1,128 per month on average, although 
that total includes workers with tenures of all different lengths. The 
---------------------------------------------------------------------------
longest-tenured workers receive about $2,400 a month.

Treasury rejected the Central States Pension Fund's application because 
it failed to satisfy several MPRA technical requirements.\49\
---------------------------------------------------------------------------
    \49\ Kenneth R. Feinberg, U.S. Department of the Treasury's MPRA 
suspension application denial letter to the Board of Trustees of the 
Central States, Southeast and Southwest Areas Pension Plan, May 6, 
2016, https://www.treasury.gov/services/Responses2/Central%20States
%20Notification%20Letter.pdf.

According to Treasury, the Fund did not meet the following statutory 
---------------------------------------------------------------------------
requirements:

(1)  To use reasonable investment return assumptions;
(2)  To use a reasonable entry age assumption;
(3)  To equitably distribute the suspensions; or
(4)  To draft its suspension notices to be understandable by the 
average plan participant.

Many commentators were shocked that Treasury denied the Central States 
application, because it is one of the largest and most financially 
troubled plans in the multiemployer system. Many believe MPRA was 
passed specifically to save Central States, on the grounds that if the 
plan went insolvent it would effectively bankrupt the PBGC's 
multiemployer plan insurance program. On the same day that Treasury 
rejected Central States' application, Treasury Secretary Jacob J. Lew 
sent a letter to Congress wherein he advised that the larger funding 
issues facing Central States and other multiemployer plans remain 
unsolved, especially as the PBGC is simultaneously heading toward 
insolvency. Secretary Lew's letter explained that Treasury's rejection 
of the application may have provided participants with some short-term 
relief but pointed out that even larger cuts may be required in the 
future for the Fund to meet MPRA's requirements.\50\
---------------------------------------------------------------------------
    \50\ Jacob J. Lew, Secretary of the U.S. Department of the 
Treasury, letter to Congress, May 6, 2016, https://www.treasury.gov/
services/Documents/MPRA%20SecLew%20Letter%20to%20
Congress%20050616.pdf.

Central States' executive director, Thomas Nyhan, said the decision was 
disappointing because the trustees believed ``the rescue plan provided 
the only realistic solution to avoiding insolvency.'' Nyhan said the 
Fund's retirees would have been better off with the cuts than they 
would be if the plan became insolvent. Given PBGC's looming insolvency, 
Nyhan noted that without the PBGC safety net, the Fund's participants 
could see their pension benefits reduced to ``virtually nothing.'' \51\
---------------------------------------------------------------------------
    \51\ Thomas Nyhan, Executive Director and General Counsel of the 
Central States, Southeast and Southwest Area Pension Plan letter to 
participants, May 20, 2016, https://my
centralstatespension.org/-/media/Pension/PDFs/cspf-letter-to-
participants-05-20-16.pdf?la=en&
hash=5A9F9CCFF4AD8A48781D30CDD684B02092531264.

As of this writing, the Fund has posted the following sobering message 
---------------------------------------------------------------------------
on its website:

        Although the decision to request approval of a pension rescue 
        plan was very difficult for the Fund's Trustees, we are 
        disappointed in Treasury's decision and strongly disagree with 
        the reasons expressed by Treasury for denying our rescue plan 
        application. Central States' proposed rescue plan was a 
        proposal of last resort, and clearly not an option that the 
        Trustees preferred. It was, however, based on a realistic 
        assessment that benefit reductions under a rescue plan were the 
        only available, practical way to avoid the hardship and 
        countless personal tragedies that will result if the Pension 
        Fund runs out of money.

Since the Central States Pension Fund submitted its application, its 
funding percentage has decreased to approximately 42.1%, with an 
estimated insolvency date of 2025. Its liabilities have increased to 
approximately $39 billion, and its assets have decreased to $16.1 
billion.\52\
---------------------------------------------------------------------------
    \52\ 2017 Notice of Critical and Declining Status of the Central 
States, Southeast and Southwest Area Pension Plan, https://www.dol.gov/
sites/default/files/ebsa/about-ebsa/our-activities/public-disclosure/
status-notices/declining/2017/central-states-southeast-and-southwest-
areas-pension-plan.pdf.
    Central States, Southeast and Southwest Area Pension Plan 2016 
Annual Form 5500, Schedule MB, October 6, 2017.
---------------------------------------------------------------------------

Road Carriers Local 707 Pension Fund

Treasury and the PBGC denied the Road Carriers Local 707 Pension Fund's 
coordinated partition and suspension applications in June 2016.\53\ The 
Fund, a Teamster plan based in Hempstead, New York, is currently 
insolvent and receives financial support from the PBGC in the amount of 
$1.7 million per month to pay benefits.\54\
---------------------------------------------------------------------------
    \53\ Kenneth R. Feinberg, U.S. Department of the Treasury's MPRA 
suspension application denial letter to the Board of Trustees of the 
Road Carriers Local 707 Pension Fund, June 24, 2016, https://
www.treasury.gov/services/Responses2/
Local%20707%20Notification%20Letter.pdf.
    See also PBGC letter to the Board of Trustees of the Road Carriers 
Local 707 Pension Fund, June 2016, https://www.pbgc.gov/documents/PBGC-
Letter-June-2016.pdf.
    \54\ Notice of Insolvency Benefit Level of the Road Carriers Local 
707 Pension Fund, dated December 2016, https://www.pbgc.gov/news/other/
res/road-carriers-local-707-faqs (October 29, 2017).

At the time the Fund submitted its applications in February and March 
2016, it was less than 5% funded and had only $24.5 million in assets, 
a 2:1 retiree-to-active participant ratio, and only nine remaining 
contributing employers.\55\
---------------------------------------------------------------------------
    \55\ Road Carriers Local 707 Pension Fund Coordinated Application 
for Approval of Suspension of Benefits Under MPRA, Exhibits 2-3, March 
15, 2016, https://www.treasury.gov/services/KlineMillerApplications/
Redacted%20Files%20Local%20707%20application_001.pdf.

The trustees had already reduced benefit levels for those in pay status 
and filed the Fund's notice of insolvency with the PBGC, informing the 
Corporation that it would become insolvent and require financial 
support beginning in February 2017. Like many other Teamster plans, 
this Fund has never been able to recover from a combination of trucking 
deregulation, little to no growth in the trucking industry, an 
increasing retiree population, bankrupt employers failing to pay their 
---------------------------------------------------------------------------
withdrawal liability, and the two financial crises in the 2000s.

In its denial of the partition request, PBGC concluded that the Fund 
failed to demonstrate that it would remain solvent following a 
partition, and that its application was based on unreasonably 
optimistic assumptions related to active participants and future 
contribution levels, including those of the Fund's dominant employer, 
YRC Worldwide.\56\ Treasury also denied the Fund's suspension 
application, mainly because the projection of solvency in the 
application was based on the implementation of a partition, which the 
PBGC denied.\57\
---------------------------------------------------------------------------
    \56\ PBGC letter to Board of Trustees of the Road Carriers Local 
707 Pension Fund, June 10, 2016, https://www.pbgc.gov/documents/PBGC-
Letter-June-2016.pdf.
    \57\ Kenneth R. Feinberg, U.S. Department of the Treasury's MPRA 
suspension application denial letter to the Board of Trustees of the 
Road Carriers Local 707 Pension Fund, June 24, 2016, https://
www.treasury.gov/services/Responses2/
Local%20707%20Notification%20Letter.pdf.
---------------------------------------------------------------------------

Other MPRA Application Denials and Withdrawals

The applications of the Automotive Industries Pension Plan, the 
Ironworkers Local Union 16 Pension Fund, and the Teamsters Local 469 
Pension Plan were all rejected, because they did not meet MPRA's 
technical requirements. According to Treasury's denial letters, these 
plans' applications were denied because the proposed suspensions were 
not reasonably estimated to avoid insolvency, the actuarial assumptions 
and methods (i.e., assumptions about mortality rates, hours of service, 
and spousal survivor benefits) were unreasonable, and/or assumptions 
about the return on investment were unreasonable.\58\
---------------------------------------------------------------------------
    \58\ See U.S. Department of the Treasury letter to Board of 
Trustees of the Automotive Industries Pension Plan, May 9, 2017; U.S. 
Department of the Treasury letter to Board of Trustees of the 
Ironworkers Local 16 Pension Fund, November 3, 2016; U.S. Department of 
the Treasury letter to Board of Trustees of the Teamsters Local 469 
Pension Fund.

On the other hand, a few plans, such as the Alaska Ironworkers Pension 
Plan and the Bricklayers and Allied Craftsmen Local No. 5 and No. 7 
Pension Plans, made the strategic decision to withdraw their 
applications from Treasury consideration before the Department could 
issue its decision.\59\ These plans likely withdrew their applications 
based on discussions with Treasury. To date, three of the four plans 
that received Treasury's approval withdrew their initial applications 
and resubmitted revised applications after consultation with 
Treasury.\60\ The recent approvals may give these plans hope that 
Treasury will approve a refiled application.
---------------------------------------------------------------------------
    \59\ See Applications for Benefit Suspensions, U.S. Department of 
the Treasury, October 31, 2017, https://www.treasury.gov/services/
Pages/Plan-Applications.aspx.
    \60\ Id.
---------------------------------------------------------------------------

                       MPRA Application Approvals

Treasury has now approved four plans' applications to suspend benefits 
under MPRA. Three of these approvals have occurred under President 
Donald Trump's administration and may indicate a changing trend in the 
review and approval process at Treasury.

Iron Workers Local 17 Pension Fund

On December 16, 2016, Treasury issued its first MPRA suspension 
application approval to the Iron Workers Local 17 Pension Fund based in 
Cleveland, Ohio.\61\ At the time the Fund submitted its application, it 
was 44.3% funded with approximately $84 million in assets and $263 
million in liabilities and was projected to become insolvent in 
2024.\62\ This Fund was one of the smaller plans to submit an 
application, with a little fewer than 2,000 participants and a 1:2 
active-to-retired-worker population ratio.
---------------------------------------------------------------------------
    \61\ Letter to the Board of Trustees of the Ironworkers Local 17 
Pension Fund, U.S. Department of the Treasury, December 16, 2016.
    \62\ Iron Workers Local 17 Pension Fund's Application to Suspend 
Benefits, July 29, 2016.

The Fund's proposed suspensions generally involved reducing accrued 
benefits and eliminating early retirement subsidies and extra benefit 
credits indefinitely. Benefits were generally estimated to be reduced 
between 20% and 60%. Under the proposed suspensions, 52%, or 1,029 of 
the plan's 1,995 participants, will not have their retirement benefits 
cut. More than 30% of participants will see benefits cut by at least 
20%. Specifically, 30 participants will see extreme cuts between 50% 
and 60%; 115 participants will see cuts between 40% and 50%; 191 will 
see cuts between 30% and 40%; and 265 will see cuts between 20% and 
30%. Another 168 participants will see benefits cut by 10% or less. The 
suspension will reduce the average monthly benefit for all participants 
by 20%, from $1,401 to $1,120. With these proposed suspensions, the 
Fund's actuaries estimated that the Fund will remain solvent through 
April 2055.

United Furniture Workers Pension Fund A

In July 2017, the Furniture Workers Pension Fund A, based in Nashville, 
Tennessee, became the second plan to receive Treasury's approval to 
suspend benefits.\63\ The Fund has approximately 10,000 participants 
and also received approval for a partition from the PBGC effective in 
September 2017.\64\ At the time the Fund submitted its suspension plan, 
it had assets of approximately $55 million and almost $200 million in 
liabilities, was approximately 30.6% funded, and was projected to 
become insolvent by 2021.\65\ As with other plans facing insolvency, 
the plan's funding had slowly deteriorated over the years due to its 
inability to recover from the market downturns in 2000 and 2008 and to 
competitive pressures caused by increased furniture imports from 
overseas, the loss of some of its larger contributing employers, the 
further decline of its active participant base, and its inability to 
attract new contributing employers in the industry.
---------------------------------------------------------------------------
    \63\ Letter to Board of Trustees of the United Furniture Workers 
Pension Fund A, U.S. Department of the Treasury, August 31, 2017, 
https://www.treasury.gov/services/Responses2/
UFW_Final_Approval_Letter.pdf.
    \64\ Letter to Board of Trustees of the United Furniture Workers 
Pension Fund A, U.S. Department of the Treasury, August 31, 2017, 
https://www.treasury.gov/services/Responses2/
UFW_Final_Approval_Letter.pdf.
    See also PBGC FAQs on the United Furniture Workers Pension Fund, 
https://www.pbgc.gov/about/faq/ufw-partition-faqs.
    \65\ United Furniture Workers Pension Fund A's Second Application 
to Suspend Benefits Under MPRA, Exhibit 3, U.S. Department of the 
Treasury, March 15, 2017, https://www.treasury.gov/services/
KlineMillerApplications/
United%20Furniture%20Workers%20Pension%20Fund%20A%
20-
%20Second%20Application%20for%20Approval%20of%20Suspension%20of%20Benefi
ts%20-%20File%202a%20of%203_Redacted.pdf.

In the Fund's application, its trustees estimated that 2,800 
participants would receive on average a reduction of 12.7%, and 7,100 
participants would receive no reductions because they were protected 
under MPRA (i.e., they were over age 80, disabled, etc.).\66\ The 
reductions were estimated to range from 0% to 62%.\67\
---------------------------------------------------------------------------
    \66\ Letter from the United Furniture Workers Pension Fund A to 
Participants, March 15, 2017.
    \67\ Id.

In the Fund's partition application, the trustees proposed to partition 
to the successor plan 100% of the liability associated with the 
terminated vested participants and 56% of the liability associated with 
those in paid status (retirees, beneficiaries, and disabled 
participants).\68\ The PBGC generally would become responsible for 
paying the partitioned liabilities in the successor plan. The trustees 
estimated that this would be the minimum amount of liability necessary 
to transfer to the PBGC to relieve some of the financial burden and to 
remain solvent for the 30-year period required under MPRA.
---------------------------------------------------------------------------
    \68\ United Furniture Workers Pension Fund A's Second Application 
to Suspend Benefits Under MPRA, U.S. Department of the Treasury, March 
15, 2017, https://www.treasury.gov/services/KlineMillerApplications/
United%20Furniture%20Workers%20Pension%20Fund%20A%20-%20Se
cond%20Application%20for%20Approval%20of%20Suspension%20of%20Benefits%20
-%20File201
%%20of%203_Redacted.pdf.
---------------------------------------------------------------------------

New York State Teamsters Conference Pension and Retirement Fund

The New York State Teamsters Conference Pension and Retirement Fund was 
the third and largest plan to receive Treasury approval.\69\ Like the 
other two successful plans before it, this plan withdrew its original 
application and submitted a new one.
---------------------------------------------------------------------------
    \69\ Letter to Board of Trustees of the New York State Teamsters 
Conference Pension and Retirement Fund, U.S. Department of the 
Treasury, September 13, 2017, https://www.treasury.
gov/services/Documents/NYST%20final%20approval%20letter.pdf.

Over the past 35 years, this Fund faced a significant deterioration in 
its contribution base. In 1990, the Fund had 37,953 total participants, 
with an active population of approximately 23,883 workers and a retiree 
and terminated vested population of 14,070.\70\ The Fund had almost 500 
contributing employers and received $60 million in annual 
contributions, while paying about $46.9 million in annual benefits.
---------------------------------------------------------------------------
    \70\ New York State Teamsters Conference Pension and Retirement 
Fund Second Application to Suspend Benefits, U.S. Department of the 
Treasury, May 15, 2017, https://www.treasury.
gov/services/KlineMillerApplications/
01a%20NYSTPF%20MPRA%20App%20C%20Exhibits%20
01%20to%2016_Redacted.pdf.

At the time the Fund submitted its revised application to Treasury in 
May 2017, it had almost the same number of participants (34,459); 
however, it now had two retirees for every active worker, and only 184 
contributing employers. The Fund was receiving $118.7 million in annual 
contributions but paying approximately $280.1 million in annual retiree 
benefits. While almost fully funded in 2000, as of January 1, 2017, the 
plan was 37.8% funded, with $1.28 billion in assets and $3.39 billion 
---------------------------------------------------------------------------
in liabilities.

In its application, the trustees proposed a 19% reduction for all 
active participants and a 29% benefit reduction for all inactive 
participants. It was estimated that nearly 28% of participants would 
not see any cuts due to MPRA's protections.

                International Association of Machinists 
                        Motor City Pension Fund

On November 6, 2017, the Troy, Michigan-based International Association 
of Machinists Motor City Pension Fund (Motor City Fund) became the 
fourth plan to receive Treasury's approval to suspend benefits.\71\ 
This Fund became the first one to receive Treasury's approval without 
undergoing a resubmission process.
---------------------------------------------------------------------------
    \71\ Letter to the Board of Trustees of the International 
Association of Machinists Motor City Pension Plan, U.S. Department of 
the Treasury, November 6, 2017, https://www.treasury.gov/services/
Pages/Benefit-Suspensions.aspx.

Over the last 15-plus years, the Motor City Fund's finances have been 
affected by the same factors plaguing other plans seeking MPRA relief--
loss of contributing employers, a decrease in active participants, and 
an inability to recover from the economic catastrophes of the 
2000s.\72\ In 2006, the Fund was 74% funded with a market value of 
assets of approximately $84 million and about $111 million in 
liabilities.
---------------------------------------------------------------------------
    \72\ Board of Trustees of the International Association of 
Machinists Motor City Pension Plan Application to Suspend Benefits, 
U.S. Department of the Treasury, March 29, 2017, https://
www.treasury.gov/services/Pages/International-Association-of-
Machinists-Motor-City-Pension-Fund.aspx.

Since then, the Fund's demographics and asset base have declined. The 
Fund has experienced numerous employer withdrawals over the years. The 
Fund had 20 contributing employers in 2012, 16 in 2015, and 11 in 2016, 
and is currently down to five. As of June 30, 2016, the Fund was about 
58% funded with only $51 million in assets and about $101 million in 
liabilities. It pays out $8.69 million in benefits to its retirees 
annually, while receiving only $1.6 million in employer contributions. 
Unbelievably, it has almost eight inactive participants receiving 
benefits per every one active worker. Without the benefit suspensions, 
---------------------------------------------------------------------------
the Fund is projected to be insolvent by the end of the 2026 plan year.

Under the Fund's suspension plan, monthly benefits payable to 
participants in pay status as of January 1, 2018, would be reduced to 
110% of the PBGC-guaranteed amount, which is the maximum reduction 
allowed under MPRA. The reduction applies to benefits earned up to 
January 1, 2018. Accruals after January 1, 2018, will return to 0.5% of 
credited contributions. As of December 2017, the Fund was in the 
process of submitting its proposal to its 1,134 members for voting.

                            IS MPRA WORKING?

MPRA has been neither an unmitigated disaster nor a panacea for 
multiemployer pension plans. Many commentators and, without a doubt, 
most plan participants are unhappy with MPRA because it allows plan 
trustees to violate the most basic tenet of ERISA: that once a benefit 
is earned, it cannot be taken away. There is little doubt, however, 
that prior to MPRA there was nothing some plans could do to avoid 
insolvency given the anti-cutback rule and the unsustainability of 
employer contribution increases. For plans that have recently reduced 
benefits, there is now hope that they will provide benefits for at 
least the next 30 years and perhaps in perpetuity. For other plans like 
Central States and the UMWA Pension Plan to survive, additional 
legislative action will need to be taken.

                                  Yes

MPRA now allows plans to reduce accrued benefits, which are by far the 
highest expense most plans have. It is virtually impossible for a plan 
with severe funding issues to reduce costs sufficiently when reductions 
are limited to future accruals. While there is a cost to providing 
future service credit, it is the past liabilities, many of which are 
unfunded but still owed, that normally sink a pension plan. With 
limited cost-cutting measures available pre-MPRA, plan trustees looked 
to employers to pay more and more every year. Now that well has run dry 
and the ability to cut accrued benefits is the last tool available for 
some plans to avoid insolvency.

The MPRA application process also appears to be getting more 
streamlined. The first several MPRA applications were denied because 
Treasury was not comfortable with the actuarial and investment 
assumptions that plans were making in proposing their benefit 
suspensions. Treasury has since issued new regulations governing 
suspension applications and has demonstrated a willingness to engage 
plan advisors during Treasury's review process. This allows for the 
exchange of information and the tweaking of certain assumptions that 
make it easier for the plan to demonstrate that suspensions will avoid 
insolvency for at least 30 years, which is what is required for 
Treasury to approve an application.

Treasury has now approved four MPRA applications, with the Motor City 
Pension Fund being the first plan to obtain an approval on its initial 
application. This could possibly bode well for future applications.

                                   No

Although Treasury seems to have implemented a process that may 
ultimately result in more suspension application approvals, the process 
is still lengthy and expensive. This is partly attributable to 
Treasury's use of its own actuarial and investment assumptions when 
reviewing and evaluating a plan's suspension application. By 
substituting its own assumptions for those of the plans' actuaries, 
Treasury adds a layer of complexity that slows the process and makes it 
more expensive.

MPRA's statutory text does not require (or authorize) Treasury to make 
such a detailed review of suspension applications. The statute 
authorizes Treasury to review applications to determine if the plan is 
eligible for the suspension and has satisfied the requirements of MPRA. 
In fact, the statute specifically says that when evaluating an 
application, Treasury must accept the trustees' determinations unless 
the plan's determinations are clearly erroneous.

While MPRA allows plans to make drastic reductions in costs by reducing 
accrued benefits, nothing in MPRA helps to infuse new money into the 
plans. Ultimately, some of the larger and most underfunded plans will 
need a new income stream in addition to benefit cuts to avoid 
insolvency. A combination of new money and benefit reductions could 
stop the bleeding from negative cash flow and allow a plan to earn its 
way out of critical and declining status. There is nothing in MPRA that 
helps on the income side of the equation.

Benefit cuts alone do not appear to be sufficient to address the 
payment of the orphan liability some plans have. MPRA has been unable 
to save two of the largest and most underfunded plans: Central States 
and the UMWA Plan. Central States' application was denied, and the UMWA 
Plan's benefit levels do not seem to make it a candidate for benefit 
suspensions under MPRA because it is already paying out benefits in 
many cases that are below the minimum amount allowed under MPRA. PBGC's 
projected insolvency is in part based on the liabilities it sees coming 
from these two plans. Although other legislative proposals have been 
made to provide relief to the UMWA Plan, nothing has been passed to 
date.

MPRA has been helpful to some plans and may prove helpful to others. 
But MPRA will not save Central States, the UMWA Pension Plan, and the 
other most severely underfunded plans because it provides no additional 
funding mechanism, which these plans will require. For these plans, and 
the more than 1 million participants in them, additional legislation is 
needed in short order.

                    WHAT HAPPENS IF NOTHING HAPPENS?

Central States, the UMWA Plan, and other plans approaching insolvency 
are not in a position to impose additional benefit cuts or employer 
contribution increases. These plans generally have no realistic 
expectation that any new employers will enter the plan. As assets 
dwindle, the trustees' fiduciary duty limits their ability to diversify 
the plan's investments.\73\ Now begins the death spiral, the inexorable 
slow march that will see the assets depleted while benefits are still 
due and owing.
---------------------------------------------------------------------------
    \73\ As mentioned earlier, as a plan's assets dwindle, trustees are 
obligated by their fiduciary duties to shift a plan's investments out 
of equities and into more conservative investment vehicles to preserve 
cash to pay benefits for as long as possible. Such investments 
generally provide for little growth, so there is no opportunity for the 
asset base to grow. If the trustees continued to leave assets invested 
in equities, a sharp downtown in equity markets could cause a plan to 
go insolvent much sooner than otherwise anticipated.

If insolvency occurs, participants will receive significant cuts in 
payments, because PBGC insurance covers only a fraction of the promised 
pension benefit payment. For example, a Local 707 Pension Fund 
participant with 30 years of service once received approximately 
$48,000 a year from the plan. Since the plan's insolvency, that 
participant receives only $12,870 per year from the PBGC, which is the 
maximum guaranteed amount. This reduction obviously puts participants 
---------------------------------------------------------------------------
in a difficult position.

Many cannot return to work because of age and health issues, not to 
mention potential skill and certification gaps. As a result, they will 
have to find other ways to make up for the reduction, including 
liquidating their assets, relying on family members, and looking to the 
government, and by extension the taxpayer, through the use of Medicare, 
Medicaid, Social Security, Supplemental Nutrition Assistance Program 
benefits, and other social safety net programs.

The failure of the largest and most underfunded plans will ultimately 
bankrupt the PBGC. In its FY 2016 Projections report, the PBGC stated 
that the multiemployer insurance program is likely to run out of money 
by the end of 2025. The PBGC Multiemployer Program's 2016 deficit of 
$59 billion increased to $65.1 billion in 2017 and is expected to 
explode to $80 billion by 2026.\74\ Once the multiemployer program is 
bankrupt, participant payments will be cut even further and may even 
cease. As such, the scenario described above will become even direr.
---------------------------------------------------------------------------
    \74\ ``PBGC Projections: Multiemployer Program Likely Insolvent by 
the End of 2025; Single-Employer Program Likely to Eliminate Deficit by 
2022,'' press release, Pension Benefit Guaranty Corporation, August 3, 
2017, https://www.pbgc.gov/news/press/releases/pr17-04.

A failure of this magnitude in the multiemployer system will damage the 
entire economy--not just employers in the multiemployer plan system. 
Insolvencies and the subsequent benefit cuts that follow also have deep 
impacts on the communities where participants live. Retirees will see 
their standard of living reduced. At a minimum, they will have less 
income to spend in local economies. The reduced spending will be felt 
by businesses, especially in small communities. Less money spent by 
retirees also means less paid to local government in sales and other 
taxes. When tax revenue decreases, the demand for social programs will 
increase, because many retirees will likely lose their homes and/or 
have difficulty paying for medical expenses. This will cause many to 
become reliant on social programs that have to be funded by taxpayers 
at a time when tax revenue will be declining. Simply put, pension plan 
insolvencies and a PBGC collapse will have a cumulative negative effect 
on entire communities. Individuals, government, and businesses will all 
suffer unless a solution is found.

                          POTENTIAL SOLUTIONS

Several proposals have been designed to address the multiemployer 
pension plan funding problem. Some are purely legislative proposals, 
whereas others deal with new pension plan designs. The most widely 
considered of the proposals are discussed below.

          PBGC Takeover of Critical and Declining Status Plans

The prospect of the PBGC taking over all plans that are classified as 
critical and declining has some appeal. After all, the PBGC was 
established in 1974 to provide insurance to private pension plans, 
including multiemployer plans. If the PBGC's mission is to provide 
assistance to financially troubled multiemployer plans, the plans in 
the worse shape should look to PBGC to not only help pay benefits if 
necessary, but to operate the plan as well.

Proponents of a complete PBGC takeover of critical and declining plans 
cite these primary reasons for their position--PBGC-operated plans will 
save money by reducing administrative expenses; or the threat of a PBGC 
takeover will provide an incentive for trustees to ensure adequate 
funding, because their jobs will be at risk otherwise.\75\
---------------------------------------------------------------------------
    \75\ Rachel Grezler, ``Congress Needs to Address the PBGC's 
Multiemployer Program Deficit Now,'' The Heritage Foundation Issue 
Brief, September 13, 2016, 2.

When a single-employer defined benefit pension plan goes insolvent, the 
PBGC takes over the operation of the plan. When a multiemployer plan 
goes insolvent, the PBGC offers financial assistance in the form of a 
loan. Not only are these loans almost never repaid, but the plan 
continues to operate under the pre-insolvency structure. This means 
that there remains a board of trustees comprised of an equal number of 
union and employer representatives who are charged with administering 
the plan in accordance with the fiduciary requirements of ERISA and the 
tax-qualification requirements of the Code. The trustees hire 
actuaries, attorneys, accountants, investment consultants, and 
investment managers to help comply with the various legal requirements. 
These professional advisors cost money, and therefore even an insolvent 
plan receiving financial assistance from PBGC has continuing 
---------------------------------------------------------------------------
administrative costs.

A PBGC takeover of critical and declining multiemployer plans would 
likely reduce administrative costs. The costs would not be eliminated, 
because the PBGC would still need the same actuarial, legal, 
accounting, and investment advisory services that the plan's trustees 
use. Nevertheless, many of the advisors would either already be on 
staff at PBGC, or the services could be provided in a less costly 
manner due to economies of scale.

However, the PBGC is not currently funded well enough itself to offer 
any meaningful long-term financial relief to multiemployer plans under 
its current structure of offering only loans. If the PBGC were to take 
over the administration of critical and declining plans, PBGC's costs 
would increase, even if only slightly. More important, plans that are 
in critical and declining status are not in that condition because of 
their administrative expenses; rather, they are in critical and 
declining status primarily because of massive negative cash flow issues 
brought on by having to pay millions more in benefits to retirees than 
they receive in contributions for active employees. While a PBGC 
takeover would most assuredly reduce administrative expenses, a 
reduction in administrative expenses alone, without shoring up the 
PBGC's financial condition, would not provide a long-term solution.

Another reason frequently cited by those advocating for PBGC takeovers 
is that the threat of a takeover will incentivize plan officials to 
more closely monitor a plan's funding level. This line of thinking 
assumes that once a plan becomes critical and declining, the PBGC 
takeover of the plan will cost people their jobs, and therefore, for 
self-preservation purposes, plan officials will do everything possible 
to prevent a plan from becoming critical and declining. While it is 
true that a plan's professional advisors and in-house administration 
(if any) would not be needed after a PBGC takeover, professional 
advisors and administrative staff do not have the authority to make 
decisions for the plan that affect funding.

Those decisions are made by the plan's trustees, who generally are not 
fulltime plan employees. Being a trustee of a multiemployer plan is 
often one of the duties of a union official or employer-appointed 
trustee, but it is not a job in and of itself. Therefore, it is 
doubtful that very many plan trustees will lose their jobs if the PBGC 
were to take over a plan; the professional advisors whose jobs would be 
at risk are already incentivized to help keep a plan out of critical 
and declining status, because if their advice is shoddy, the trustees 
will terminate them. Finally, the PBGC ``takeover as incentive/threat'' 
position assumes that critical and declining plans are in that 
condition because plan officials were not diligent or were asleep at 
the wheel. This is rarely the case, as changing demographics and stock 
market returns have been more influenced by government policy and 
market forces than by trustees' decisions.

                              PBGC Funding

There are limited tools available to improve the PBGC's funded status. 
Historically, the PBGC multiemployer program has been funded solely 
through annual premiums that multiemployer plans are required to pay, 
and not by individual tax payers. Broadening the PBGC's funding 
mechanisms to include taxpayer dollars from the general treasury is 
appealing to some but anathema to others.\76\ Some pundits believe that 
the federal government has been complicit in the downfall of some 
multiemployer plans by imposing strict funding rules and deregulating 
certain industries.\77\ These pundits believe that the government 
should help fund the PBGC to make up for prior policies that have put 
the plans at risk. Others believe that American taxpayers, the majority 
of whom do not participate in multiemployer pension plans, should not 
be asked to sacrifice for others when they have their own retirements 
to fund.\78\
---------------------------------------------------------------------------
    \76\ Id., 2.
    \77\ Mary Sanchez, ``The Federal Government's Little Known Pension 
Heist,'' Baltimore Sun, February 17, 2015.
    \78\ Rachel Grezler, ``Congress Needs to Address the PBGC's 
Multiemployer Program Deficit Now,'' The Heritage Foundation Issue 
Brief, September 13, 2016.

Another way to improve PBGC funding is to increase the annual premiums 
that multiemployer plans pay. This has already been done in recent 
years, but increases have not been large enough to solve the PBGC's 
funding deficit. In 2014, multiemployer plans paid an annual flat rate 
premium of $12 per participant. In 2018, multiemployer premiums will be 
$28 per participant. Despite more than doubling the premium, the PBGC 
still projects that there is a 90% chance it will be insolvent by 2035. 
Even more disturbing is that the PBGC estimates that if premiums were 
increased to $120 per participant, its deficit in 2022 would still 
increase by $15 billion.\79\
---------------------------------------------------------------------------
    \79\ Alicia H. Munnell and Jean-Pierre Aubry, ``Can PBGC Save 
Multiemployer Plans?,'' Center for Retirement Research at Boston 
College, September 2014, Number 14-16, 5, http://crr.bc.edu/
uncategorized/can-pbgc-save-multiemployer-plans/.

According to the Congressional Budget Office, PBGC premiums would have 
to be increased to $232 per participant to achieve a 90% probability of 
covering its deficit by 2036.\80\ Based on the fair-value estimated 
deficit of $101 billion, a $232 premium increase would cover only 36% 
of the PBGC's deficit.\81\ Furthermore, raising premiums eightfold 
would require increasing employer contributions. As many plans are in 
critical and declining status because employers could not afford the 
contribution increases required under their rehabilitation plans, it 
seems unlikely that employers would be able to pay the increases 
necessary to increase PBGC premiums to a level that would cure the 
PBGC's deficit.
---------------------------------------------------------------------------
    \80\ Rachel Grezler, ``Congress Needs to Address the PBGC's 
Multiemployer Program Deficit Now,'' The Heritage Foundation Issue 
Brief, September 13, 2016, 2.
    \81\ Alicia H. Munnell and Jean-Pierre Aubry, ``Can PBGC Save 
Multiemployer Plans?,'' Center for Retirement Research at Boston 
College, September 2014, Number 14-16, 5, http://crr.bc.edu/
uncategorized/can-pbgc-save-multiemployer-plans/.
---------------------------------------------------------------------------

                        Partitioning of Orphans

Orphan participants constitute a significant portion of total 
multiemployer participants. Approximately 1.6 million of the 10.7 
million multiemployer plan participants are orphans.\82\ To relieve 
severely underfunded plans of the burden of unfunded orphan liability, 
many practitioners suggest that the liability be transferred to the 
PBGC via a partition. Once a partition is approved, and the original 
plan transfers liabilities to the PBGC, the PBGC becomes responsible 
for paying benefits to the partitioned participants at the PBGC 
guaranteed level.
---------------------------------------------------------------------------
    \82\ Alicia H. Munnell, Jean-Pierre Aubry, and Caroline V. 
Crawford, ``Multiemployer Pension Plans: Current Status and Future 
Trends,'' Center for Retirement Research at Boston College, November 
2017, 170.

Since MPRA's enactment, only the Furniture Workers Fund has 
---------------------------------------------------------------------------
successfully applied for a partition.

While partitions can help reduce a plan's underfunding, they are far 
from a panacea because they rely on the PBGC to pay the partitioned 
participants' benefits. PBGC is simply not funded well enough to pay 
all orphaned liabilities for all critical and declining plans. The PBGC 
funding issue is actually exacerbated in a partition, because PBGC 
starts paying the partitioned benefits immediately, unlike when the 
plan as a whole goes insolvent. Absent additional funding, this move 
would likely accelerate PBGC's projected insolvency.\83\ Assuming the 
funding issue could be resolved, the value of partitioning would be to 
help plans to focus on maximizing contributions to pay for current 
costs.
---------------------------------------------------------------------------
    \83\ Alicia H. Munnell and Jean-Pierre Aubry, ``Can PBGC Save 
Multiemployer Plans?'', 5.
---------------------------------------------------------------------------

                              Plan Mergers

As discussed previously, MPRA provides the PBGC with the authority to 
facilitate mergers. Some commentators believe that, with PBGC-assisted 
mergers or partitions, many plans will be able to recover using 
contributions from the remaining active employers and employees, which 
might help preserve plans covering some 800,000 people.\84\ However, it 
does not appear that many plans have sought PBGC assistance in 
effectuating mergers under MPRA. This could be because trustees of 
critical and declining plans have been focused on determining whether a 
benefit suspension and/or partition application would solve their 
plans' solvency issues rather than on investigating potential mergers.
---------------------------------------------------------------------------
    \84\ ``What Can Congress Do to Help People in Multiemployer Pension 
Plans: Testimony by Hon. Joshua Gotbaum Before the Senate Committee on 
Finance,'' March 1, 2016, https://www.
finance.senate.gov/imo/media/doc/
03012016%20Gotbaum%20SFC%20Gotbaum%20Multiem
ployer%20Pensions%20Testimony.pdf.

The MPRA application process is labor intensive, time consuming, and 
expensive and requires only the involvement of one board of trustees. 
It would thus be difficult and time consuming to explore potential 
mergers or perform a merger study and to prepare a MPRA application at 
the same time. It is possible that those plans that have had their MPRA 
applications rejected, or who have withdrawn their applications, may 
investigate whether a PBGC-facilitated merger with another plan is 
feasible. However, any solution that requires PBGC funding is not 
necessarily going to permanently resolve a plan's funding issues 
because of PBGC's own precarious financial condition. To make plan 
mergers a viable tool for critical and declining plans, more guidance 
is needed from Treasury/PBGC and/or Congress.

                         Benefit Modifications

While the PPA has allowed many plans to make benefit modifications to 
future accruals and other adjustable benefits, and MPRA now authorizes 
reductions to benefits in pay status, some are calling for even more 
flexibility to allow financially troubled plans to make benefit 
modifications. It is possible that for some deeply troubled plans that 
are nearing the death spiral, benefit reductions that go beyond those 
allowed by MPRA may be necessary.

The more time that elapses without a workable solution, the bigger the 
cuts will have to be. These plans' plights are exacerbated by PBGC's 
underfunded status. It is estimated that if the PBGC becomes insolvent, 
ongoing premiums that multiemployer plans pay would cover only about 
10% of the benefits for which Central State is responsible. This would 
require participants to take a 90% reduction in their benefits.\85\
---------------------------------------------------------------------------
    \85\ Id.

In an article for the Heritage Foundation, Rachel Grezler proposed 
several ideas to improve multiemployer plan funding. First, she 
suggested creating special rules for critical and declining plans that 
``have no hope of becoming solvent.'' Under the proposal, critical and 
declining plans would not be allowed to continue adding new 
liabilities. Instead, they would be required to freeze new benefits and 
reduce existing benefits, including to those in pay status, similar to 
MPRA.\86\ The paper also advocates for rules making it easier for plans 
to reduce benefits prior to becoming insolvent as doing so would 
prevent older workers in underfunded plans from continuing to receive 
full benefits, while younger worker accrue very little. The authors 
suggest that plans looking to make MPRA reductions be able to do so 
without demonstrating that the reductions will result in the plan's 
long-term solvency.\87\ Another concept is to allow the PBGC, on its 
initiative, to reduce benefits within a plan prior to the plan going 
insolvent, or to reduce the PBGC guaranty after insolvency. The 
Heritage Foundation recognizes however, that reductions in the PBGC 
guaranty alone would not be enough to prevent PBGC insolvency, and that 
other changes are necessary.
---------------------------------------------------------------------------
    \86\ Rachel Grezler, ``Congress Needs to Address the PBGC's 
Multiemployer Program Deficit Now,'' The Heritage Foundation, September 
13, 2016, 3.
    \87\ Id.
---------------------------------------------------------------------------

                     Variable Defined Benefit Plans

While technically a defined benefit plan, a variable defined benefit 
plan has characteristics of both defined benefit and defined 
contribution plans. Interestingly, the variable defined benefit plan 
has been used by multiemployer defined benefit plans with severe 
funding issues (like the Sheet Metal Workers' National Pension Fund) to 
allocate part of the investment risk to employees, as well as by 
multiemployer 401(k) plans (like the UNITE HERE Local 26 Pension Plan) 
to shift some investment risk to employers.

Variable defined benefit plans can be designed to be 100% funded.\88\ 
They are similar to traditional defined benefit plans in that the 
contributing employers bear the financial obligation and the plan's 
assets are invested in a pooled account. They are unlike defined 
benefit plans in that they spread investment risk among contributing 
employers and participants and rely on less risky investment 
assumptions.\89\ The benefit the plan pays is ``variable,'' because the 
amount varies depending on actual investment performance.
---------------------------------------------------------------------------
    \88\ David B. Brandolph, ``Hotel Industry Trust That Left 401(k) 
for Pension Gets IRS OK,'' August 2017, Bloomberg BNA, https://
www.bna.com/hotel-industry-trust-n73014462612/.
    \89\ Gene Kalwarski, ``The Variable Defined Benefit Plan,'' 
Cheiron, accessed December 13, 2017, https://www.cheiron.us/
cheironHome/doc/Retirement_USAv1.pdf.

Basically, the variable defined benefit plan pays the greater of a 
floor defined benefit and a variable benefit. After taking into account 
contribution levels, the plan actuary will determine the floor benefit 
based on plan demographics and a conservative interest assumption (for 
example 4% to 5%). The floor benefit would also be converted into 
investment units in the plan's collective assets, which would be 
professionally managed. These investment units fluctuate in value 
annually, increasing in value if the plan's investment return exceeded 
the conservative interest assumption (plus a reserve factor) and 
decline in value if the plan's investment return falls below the 
---------------------------------------------------------------------------
assumption.

At retirement, the employee would receive the greater of the sum of his 
or her floor benefits or the sum of his or her investment units.\90\ 
The floor benefit is thus designed to be the minimum that a participant 
might receive at retirement, but the variable component allows the 
benefit to increase (within certain specified limits) when investment 
returns are higher. Extraordinarily high investment returns above those 
specified in the plan are placed into reserve to protect against the 
inevitable negative investment return years.
---------------------------------------------------------------------------
    \90\ Gene Kalwarski, ``Re-Envisioning Retirement Security: Variable 
Defined Benefit Plan,'' Retirement USA, October 21, 2009, http://
www.retirement-usa.org/re-envisioning-retirement-security-variable-
defined-benefit-plan.

Proponents of the variable defined benefit plan laud the design's 
ability to pay an adequate benefit in the form of a life annuity, while 
at the same time allocating the investment risk among contributing 
employers and participants. The conservative investment assumption is 
lower than the traditional 7% to 8% that most defined benefit plans 
assume, which provides a higher probability that the promised floor 
benefit will never have to be adjusted because the lower return is more 
likely to be achieved.\91\
---------------------------------------------------------------------------
    \91\ David B. Brandolph, ``Hotel Industry Trust That Left 401(k) 
for Pension Gets IRS OK,'' August 2017, Bloomberg BNA, https://
www.bna.com/hotel-industry-trust-n73014462612/.

Variable defined benefit plans are of recent vintage in the 
multiemployer arena. While there appear to be benefits to all 
stakeholders, these plans might be more helpful for younger workers and 
could possibly become the defined benefit plan of the future. The 
variable defined benefit plan does not do anything to solve the funding 
issues of plans that face insolvency today and that jeopardize the 
retirement security of those near or in retirement.

                            Composite Plans

Another plan design that has gained traction among multiemployer plan 
stakeholders and practitioners is the composite plan. The concept of 
the composite plan was first introduced in 2013 by the National 
Coordinating Committee for Multiemployer Plans (NCCMP).\92\ Draft 
legislation language was released by the House Education and Workforce 
Committee in September 2016, but to date no legislation has been 
enacted.
---------------------------------------------------------------------------
    \92\ See NCCMP 2013 Retirement Security Review Commission Report, 
Solutions not Bailouts.

Like variable defined benefit plans, composite plans are designed to 
allocate investment risk to both employers and participants. A 
composite plan is neither a defined benefit nor a defined contribution 
plan, but has characteristics of each. Like multiemployer defined 
benefit plans, the trustees would determine the rate at which benefits 
accrue and benefits would be paid in the form of an annuity. However, 
unlike defined benefit plans, the ultimate benefit paid would be 
variable and depend on the market value of assets.\93\ Benefit amounts 
would be adjusted on an annual basis to mitigate the frequency and 
impact of market fluctuations, projected for a 15-year period.\94\ 
Composite plans would not have any withdrawal liability and would not 
be subject to PBGC guarantees. The employers' contribution obligation 
would be limited to the rates negotiated with the union.\95\
---------------------------------------------------------------------------
    \93\ The United States House of Representatives Committee on 
Education and the Workforce Subcommittee on Health, Employment, Labor, 
and Pensions, ``Examining Reforms to Modernize the Multiemployer 
Pension System,'' testimony of Randy G. DeFrehn, April 29, 2015.
    \94\ Id.
    \95\ Id.

Those advocating for composite plans note that composite plans no 
longer place the risk of ensuring performance of the investment markets 
solely on employers, while at the same time providing a mechanism for 
union workers to receive retirement income for life.\96\ The composite 
plan design also has its critics. International Brotherhood of 
Teamsters President James Hoffa believes the composite plans would not 
be adequately funded under the proposed legislation and the net result 
would be two underfunded plans.\97\ The Pension Rights Center describes 
the proposed legislation as a bill that would allow ``relatively 
healthy multiemployer plans with secure adequate benefit structure to 
transition to two inferior plans.'' \98\
---------------------------------------------------------------------------
    \96\ ``Examining Reforms to Modernize the Multiemployer Pension 
System,'' testimony of Randy G. DeFrehn, April 29, 2015.
    \97\ ``Teamsters Strongly Oppose New House `Composite' Pension 
Legislation,'' Teamsters, September 22, 2016, https://teamster.org/
news/2016/09/teamsters-strongly-oppose-new-house-composite-pension-
legislation.
    \98\ ``Composite Bill Legislative Summary,'' Pension Rights Center, 
November 10, 2016, http://www.pensionrights.org/issues/legislation/
composite-bill-legislative-summary.
---------------------------------------------------------------------------

                         Loan Program Proposals

In recent months, stakeholders representing both union and management 
have put forth potential legislative solutions they believe could solve 
even the most severely underfunded plans' funding problems. Recognizing 
the uphill political battle procuring a pure tax payer bailout of 
multiemployer plans would entail, these proposals involve providing 
loans to pension plans that would be paid back to the U.S. government 
over time.

Butch Lewis Act

In November 2017, Senator Sherrod Brown (D-OH) and Representative 
Richard Neal (D-MA) introduced the Butch Lewis Act (S. 2147 and H.R. 
4444, respectively), which would allow struggling multiemployer pension 
plans to borrow money from Treasury to remain solvent.

The bill would create a new office within Treasury, known as the 
Pension Rehabilitation Administration (PRA). The PRA would allow 
financially troubled plans to borrow money for up to 30 years at low 
interest rates. The PRA would raise money for the loan program through 
the sale of Treasury-issued bonds to financial institutions. The 30-
year period is supposed to give the borrowing plans ample time to repay 
the loan, while simultaneously incentivizing it to make smart long-term 
investments. The legislation would also prohibit the plans from making 
certain ``risky'' investments during the loan period. Every 3 years, 
the plans will have to report back to the PRA and demonstrate they are 
rehabilitating themselves and avoiding insolvency. The PBGC would also 
share some responsibility in financing the loan program by providing a 
plan the funds it requires beyond the loan program to pay benefits.\99\
---------------------------------------------------------------------------
    \99\ ``Brown Announces Plan to Protect Ohio Pensions, Keep Promises 
to Ohio Workers,'' press release, Sherrod Brown Senator for Ohio, 
November 12, 2017, https://www.brown.senate.gov/newsroom/press/release/
brown-announces-plan-to-protect-ohio-pensions-keep-promises-to-ohio-
workers.
---------------------------------------------------------------------------

Curing Troubled Multiemployer Pension Plans: Proposal

A stakeholder group made up of employers and unions has been proactive 
in formulating its own legislative proposal, and has been actively 
marketing the proposal to multiemployer plans, the NCCMP, and members 
of Congress. The proposal is titled ``Curing Troubled Multiemployer 
Pension Plans'' and the theme is that saving multiemployer plans will 
require shared sacrifices. Under this proposal, multiemployer plans 
will be saved from impending insolvency through a combination of 
federal loans, benefit reductions, and surcharges to plan participants.

Under the proposal, any plan that is in critical and declining status 
would be eligible for a federal loan. The plan would submit an 
application to the Department of Treasury, together with an actuarial 
certification that the plan is critical and declining and that the loan 
proceeds would be sufficient to cure the plan's funding issues and that 
the plan could repay the loan. The loan proceeds would cover the plan's 
negative cash flow (i.e., the difference between the amount the plan 
pays in benefits each month, plus administrative expenses and the 
amount the plan receives in employer contributions).

A plan would be able to take up to three loans. The total amount of the 
loan would be calculated by the plan's actuary, and would be sufficient 
to pay five times the projected contribution income and earnings minus 
benefit payments and administrative expenses. The proposal refers to 
this amount as the ``shortfall.'' The interest rate on the loan would 
be 1% and would be paid over 30 years, with interest-only payments 
during the first 5 years (or 10 years if two loans are necessary, and 
15 years if three are needed).

The proposal also requires plans to reduce all benefit payments by 20% 
within 60 days after the loan application is approved. These benefit 
reductions would apply to all participants and there would be no 
protected classes. The reductions would apply even if they resulted in 
a participant receiving less than the PBGC guarantee. The 20% reduction 
would also apply to those participants who are not yet receiving 
benefits. Proponents of the proposal assert that because the loan will 
cover the shortfall, and the shortfall is calculated using the 
unreduced benefit amounts, plans will have an opportunity to improve 
its funded status through investment performance.

After the initial 5-year loan period, the plan's actuary will determine 
whether the plan is still in critical and declining status. If the plan 
is still critical and declining, the shortfall is recalculated (again 
without including benefit reductions) and a new loan amount is 
calculated and paid in monthly installments. If the plan is no longer 
in critical and declining status, repayment of the loan principal 
begins. Benefit reductions would remain in place until the plan is 
neither in critical or endangered as defined in the PPA.

The Curing Troubled Multiemployer Pension Plans proposal estimates that 
approximately $30 billion in loans might be necessary to save 
underfunded multiemployer plans. In order to reduce the risk of default 
on the loans (the plans will be paying interest only for 5 to 15 
years), a multiemployer plan risk reserve pool (MRRP) would be 
established. The MRRP would be funded by imposing monthly surcharges on 
participants and employers, and by increasing PBGC premiums that 
multiemployer plans pay. PBGC would administer the MRRP and would 
invest the money in a trust separate from PBGC's other assets.

Draft Federal Credit Proposal

The NCCMP has put forth its own proposal. The NCCMP was instrumental in 
designing and lobbying for the passage of MPRA and firmly believes that 
Central States' funding issues would have been resolved if Treasury had 
approved Central States MPRA application.\100\
---------------------------------------------------------------------------
    \100\ Michael D. Scott, Multiemployer Pension Facts and the Draft 
Emergency Multiemployer Pension Loan Proposal, September 20, 2017, 8.

The NCCMP proposal is similar to the shared sacrifices proposal. The 
NCCMP's Draft Credit Proposal (DCP) also contemplates federally 
subsidized 30-year loans at a 1% interest rate. According to NCCMP, it 
has modeled its program using data from five plans and that each plan 
demonstrated that it would maintain solvency and be able to repay the 
loan. The DCP provides for three alternatives to be presented to 
---------------------------------------------------------------------------
Congress.

Alternative 1 would require no benefit reductions and the federal 
government would pay all credit subsidy costs. The credit subsidy cost 
is the estimated long-term cost to the government of a direct loan or 
loan guarantee, calculated on a net present value basis and excluding 
administrative costs. The NCCMP concedes that there is no precedent for 
any federal credit program that did not require the recipients to 
restructure their obligations and governance.\101\ It is thus hard to 
imagine that Alternative 1 would be adopted given the current political 
climate.
---------------------------------------------------------------------------
    \101\ Id., 11.

Alternative 2 requires the same 20% across the board reduction in 
benefits that the shared sacrifices proposal calls for. Unlike the 20% 
UPS reductions, which would be used to provide plans with the ability 
to earn their way back to solvency, the reductions under the DCP would 
be paid to the government to reduce the cost of the government subsidy. 
The government would pay any remaining subsidy costs. The NCCMP is on 
record that it will not support any tax or other payment on the 
multiemployer plan system to pay for or credit-enhance the loan program 
because the structure is consistent with the Federal Credit Reform 
Act.\102\
---------------------------------------------------------------------------
    \102\ Id.

Alternative 3 also requires a 20% across-the-board benefit reduction, 
and then requires any additional amounts needed to achieve a zero 
credit subsidy to the government.\103\
---------------------------------------------------------------------------
    \103\ Id.

The NCCMP recognizes that for plans like Central States and the UMWA 
Plan, time is of the essence in passing a solution. Each day that goes 
by brings both plans closer to the death spiral from which there would 
likely be no return. The NCCMP believes that its proposal maximizes the 
probability of success and would be palatable to the government, which 
makes implementation more likely.

                               CONCLUSION

Although most multiemployer pension plans are not in endangered or 
critical status, a significant crisis is looming in the multiemployer 
system. Most plans have survived last decade's two financial crises and 
absorbed the impact of a dwindling ratio of active participants to 
retirees. These plans survived primarily due to a combination of 
benefit reductions and contribution increases allowed by the Pension 
Protection Act of 2006, as well as an improving economy. Some plans 
might be able to survive if they make significant Multiemployer Pension 
Reform Act of 2014 reductions to benefits in pay status. Those appear 
to be the fortunate plans.

Unfortunately, some plans are nearing the death spiral, where even 
maximum reductions under the Multiemployer Pension Reform Act of 2014 
will not be sufficient to stave off insolvency. At the same time, the 
gap between those critical and declining plans and healthier funds 
continues to widen, while the Pension Benefit Guaranty Corporation's 
insolvency is quickly approaching. If these plans fail, the negative 
effects will be felt by the participants and their families, local 
economies, and U.S. taxpayers as a whole.

                                 ______
                                 

   The Multiemployer Pension Plan Crisis: Businesses and Jobs at Risk

                        U.S. Chamber of Commerce

                           EXECUTIVE SUMMARY

    Employers that are contributing to multiemployer pension plans 
entered into these agreements with the goal of providing competitive 
benefits and a secure retirement to their workers. However, many of 
these plans are now in jeopardy, with insufficient resources to pay 
promised benefits. This is a threat both to retirees and employers.

    At the end of 2017, the U.S. Chamber of Commerce issued a report 
detailing the many factors that have led to the current multiemployer 
pension plan crisis.\1\ With the Joint Select Committee on Solvency of 
Multiemployer Pension Plans now considering solutions, the Chamber is 
issuing this new report to inform the Committee, and others, of the 
issues facing contributing employers and the potential consequences 
likely to befall these businesses should the plans they are funding 
become insolvent.
---------------------------------------------------------------------------
    \1\ U.S. Chamber of Commerce, ``The Multiemployer Pension Plan 
Crisis: The History, Legislation, and What's Next?'', December 19, 
2017, https://www.uschamber.com/report/the-multiemployer-pension-plan-
crisis-the-history-legislation-and-whats-next.

    In many ways, this crisis has put the multiemployer system into 
uncharted waters. Although 72 multiemployer plans have gone insolvent 
to date, the sheer number and size of plans headed toward this fate 
during the next decade present the system with challenges of a size and 
---------------------------------------------------------------------------
scope never seen before.

    But the threat to businesses has already begun to hit home. The 
potential fate of the multiemployer system has already begun to impact 
how they operate. As the financial conditions of multiemployer plans 
have deteriorated, required contributions have increased--often 
doubling or tripling within a space of only a couple of years. Despite 
these increased contributions, active workers are seeing a decrease in 
the accrual of benefits, which reduces the ability of a business to 
retain talent. Some employers who may wish to exit the multiemployer 
system are trapped, because withdrawal liability exceeds the value of 
their business. In addition, the potential for withdrawal liability is 
beginning to impact the ability of some employers to get and maintain 
credit.

    Plan insolvency will obviously exacerbate the problems faced by 
contributing employers. If a plan goes insolvent but does not 
terminate, businesses could be required to pay contributions in 
perpetuity--meaning a permanent strain on their finances. However, if 
an insolvent plan does terminate, the financial situation for employers 
becomes even more drastic. Contributing employers could be assessed 
with immediate withdrawal liability; could be part of a mass 
termination; and/or could be subjected to minimum funding rules which 
would require even higher contributions and possible excise taxes. Any 
one of these scenarios could drive an employer into bankruptcy.

    In addition to the threat of an individual plan becoming insolvent, 
there is a significant concern that such an outcome will cause other 
plans to fail--what is known as the ``Contagion Effect.'' The financial 
solvency of a number of multiemployer plans is dependent upon only one 
or two contributing employers, and these businesses also contribute to 
several other plans. If one plan failure causes a major contributing 
employer to be unable to make continued contributions to other plans, 
those plans could fail as well. Again, this is uncharted territory; 
however, it is reasonable to foresee that if a contributing employer 
becomes financially distressed by one plan failure, it would have a 
detrimental effect on the other plans to which that employer 
contributes.

    It is important for those charged with finding a solution for the 
multiemployer funding crisis to understand the very real threats facing 
employers as well as retirees and taxpayers. The U.S. Chamber presents 
this report to help all interested parties understand the serious risks 
that the multiemployer pension crisis present to businesses, jobs, and 
retirement security.

                              INTRODUCTION

    The multiemployer pension plan system is in crisis and its 
potential collapse will have a catastrophic effect on participants and 
beneficiaries of multiemployer pension plans, contributing employers to 
such plans, and the U.S. economy in general. Retirees face the prospect 
of severely reduced benefits; current workers face the prospect of 
accruing little or no benefit for the contributions being made on their 
behalf; and many contributing employers face liabilities that far 
exceed the net worth of their companies. Making matters worse, the 
Pension Benefit Guarantee Corporation (PBGC), the federal corporation 
that insures private multiemployer plans, is itself projected to go 
insolvent by 2025.

    According to the PBGC, approximately 130 multiemployer pension 
plans--including two of the largest plans--are in Critical and 
Declining Status, which means that they are projected to become 
insolvent within 15 years.\2\ While it is true that the vast majority 
of multiemployer pension plans are Green Zone plans--meaning they are 
not in distress status--it is equally true that the contributing 
employers to those plans are often the same contributing employers to 
the 130 Critical and Declining plans. If only a handful of those 130 
plans become insolvent within the next 3-5 years--a very likely 
scenario--the contributing employers will face severe consequences, 
including the ultimate price of bankruptcy.
---------------------------------------------------------------------------
    \2\ Pension Benefit Guarantee Corporation, ``FY 2017 Projections 
Report,'' https://www.pbgc.
gov/sites/default/files/fy-2017-projections-report.pdf.

    In enacting the Multiemployer Pension Reform Act of 2014 (MPRA), 
Congress focused on providing tools to plan trustees to avoid 
insolvency. Left unanswered was the question of what happens when there 
are large-scale plan insolvencies. Multiemployer plans, participants, 
and contributing employers are in uncharted waters when it comes to the 
issues confronting them today. The funding problems that currently 
exist are unprecedented in the more than 70 years that these plans have 
been in existence. While most of the focus, and rightly so, has been on 
the catastrophic effect pension plan insolvencies will have on plan 
participants and the communities in which they live, the employers that 
employ these participants (and in many cases, that employ many more 
people than just the plan participants) are at extreme risk of being 
put out of business. Whether they are required to contribute at 
exorbitantly high contribution rates in perpetuity to stave off 
withdrawal liability or plan termination, or whether they are forced to 
withdrawal by trustees and/or the PBGC, or whether they become required 
to make up a minimum funding deficiency, American business are in a 
precarious position.

               CRITICAL ISSUES CURRENTLY FACING EMPLOYERS

    Even before a plan reaches insolvency, there are critical issues 
that can plague contributing employers--many of which are adversely 
affecting the ability of employers to grow their businesses, expand 
their workforces, or pass on businesses to family.

    Potential Withdrawal Liability Negatively Impacts Business 
Decisions. Withdrawal liability is not ``booked'' until there is a 
termination, or partial termination, of the plan. However, the 
Financial Accounting Standards Board (FASB) requires contributing 
employers to disclose certain information about the multiemployer 
pension plans in which they participate.\3\ As the depth of the 
multiemployer pension crisis is increasing, employers are finding that 
ordinary business activities are being affected by the fear of the 
potential for withdrawal liability. Even though the employers have not 
been assessed a withdrawal liability, some banks and lenders are 
questioning these employers creditworthiness, leading to less optimal 
lending rates or even denial of credit.
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    \3\ FASB requires the following disclosures: (1) The amount of 
employer contributions made to each significant plan and to all plans 
in the aggregate; (2) An indication of whether the employer's 
contributions represent more than five percent of total contributions 
to the plan; (3) An indication of which plans, if any, are subject to a 
funding improvement plan; (4) The expiration date(s) of collective 
bargaining agreement(s) and any minimum funding arrangements; (5) The 
most recent certified funded status of the plan, as determined by the 
plan's so-called ``zone status,'' which is required by the Pension 
Protection Act of 2006; and (6) A description of the nature and effect 
of any changes affecting comparability for each period in which a 
statement of income is presented. ``Financial Accounting Standards 
Board Accounting Standards Update No. 2011-09'' (the Update), https://
www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdatePage&cid=
1176156724606.

    In other situations, certain employers have lost the opportunity to 
expand their business operations through mergers because other 
companies do not want to be associated with the potential for future 
withdrawal liability. Small family businesses are deciding to shut 
their doors, rather than pass the business down to heirs for fear of 
leaving them to pay a future withdrawal liability. All of these events 
---------------------------------------------------------------------------
results in lost business opportunities and fewer jobs.

    Employers Are Facing Unexpected Partial Withdrawal Liability. To 
ensure employers that gradually reduce their contributions to a 
multiemployer plan do not escape withdrawal liability, ERISA has rules 
under which a partial cessation of the employer's obligation to 
contribute could trigger liability. A partial withdrawal occurs when 
there is:

          A decline of 70% or more in the employer's contribution base 
        units; or
          A partial cessation of the employer's obligation to 
        contribute.

    Due to the declining number of union workers, there are businesses 
that have a dwindling union workforce. If the number of those employees 
declines by 70% or more or if an employer ceases to contribute for 
those employees at a facility that continues to operate, the employer 
can be assessed a partial withdrawal liability. The amount of liability 
for a partial withdrawal is based on the liability for a complete 
withdrawal liability, calculated under a formula in the law.\4\ Because 
of the amount of some plans' unfunded liabilities, the partial 
withdrawal liability can be high enough to impact the ability of an 
employer to efficiently run a business and can put a small employer out 
of business completely.
---------------------------------------------------------------------------
    \4\ ERISA Sec. 4205, 4206, and 4208.

    High Contribution Rates Thwart Employee Retention. Owing to 
increased liabilities, employer are faced with increasing 
contributions. There are some employers paying $15.00 or more per hour 
to plans for every hour an employee works. Because of the unfunded 
liabilities associated with bankrupted contributing employers, 
employees understand that they are never going to receive a benefit 
that is commensurate with the contribution rate the employer is paying. 
This provides a disincentive for the employee to stay with the 
employer. Employee retention problems threaten an employer's 
competitiveness. Furthermore, if enough employees leave, and the 
employer cannot replace them, it can lead to a partial or complete 
withdrawal.

       CRITICAL ISSUES FACING EMPLOYERS DURING A PLAN INSOLVENCY

    Most of the discussion involving the consequences of multiemployer 
pension plan insolvency has focused on what will happen to retirees 
when some of the larger multiemployer plans become insolvent and can no 
longer pay promised benefits.\5\ While there is no doubt that 
widespread multiemployer pension plan insolvencies will have disastrous 
consequences for retirees and will negatively affect the communities in 
which they live, insolvencies also pose severe risks to the continued 
viability of contributing employers. Skyrocketing pension costs have 
already made it difficult for employers in some industries to compete. 
An onslaught of pension plan insolvencies would likely lead to 
employers filing bankruptcy and/or dissolving. Many of these companies 
employ union and nonunion workforces. When these employers shut down 
because of multiemployer pension plan costs, all employees' jobs are 
threatened--not just those employees who participate in multiemployer 
pension plans.
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    \5\ According to a study by the Society of Actuaries, there are 
approximately 1.4 million participants currently covered by 
multiemployer plans that are in danger of becoming insolvent in the 
very near future, 719,000 of whom are retirees currently receiving 
annual benefits totaling more than $7.4 billion. ``Multiemployer 
Pension Funding a Big Challenge for PBGC, Wider Economy,'' 
www.planadvisor.com/multiemployer-pension-funding-big-challenge-pbgc-
wider-econmy, John Manganaro.

    The Credit of Employers, Particularly Small Employers, Could Be 
Impacted by the Insolvency of a Systemically Important Plan. There are 
current consequences, short of bankruptcy, that contributing employers 
could face. Of primary concern are the consequences of the insolvency 
of a systemically important plan. For purposes of approving a benefit 
suspension, MPRA established a new category of multiemployer plans--
systemically important--that was formally defined as those plans the 
PBGC determines as having a present value of projected financial 
assistance payments exceeding $1 billion if benefit suspensions were 
not implemented.\6\
---------------------------------------------------------------------------
    \6\ IRC Sec. 432.

    Less formally, a systemically important plan is viewed as a plan 
that poses a system-wide risk if allowed to become insolvent. Since 
passage of MPRA, no systemically important plan has gone insolvent. Yet 
several plans--including Central States--are in Critical and Declining 
status, meaning that they are projected to become insolvent within 15 
years. The financial markets and other lenders may be willing to accept 
withdrawal liability risk from relatively small multiemployer plans 
that are currently insolvent, but it is highly unlikely they will 
accept such risk from an insolvent systemically important plan like 
---------------------------------------------------------------------------
Central States.

    Nine out of 10 contributing employers to Central States are small 
businesses with fewer than 50 employees. It is highly probable that the 
overwhelming majority of these businesses have lines of credit or other 
capital debt predicated on maintaining asset/liability ratios that 
would be violated following a Central States insolvency.

    Ongoing Contributions to an Insolvent Pension Plan Can Impose 
Insurmountable Financial Burdens on Contributing Employers. A 
misconception exists on the part of some that when a multiemployer plan 
becomes insolvent, the PBGC takes over administration of the plan or 
that the plan is terminated. While the PBGC does take over insolvent 
single employer plans, it does not take over the administration of 
multiemployer plans. When a multiemployer plan becomes insolvent, the 
plan continues to operate and be administered by the plan's trustees.

    If the plan is not terminated,\7\ it continues collecting employer 
contributions and paying pension benefits at a reduced level. After 
insolvency, employers will continue to have an obligation to contribute 
to the plan at the collectively bargained rate, consistent with the 
rehabilitation plan. Active employees of contributing employers will 
continue to earn pension credit. The PBGC provides financial assistance 
to the multiemployer plan in the form of a loan. The plan's trustees 
are required to sign a promissory note and a security agreement giving 
the PBGC a security interest in all plan assets, which generally 
includes all employer contributions.
---------------------------------------------------------------------------
    \7\ A discussion of plan termination upon insolvency is discussed 
later in the paper.

    The continuation of employer contributions allows the employer to 
avoid paying withdrawal liability. Additionally, the contributions are 
usually being made consistent with the terms of the plan's 
rehabilitation plan. This is important because so long as the plan's 
trustees continue to comply with the rehabilitation plan, the minimum 
funding requirements of ERISA and the Internal Revenue Code (Code) do 
not apply.\8\ Avoiding minimum funding and withdrawal liability is 
critical for most employers if they have any hope of staying in 
business.
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    \8\ Although the general funding rules do not apply to plans that 
have adopted and comply with the terms of a rehabilitation plan, there 
are differing interpretations of how insolvency affects the ability to 
comply with a rehabilitation plan.

    Nevertheless, the contribution rates that many employers are paying 
into multiemployer plans are exorbitantly high because the contribution 
rates for the last several years have been imposed by the plan's 
trustees via rehabilitation plans. Rehabilitation plans are designed to 
have the plan emerge from critical status or forestall possible 
insolvency and therefore require significantly higher contributions 
than what had previously been required. Most current contribution rates 
for plans facing impending insolvency have not been established through 
traditional collective bargaining between the union and the employer. 
While most employers would rather absorb the higher contribution rates 
than incur withdrawal liability in the near term, the long-term effect 
of the high rates is that they make the employer less competitive. For 
example, higher pension costs are ultimately passed on to customers, 
---------------------------------------------------------------------------
who may look elsewhere to do business.

    Another problem for employers that contribute to insolvent plans is 
that the exorbitantly high contribution rates make it harder to retain 
employees. Employees know what the contribution rates are, and they 
know they are not receiving any additional benefit accruals because of 
those rates. In fact, the exorbitant pension contribution rates cause 
wage stagnation, or even reduction, because the employer cannot afford 
to pay both pension and wage increases. While active employees already 
are concerned about future benefit accruals, once a plan is insolvent, 
the maximum benefit the worker can receive is the PBGC guaranteed 
benefit. Employers are essentially paying contributions into a ``black 
hole.'' Employees understand that they are never going to receive a 
benefit that is commensurate with the contribution rate the employer is 
paying. Consequently, there is no incentive for the employee to stay 
with the employer.

    While continuing to pay contributions in an insolvent plan may save 
an employer from short-term economic disaster, it is doubtful that 
employers can endure such high pension contribution rates over the long 
term. It is likely that plan insolvency will lead to employers going 
out of business, filing for bankruptcy, or both. It is just a matter of 
time.

    Employers May Not Be Able to Avoid Withdrawal Liability. While 
continuing to contribute to an insolvent plan will generally allow an 
employer to avoid the imposition of withdrawal liability, there are 
scenarios where withdrawal liability can be imposed despite the 
employer's intention to remain a contributing employer to the plan. The 
issue is problematic for employers because they have no control over 
the withdrawal.

    To avoid bankruptcy and continue to retain and pay their employees, 
employers may try to negotiate lower contribution rates after the PBGC 
has begun to provide financial assistance. This would allow the 
employer to potentially reduce its pension costs and/or pay a portion 
of what otherwise would be paid into a ``black hole'' into another 
benefit plan for its employees or directly to the employee in the form 
of wages.\9\
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    \9\ Negotiating lower contribution rates is not always possible 
because doing so would likely require the approval of entities other 
than the employer and the union.

    Since employers are generally paying contributions pursuant to a 
rehabilitation plan even post-insolvency (complying with the terms of a 
rehabilitation plan likely prevents the employer from being subject to 
the minimum funding requirements), employers would have to get the 
plan's trustees to agree to accept the lower rate. This would require 
the trustees to amend the rehabilitation plan in most cases. If the 
trustees reject the lower contribution rate, the employer must either 
continue contributing at the higher rehabilitation plan rate or risk 
the plan's trustees rejecting the employer's continued participation in 
the plan. If the trustees reject the employer's continued 
participation, the employer will incur withdrawal liability. Given the 
choice between a forced withdrawal and the assessment of withdrawal 
liability, most employers will choose to continue to pay the higher 
---------------------------------------------------------------------------
contribution rate.

    Even if the plan's trustees are inclined to accept a lower 
contribution rate, it is possible that the PBGC would object to a 
decrease in the contribution rate. Although the PBGC does not get 
involved or weigh in on labor-management negotiations, the PBGC is a 
secured party in all assets of an insolvent plan. Because employer 
contributions are part of the plan's assets, the PBGC could take the 
position that a reduction in the contribution rate constitutes a 
diminution in the collateral in which it is secured. Additionally, the 
PBGC has the authority under the insolvency provisions of ERISA to 
provide financial assistance under conditions the PBGC determines are 
``equitable and are appropriate to prevent unreasonable loss to'' the 
[PBGC] with respect to the Plan. \10\ Although the PBGC has not yet 
opined on a post-insolvency employer contribution rate decrease, the 
statutory language arguably gives the PBGC the authority to do so. If 
the PBGC advises plan trustees that PBGC-provided financial assistance 
will be withheld if the trustees accept a lower contribution rate, it 
is an absolute certainty that the trustees will reject the lower rate.
---------------------------------------------------------------------------
    \10\ ERISA Sec. 4261(b)(1).

    If an employer cannot negotiate a lower contribution rate but 
agrees to continue paying at whatever exorbitant rate is in effect, the 
employer can still find itself subject to a withdrawal liability 
assessment. As discussed earlier, an employer that is contributing to 
an insolvent multiemployer plan is generally paying a fairly high 
contribution rate. The employees on whom the employer is contributing 
are not earning any benefit or at least will not accrue more than the 
PBGC guarantee. Employees who know that their employers are paying 
$15.00 or more per hour into a pension plan for which the employee 
perceives they are not receiving any benefit is likely to leave that 
employer. It will be hard for the employer to attract new employees to 
replace the departing employee for the same reasons. If all the 
employees working under the collective bargaining agreement leave, the 
employer will have essentially ceased operations under the plan, and 
withdrawal liability, or at least a partial withdrawal liability, could 
be assessed.\11\
---------------------------------------------------------------------------
    \11\ ERISA Sec. 4203(a)(2).

    A Mass Withdrawal Substantially Increases Expected Withdrawal 
Liability and Can Push an Employer Into Bankruptcy. The previous 
examples in this report describe scenarios where an employer wants to 
stay in the plan but still incurs an unwanted or unplanned withdrawal. 
Some employers may do a cost-
benefit analysis and determine that exiting an insolvent plan and 
paying their current withdrawal liability is less risky than remaining 
in the plan and continuing to pay exorbitant contribution rates in 
perpetuity. However, employers that leave an insolvent plan are exposed 
to a greater risk of unintentionally being part of a mass withdrawal. 
In general, withdrawal liability payments are limited to 20 years; 
however, this cap does not apply to mass withdrawal liability. And 
employers with mass withdrawal liability are often required to pay 
withdrawal liability over a period that is longer than 20 years.\12\
---------------------------------------------------------------------------
    \12\ ERISA Sec. 4219.

    A mass withdrawal occurs upon withdrawal of every employer from the 
plan, the cessation of the obligation of all employers to contribute to 
the plan,\13\ or the withdrawal of substantially all employers pursuant 
to an agreement or arrangement to withdraw from the plan.\14\ Employers 
that withdraw during a period of three consecutive years within which 
substantially all employers that have an obligation to contribute to 
the plan are presumed to have withdrawn due to an agreement or 
arrangement.\15\ Therefore, an employer that intentionally withdraws 
from a plan and intends to pay its calculated withdrawal liability 
could become part of a mass withdrawal if substantially all of the 
other employers that contribute to the plan withdraw within the three-
year period before or after the employer withdraws. The employer that 
intends to withdraw has no control over what other employers do. The 
fact that the plan is insolvent and participants are not receiving any 
benefit beyond the PBGC guaranteed amount makes it more likely that a 
mass withdrawal may occur than if a planned withdrawal is made from a 
financially healthy plan.
---------------------------------------------------------------------------
    \13\ ERISA Sec. 4041A(a)(1)(2).
    \14\ 29 CFR Sec. 4001.2.
    \15\ The presumption can be rebutted by the employer.

    The danger of being part of a mass withdrawal is that it can 
require an employer to pay much more in withdrawal liability than it 
would under a standard withdrawal. In a mass withdrawal, employers are 
subject to reallocation liability. Reallocation liability means that 
the plan's full cost of all unfunded vested benefits is allocated among 
all withdrawing employers. In a mass withdrawal, the withdrawal 
liability is calculated using PBGC interest rates that are often lower 
than the rates used by the plan in a standard withdrawal, which results 
in a higher liability.\16\
---------------------------------------------------------------------------
    \16\ ERISA Sec. 4219.

    Reallocation liability can significantly increase the amount of the 
plan's unfunded liability that is allocated to an employer. In 
addition, the 20-year cap applicable in a standard withdrawal does not 
apply to mass withdrawal liability. This could result in some employers 
having to pay withdrawal liability for a period longer than 20 years. 
In situations where an employer's annual payments are not high enough 
to amortize the full liability, the employer theoretically has to pay 
---------------------------------------------------------------------------
forever.

    An employer that makes a business decision to withdraw from a plan 
and pay its withdrawal liability could end up in bankruptcy if a mass 
withdrawal occurs within the three-year period after the employer 
withdraws. For employers that make up a large percentage of a plan's 
contribution base, the risk of a mass withdrawal occurring is greater 
because once smaller employers find out that the largest employer is 
leaving, the smaller employers might be incentivized to leave too so 
that they are not the ``last man standing.'' \17\
---------------------------------------------------------------------------
    \17\ Every employer in a multiemployer pension plan is responsible 
for all pension liabilities of every other employer in the plan. Thus, 
employers that withdraw from the plan without paying their withdrawal 
liability leave their liabilities behind for those still left in the 
plan--thus, this is referred to as the ``last man standing.''

    Plan Termination Could Result in the Reinstatement of Minimum 
Funding Rules and Excise Taxes. Multiemployer plans are generally 
subject to minimum funding standards.\18\ If the employers do not make 
the contribution necessary to balance the funding standard account, the 
plan has a minimum funding deficiency, and contributing employers can 
be assessed excise taxes on top of having to make up the deficiency. 
The initial tax is 5% of the funding deficiency.\19\ If the funding 
deficiency is not cured within the taxable period, the excise tax is 
100% of the funding deficiency.\20\
---------------------------------------------------------------------------
    \18\ ERISA and the Code's minimum funding rules require 
multiemployer plans to maintain a funding standard account. The funding 
standard account gets debited for charges related to benefit accruals, 
investment losses, and other negative plan experience. Credits are 
given for employer contributions, investment gains, and other positive 
plan experience. The minimum required contribution to a multiemployer 
plan is the amount needed, if any, to balance the accumulated credits 
and accumulated debits to the funding standard account. If the debits 
exceed the credits, there is a negative balance, and contributing 
employers must pay the amount necessary to balance the account. ERISA 
Sec. Sec. 302 and 304; IRC Sec. Sec. 412 and 431.
    \19\ IRC Sec. 4971(a)(2).
    \20\ IRC Sec. 4971(b)(2). A multiemployer plan can apply for a 
minimum funding waiver from the IRS. However, the IRS cannot waive the 
minimum funding standard for more than 5 of any 15 consecutive plan 
years. There are also procedures for employers to apply for a waiver of 
the 100% excise tax, but the IRS will not appear to waive the 5% excise 
tax. ERISA Sec. 302(c).

    The Pension Protection Act of 2006 (PPA) changed the general 
funding rules for financially troubled multiemployer plans. Plans that 
are certified as being in critical status are allowed to have minimum 
funding deficiencies without the employers having to make up the 
deficiency within the taxable year or paying excise taxes if certain 
conditions are satisfied.\21\ One such condition is that trustees of 
plans in critical status are required to adopt a rehabilitation plan. A 
rehabilitation plan is one that consists of a list of options, or range 
of options, for the trustees to propose to the bargaining parties, 
formulated to provide, based on anticipated experience and reasonable 
actuarial assumptions, for the plan to cease to be in critical status 
by the end of the rehabilitation period (generally 10 years). The 
rehabilitation plan may include reductions in plan expenditures, 
reductions in future benefit accruals, or increases in contributions, 
or any combination of such actions. The rehabilitation plan must be 
updated annually and the plan must show that it is making scheduled 
progress toward emerging from critical status. If the trustees 
determine that, based on reasonable actuarial assumptions, the plan 
cannot reasonably be expected to emerge from critical status by the end 
of the rehabilitation period, the plan must include reasonable measures 
to emerge from critical status at a later time or to forestall possible 
insolvency.\22\
---------------------------------------------------------------------------
    \21\ ERISA Sec. 302(a)(3). A plan is in critical status if it (1) 
is less than 65% funded and will either have a minimum funding 
deficiency in 5 years or be insolvent in 7 years; or (2) will have a 
funding deficiency in 4 years; or (3) will be insolvent in 5 years; or 
(4) liabilities for inactive participants is greater than the liability 
for active participants, contributions are less than the plan's normal 
cost, and there is an expected funding deficiency in 5 years. ERISA 
Sec. 305(b)(2).
    \22\ IRC Sec. 432.

    Thus far, plans that have become insolvent have not terminated, and 
because employers continue to contribute to the plan in accordance with 
the rehabilitation plan, the minimum funding rules do not appear to 
automatically apply just because a plan becomes insolvent. There are 
situations, nonetheless, where it appears that a contributing employer 
to an insolvent plan could be required to make up a plan's minimum 
funding deficiency and/or be assessed an excise tax. Although this has 
not happened yet, the risk of it happening increases as the insolvency 
date of the PBGC gets closer. An insolvent PBGC leaves insolvent plans 
with no other funding source other than contributing employers. When 
the PBGC can no longer pay the guaranteed benefit, employers could be 
---------------------------------------------------------------------------
required to fund the benefits that PBGC previously paid.

    One scenario that poses a risk to employers as plans and the PBGC 
go insolvent is the requirement that a plan's rehabilitation plan must 
satisfy certain Code provisions. If a multiemployer plan fails to make 
scheduled progress under the rehabilitation plan for three consecutive 
plan years or fails to meet the requirements applicable to plans in 
critical status by the end of the rehabilitation period, for excise tax 
purposes, the plan is treated as having a funding deficiency equal to 
(1) the amount of the contributions necessary to leave critical status 
or make scheduled progress or (2) the plan's actual funding deficiency 
if any.\23\
---------------------------------------------------------------------------
    \23\ Plans may apply for a waiver if the failure is due to 
reasonable cause and not willful neglect.

    It is possible that the IRS could take a more aggressive approach 
in assessing excise taxes when the PBGC can no longer provide a 
backstop for insolvent plans. This is troubling because employers have 
no control over whether the rehabilitation plan satisfies the 
requirements of the Internal Revenue Code. Nor do they have any control 
over the actuarial certification. This means that an employer that 
continues to make contributions in accordance with its rehabilitation 
plan post-insolvency can still be required to make up a funding 
deficiency and pay an assessed excise tax. Because the funding 
deficiencies of most insolvent plans are large, this requirement would 
---------------------------------------------------------------------------
effectively put the employer out of business.

    Another complication for employers is the broad authority that the 
PBGC wields over an insolvent plan. As noted previously, PBGC has the 
authority under the insolvency provisions of ERISA to provide financial 
assistance under conditions that the PBGC determines are ``equitable 
and are appropriate to prevent unreasonable loss to'' the [PBGC] with 
respect to the plan.\24\ Accordingly, if the PBGC determines that the 
continued operation of the plan somehow poses a financial risk to it, 
the PBGC could impose as a condition of providing financial assistance 
that the plan be terminated. There are three ways a multiemployer plan 
can be terminated: (1) by mass withdrawal, (2) by converting the plan 
to an individual account plan, (3) or by amending the plan to provide 
that participants will not receive credit for any purpose under the 
plan for service with any employer after the date specified in the 
amendment. While ERISA provides that minimum funding does not apply to 
a plan that terminates by mass withdrawal, there is no such provision 
relating to termination by plan amendment. While the PBGC has opined 
that insolvent plans will continue to operate, there appears to be at 
least a statutory mechanism through which a plan can be terminated 
without consent of the employer or even the trustees. If such a 
scenario were to arise, many employers would be forced out of business.
---------------------------------------------------------------------------
    \24\ ERISA Sec. 4261(b).
---------------------------------------------------------------------------

                          THE CONTAGION EFFECT

    Many employers contribute to more than one multiemployer plan. That 
is because they have regional or national operations, or because they 
employ people who work in multiple industries or trades. There is a 
valid concern that the failure of a multiemployer plan, particularly a 
large plan, could cause other plans to go insolvent. For example, if 
any of the scenarios described in this paper were to come to fruition, 
and employers were assessed withdrawal liability, a minimum funding 
deficiency and/or an excise tax, it could cause the employer to go out 
of business. If such an employer contributes to one or more other 
plans, then it would likely be unable to continue contributing to the 
other plans. If the employer is the major contributing employer to 
these plans, all the plans to which the employer contributes would be 
in jeopardy. To date, no extremely large plan has gone insolvent, but 
there are several that are projected to go insolvent within the next 5 
to 10 years.

    Moreover, many Critical and Declining Status plans are dependent on 
a very small number of employers to provide a disproportionate share of 
the contributions being made to the plans. For instance, in the UMW 
1974 Pension Plan, there are currently 10 contributing employers with 
approximately 97% of the contributions derived from two controlled 
groups of signatory companies. For the New York State Teamsters 
Conference Pension and Retirement Fund, there are 156 contributing 
employers with approximately 83% of the contributions derived from two 
companies. For the Local 707 Teamster Pension Fund, there are 8 
remaining contributing entities with 84% of the contributions coming 
from 2 companies. For the Tri-State Pension Plan, there are 9 
contributing employers with one controlled group entity accounting for 
95% of the contributions.

    Taken together, these factors pose a dual risk. If a large, 
systemically important plan were to become insolvent, it has the 
potential to adversely impact the contributing employers and their 
participation in other plans. Conversely, if one of the large employers 
were to exit one of the plans mentioned here, it would significantly 
and negatively impact the plan, the remaining contributing employers, 
and ultimately the beneficiaries.

                               CONCLUSION

    The multiemployer pension plan crisis puts businesses and jobs at 
significant risk. Under current rules, employers cannot leave these 
plans without paying large sums or claiming bankruptcy. At the same 
time, ongoing contributions to plans that are not able to provide 
promised benefits is an untenable financial situation for many 
employers, and plan terminations threaten to bankrupt many contributing 
employers. All these situations negatively impact the ability to 
provide jobs, make capital investments, and increase salaries. Congress 
must find a solution to avoid the most devastating effects of this 
multiemployer pension crisis.

                                 ______
                                 

                             Communications

                              ----------                              


                      American Bakers Association

                   601 Pennsylvania Avenue, Suite 230

                          Washington, DC 20004

              Testimony of Robb Mackie, President and CEO

Chairmen Hatch and Brown, and Members of the Committee:

    Thank you very much for the opportunity to submit testimony to the 
Committee today as it hears from the employer community on the unique 
challenges facing multiemployer plans. The American Bakers Association 
(``ABA'') is the Washington D.C.-based voice of the wholesale baking 
industry. Since 1897, ABA has represented the interests of bakers 
before the U.S. Congress, federal agencies, and international 
regulatory authorities. ABA advocates on behalf of more than 1,000 
baking facilities and baking company suppliers. ABA members produce 
bread, rolls, crackers, bagels, sweet goods, tortillas and many other 
wholesome, nutritious, baked products for America's families. The 
baking industry generates more than $153 billion in economic activity 
annually and employs more than 799,500 highly skilled people.

    Many of those people participate in multiemployer pension plans 
sponsored jointly by ABA member companies and the labor organizations 
that represent their employees in collective bargaining. ABA member 
companies that participate in these plans have much invested in them--
hundreds of millions of dollars in contributions; countless hours 
serving--with labor representatives--on boards of trustees that oversee 
the operation of these plans; and--most importantly--the retirement 
security of our employees and associates.

    Consequently, it is critical that one point be clear from the 
outset. This is not--as some have portrayed it--a ``union problem.'' 
This is an employer problem; an industry problem; a national problem. 
Indeed, this is our collective problem--a challenge that we can and 
must meet to secure the retirements of many employees and former 
employees in our industry. The ABA therefore believes it is critical 
that all stakeholders--employers, plan participants, labor 
organizations, and the government and regulatory agencies responsible 
for pension plan oversight--be open to creative solutions as this 
Committee, and the entire multiemployer plan community, work to solve 
this issue in the days and weeks to come.

A Problem With a Number of Causes

    The challenge facing the multiemployer plan community did not arise 
overnight; it developed over decades and was caused by numerous forces. 
Multiemployer plans have been in existence since at least the 1950s and 
have provided secure and relatively inexpensive retirement income to 
countless Americans. For years, these plans were financially healthy, 
enjoying relatively steady rates of return and with many more active 
participants than retirees.

    Over time, demographic, financial and other challenges all took 
their toll. Many of these plans were well-funded into the last decade 
of the 20th century- enjoying very strong market returns for several 
years in a row. Indeed, due to artificially low limits on funding 
levels imposed by the tax code, many of these plans found themselves 
not only ``fully funded'' for withdrawal liability purposes (meaning 
that an employer could withdraw from the plan in those years with 
little or no withdrawal liability), but also having to adopt benefit 
increases to participants and/or give ``contribution holidays'' to 
contributing employers in order to maintain the tax deductibility of 
contributions for those employers. Ironically, while these changes 
benefitted all parties in the short term, these benefit increases 
contributed to longer term costs for these plans with which many are 
still contending today. In short, these artificially low limits on 
funding levels prevented many multiemployer plans from building up 
reserves in the good years that they could desperately use today.

    In addition, many of the industries that historically supported 
these plans were shrinking. The deregulation of the trucking industry 
in the 1980s saw many smaller trucking companies exit the industry. 
Many manufacturing jobs were downsized or moved overseas. As the active 
base of these plans shrank, their retirement rolls increased. Plans 
that previously had many more actives than retirees saw those ratios 
shrink, approach even, and--in many instances--``flip'' so that many 
such plans now have more retirees than actives, in some cases more than 
double the amount.

    Finally, economic and legal factors played a role. The ``Great 
Recession'' of 2008 and 2009 hit many of these plans particularly hard. 
A plan that already has more retirees than actives is often using 
earnings on accrued assets (in addition to operating income from 
contributions) to pay benefits. While that is expected for a ``mature'' 
multiemployer plan, if such a plan suffers a dramatic and unexpected 
drop in asset values, it can be difficult for such a plan to 
recover.Because earnings and contributions are no longer sufficient to 
pay benefits, the plan has to dip into reserves to pay its ongoing 
benefit obligations, and the reserves are not there to support future 
earnings.

    In addition, the nation's bankruptcy laws have often left these 
plans--and their participants--without sufficient protection in the 
wake of employer bankruptcies. When employers withdraw in bankruptcy, 
multiemployer plans are treated as unsecured creditors--resulting in 
little or in some cases no recovery. The withdrawing employer's share 
of the plan's underfunding remains with the plan, to be borne by the 
remaining employers in the event they ever withdraw.

Impact on the Baking Industry

    The baking industry and ABA members have been directly confronted 
with these issues. Many ABA member companies participate in the Bakery 
and Confectionery Industry Union and Industry Pension Fund, one of the 
nation's largest multiemployer plans. This plan, historically well-
funded, suffered losses similar to many other plans in the Great 
Recession. Shortly thereafter, its largest contributing employer 
withdrew in bankruptcy. Not only did this plan lose its single largest 
contributor, but the company utilized the bankruptcy laws to avoid 
paying any withdrawal liability to the plan--a loss to the plan of 
almost $1 billion.

    Another plan to which ABA member companies contribute is the 
Central States Teamsters Plan, which has publicly projected insolvency 
in the 2025 plan year. Once the plan becomes insolvent, participant 
benefits will be reduced to levels guaranteed by the PBGC--if the PBGC 
multiemployer program still exists. PBGC's own multiemployer program is 
likewise projecting insolvency in 2025.

    All of this uncertainty has a detrimental impact on our industry. 
Employers that remain active in these plans are seeing their potential 
withdrawal liability grow year after year. Moreover, many of these 
plans have funding improvement or rehabilitation plans in place that 
require annual increases in contributions. For example, one member 
company that participates in a multiemployer plan for its 
transportation employees reports that, in 2007, it was paying $3.49 per 
hour ($7,259 per year) for its transport drivers to participate in a 
multiemployer plan. Today, that contribution has increased to $8.55 per 
hour ($17,784 per year) and is projected to increase to $11.63 per hour 
($24,169 per year) by 2022.

    Such increases are simply not sustainable. They divert money that 
could otherwise be used for wage and health care contributions. 
Moreover, these increasing costs make it very difficult to devote 
capital to needed equipment improvement, or to attract investment for 
future growth. Indeed, the presence of these obligations on company 
balance sheets and the uncertainty they create imposes very real 
barriers to the acquisition of capital to fund future growth. And, 
perhaps most unfortunate of all, many of our smaller member companies--
family-owned bakeries that have contributed to the cultural and social 
fabric of their communities for generations--are faced with no 
alternative other than bankruptcy because they can no longer bear the 
ever-increasing cost of these benefits.

The Quest for a Solution

    The challenge is great; the solution will not come easily. 
Fundamentally, there are only three ways to rectify an underfunded 
multiemployer pension plan: (i) more time; (ii) reduced benefits; and 
(iii) more money. Time is in short supply. Many of the multiemployer 
funds in which our member companies participate are in ``critical and 
declining'' status, which means they have a projected insolvency date. 
Moreover, the ``safety net'' for these plans, the PBGC's multiemployer 
program, is itself projecting insolvency in 2025. Clearly we are out of 
time, which is why it is so important that this Committee find a 
workable solution that can be enacted this year.

    Reducing benefits poses similar challenges. Many of these plans 
already pay relatively modest benefits. Reducing those benefits will 
move some recipients from impoverished to destitute. Many recipients of 
these benefits are at a point in their lives where they cannot--through 
work or otherwise--replace the income that is lost. Due to their 
advanced age, these retirees are simply unable to return to work in the 
industry--or in any job--to replace lost pension income. Finally, some 
of these plans have already reduced or eliminated so-called 
``adjustable benefits'' under the Pension Protection Act of 2006 
(``PPA''). Additional benefit reductions would compound those already 
(in some cases) significant cuts.

    And finally, money. As noted above, many of the plans to which our 
member companies contribute have in place so-called ``funding 
improvement plans'' or ``rehabilitation plans'' required by PPA that 
impose percentage increases in employer contributions year after year. 
As detailed above, these increases are already driving member companies 
that cannot afford them out of the industry and into bankruptcy. Even 
employers who can afford them are diverting capital needed for 
improvements or that could be used for other employment needs to these 
ever increasing contributions, which are buying the same or--in some 
cases--reduced benefits.

    If the money cannot come from the industry, where can it come from? 
One potential solution that is common to several proposals being 
discussed in the multiemployer plan community is the notion of low-
interest loans to these plans, funded by debt instruments issued by--or 
guaranteed by--the federal government. Such a solution could give these 
troubled plans the short-te1m capital infusion they need to recover 
their funded status while continuing to pay benefits.

    Obviously there are many issues that would need to be discussed and 
many questions that would need to be answered before such a proposal 
could be implemented: (i) What would be the conditions for receiving 
such a loan? (ii) What rules would govern repayment, including interest 
rate and term of the loan? (iii) Would loan proceeds need to be 
segregated from general plan assets? (iv) Would plans be required to 
reduce benefits in order to qualify for loans? If so, by how much? 
These are but a few of the myriad of questions and issues that would 
need to be addressed.

Concluding Thoughts

    The multiemployer plan system does not need a federal ``bail out,'' 
nor does the ABA support one. We do, however, support the quest for a 
solution that addresses the challenge before us--that restores 
retirement security to the more than 10 million Americans participating 
in 1,400 multiemployer plans. Low-interest loans to these plans could 
form the cornerstone of a plan that would restore these plans to 
solvency. Clearly, there could be other solutions that would similarly 
protect the interests of our members, their employees and former 
employees, and the communities in which they live. We encourage the 
Committee to keep an open mind and to work in a bipartisan spirit as it 
seeks a long-term solution to this problem. The ABA and its member 
companies stand ready to assist you through further dialogue, providing 
additional information specific to our industry, or in any other way 
that we can.

    Thank you for the opportunity to submit these comments to the 
record of the Committee's deliberations.

                                 ______
                                 
                          ArcBest Corporation

                           8401 McClure Drive

                          Fort Smith, AR 72916

                Statement of Judy McReynolds, Chairman, 
                 President, and Chief Executive Officer

    Co-Chairs Hatch and Brown, and other distinguished members of the 
Committee, thank you for the opportunity to submit this statement 
regarding the impact of potential multiemployer pension plan reforms on 
employers generally and on the trucking industry specifically.

    I am the Chairman, President, and Chief Executive Officer of 
ArcBest Corporation. Our largest operating subsidiary, ABF Freight 
System, Inc. (ABF), currently contributes to 24 multiemployer pension 
plans. ABF, which is based in Fort Smith, Arkansas, has been in 
continuous operation since 1923 and is one of the largest less than 
truckload (LTL) motor carriers in North America. ABF has more than 
10,000 employees and provides interstate and intrastate direct service 
to more than 44,000 communities through 275 service centers in all 50 
states, Canada, Puerto Rico, and Mexico.

    ABF is a well-run company that has continued in business while 
competing in an industry now dominated by non-union carriers. We are at 
or near the top of the industry in all cost efficiency measures other 
than employee benefits. We are consistently recognized for excellence 
in safety, security and loss prevention. We are an eight-time winner of 
the American Trucking Association's Excellence in Security Award, a 
seven-time winner of the President's Trophy for Safety, and a seven-
time winner of the Excellence in Claims & Loss Prevention Award. In 
January 2016, we were named to Chief Executive Magazine's ``2016 Best 
Companies for Leaders List,'' and also received the Circle of 
Excellence award from the National Business Research Institute for our 
efforts in increasing employee engagement. We were named to Forbes' 
``America's Best Employers'' list for 2016 and has been ranked on 
Fortune magazine's ``Fortune 1000'' list annually since 2013.

    We have also done the right thing by funding lifetime retirement 
benefits for our employees. We have consistently made timely 
contributions to the 24 different multiemployer plans in which we 
participate. Over the last ten years, ABF has contributed more than 
$1.3 billion to multiemployer pension plans. Just since 2008, more than 
half of ABF's contributions have been to fund pensions of ``orphan'' 
participants, who were never employed by ABF. Due primarily to the 
bankruptcies of other participating employers, ABF has been forced to 
shoulder an increasing load as the plans have required increased 
contribution rates. The wave of bankruptcies in our industry was the 
result of trucking deregulation that was enacted in 1980. Since that 
time, the number of unionized trucking companies with which we compete 
has shrunk from more than 1,000 to a handful.

    Despite our relatively small size, we are now the largest 
contributor to the deeply troubled Central States Teamsters Pension 
Fund (close to $80 million in 2017, compared to $32 million for the 
second largest contributor). The Teamsters, who represent about 83% of 
our workforce, have recognized the risk that these obligations place on 
ABF's viability. In our recently concluded bargaining of the National 
Master Freight Agreement, the Teamsters agreed to a contribution freeze 
for all of the plans to which we contribute because they were convinced 
ABF could not afford any increases in pension costs. ABF's retirement 
plan obligations have made it less competitive; hurt its market share 
due to higher costs that must be passed through to customers; and 
constricted future growth by reducing cash flow. If these costs 
increase further, they could jeopardize the financial viability of ABF.

    A comparison of our retirement plan costs compared to those of our 
closest competitors is jarring. Our contributions to multiemployer 
pension plans average more than $18,000 per employee each year. For 
some plans, the contributions far exceed the average. For example, 
ABF's per-employee contribution to the New York State Teamsters Pension 
Fund was $33,221 in 2017. This compares to average contributions of 
$3,640-$4,576 per employee per year by YRCW, one of ABF's largest 
competitors, with other competitors far below even YRCW's level. In 
fact, ABF's retirement plans costs for its drivers are 10 to 20 times 
higher than those of its closest competitors that do not have 
multiemployer plan obligations. In addition, ABF's hourly pension and 
health plan costs now represent more than 75% of employees' wage rates, 
compared to around 30% in 1990.

    There has been and will continue to be a lot of talk about ``shared 
sacrifice.'' However, ABF has already made that sacrifice through its 
outsized pension contributions. ABF simply cannot afford any more 
direct or indirect increases in its pension-related costs. We care 
deeply about our active and retired employees. We want to be able to 
continue contributing to these plans and to ensure that our employees 
and retirees receive the promised benefits that we have so steadfastly 
funded.

    ABF has been working since 2009 with other interested parties on 
possible legislative solutions to the multiemployer plan crisis. Our 
engagement has included proposals by Representatives Pomeroy and 
Tiberi; the Kline-Miller Multiemployer Pension Reform Act of the 2014; 
and the present, federal loan proposals. Despite the efforts of so 
many, the crisis has continued unabated, with many plans a decade or 
less away from insolvency. As the members of the Committee are well 
aware, the Pension Benefit Guaranty Corporation's Projection Report 
that was released on May 31, 2018 concluded that the multiemployer 
program will almost certainly run out of money by the end of fiscal 
year 2026, if not sooner.

    The system needs to be fixed as quickly as possible. However, the 
details, mechanics, and funding of the reforms are up to the Congress. 
ABF is open to a program that saves plans from insolvency. However, as 
outlined in Exhibit B, there are three critical issues that ABF needs 
to be included in any reform program:

          First, there must be no direct or indirect cost increases 
        for ABF and other struggling employers. We need to make sure 
        that the cure does not kill the patient. ABF and other 
        employers simply cannot afford any more increases. The loss of 
        contributing employers is what has put so many multiemployer 
        plans in their current predicaments. Imposing additional costs 
        on struggling employers through, for example, contribution 
        increases, surcharges and increased PBGC premiums (which are 
        generally passed through to employers), would jeopardize the 
        viability of these companies and further harm plans' 
        contribution bases. In addition to the loss of thousands of 
        jobs, it would compromise the ability of the plans to repay any 
        loans they may have received if that is the approach the 
        Congress chooses, and would make it more likely that the PBGC 
        would ultimately have to step in.

          Second, struggling employers should be permitted to 
        negotiate reductions in their pension contribution rates. If 
        there is another economic downturn, ABF and other struggling 
        employers may need to seek a reduction in their contribution 
        rates in order to survive. The failure to allow such a 
        reduction could result in the loss of thousands of jobs and 
        further shrink the contribution bases of plans. It would be 
        better to have a company reduce contributions rather than have 
        the plan receive no contributions at all because the employer 
        has been driven into bankruptcy. Of course, any contribution 
        rate reduction could occur only if the labor union agreed to 
        it.

          Third, there should not be any changes to statutory 
        withdrawal liability calculation rules that would increase the 
        costs of struggling employers that negotiate withdrawals from 
        multiemployer plans. It may be in the best interests of active 
        employees, the plan and the employer if the employer withdrew 
        from the plan; paid its full withdrawal liability; and provided 
        retirement benefits to active employees through a different 
        mechanism. Because these withdrawals would be negotiated with 
        the union, employees' interests would be protected. In 
        addition, the plan would be protected because it would receive 
        the withdrawal liability payments, determined in the normal 
        manner, which is very protective of plans' interests.

    Thank you for the opportunity to present our views on these 
critical issues. I would be pleased to answer any questions that the 
members of the Committee may have.

                                 ______
                                 
                  Letter Submitted by James E. Johnson
To: Congresswomen Debbie Dingell (D-MI)

    This letter is to ask you to take a look at the Butch Lewis Act and 
vote for it to help my other 1.4 million workers and retirees and 
myself.

    I have worked in the trucking industry for over 40 years as a 
mechanic. This retirement is very important to all of us. We worked 
hard for it. When I started work I was only making $1.65 an hour, which 
did not buy very much then, and it is also about that now.

    I am a veteran of the Navy from 1960 to 1964. When I signed up for 
VA benefits, they told me I did not qualify for anything.

    Please take a look at the Butch Lewis Act and vote for it. We would 
appreciate it very much.

            Thank you,

            James E. Johnson

                                 ______
                                 
                  Letter Submitted by David Nadolinski

June 20, 2018

Joint Select Committee on Solvency of Multiemployer Pension Plans
219 Dirksen Senate Office Building

To the Attention of: Mr. Chris Langan, Vice President of Finance, UPS, 
Atlanta, GA

Subject: Comments on Mr. Lagan's testimony on June 14, 2018

Dear Mr. Langan,

This is a rebuttal to your testimony in front of the Joint Select 
Committee.

I am a retired 31-year United Parcel Service employee from Buffalo, NY 
Teamsters local 449.

I challenge your testimony and am sickened by it.

You were in the position to give an objective opinion and 
representation of facts in the presence of that committee who are not 
as well informed as you are. Instead you chose to express the slanted 
corporate view with focus on the profits that you and other major 
stakeholders have in the outcome of this multiemployer pension crisis.

For the purpose of this rebuttal and commentary, I will focus on the 
New York State Teamsters Pension Fund which you coyly are strongly 
attempting to bundle into the demise of declining and critical status 
funds, most mentioned was the Central States Pension Fund.

I was very disappointed that there was no mention of NYS Teamsters 
Pension Fund (NYSTF) and the cuts sustained to our fund under the 
Multi-employer Pension Reform Act, also known as MPRA.

Roughly 34K Teamsters are affected by these cuts, of which 4K to 5K are 
UPS retirees.

Be assured there will be those that will not stand by and accept 
quietly your proposal for a 20% cut in our retiree's pensions for 
stated reasons that follow:

      Pensions that were promised the day a new hire was spoken to by 
an HR member of Corporate UPS.
      Pensions earned by collective bargaining by both employee and 
Corporate UPS of what is approaching $17/hr. This amounts to 
approximately $35k per employee per year. Of which less than $100 per 
month is benefit bearing for the UPS employee; the remaining going 
towards the unfunded liability of NYSTF. Would it be correct to assume 
the tax write-offs that UPS receives on its pension contributions are 
more advantageous to corporate UPS and their shareholders than the 
consideration of those who made this a Fortune 500 company, the men and 
women in ``Brown'' who gave the best 30 plus years of their lives?
      Would it be accurate to state that OSHA created a special label 
referred to as ``Industrial Athlete'' due to the harsh job requirements 
of the UPS employee?
      Is it a stretch to state that the life expectancy is reduced due 
to the many injuries sustained that are common due to the volume of 
heavy repetitive weight bearing activity required for employment at UPS 
in comparison to the population norm. Associated with these injuries 
are significant decreased options for future employment.
      How is it that UPS can give Stocks and Bonuses of up to 34% and 
beyond of annual wages to management?

     Woe to the downtrodden employee, the UPS representative, of this 
vastly successful company. Cough up the cash, you should be ashamed of 
what this company is asking in concessions! Is there the need to cite 
the many various recent news articles on the popularity of the UPS 
driver? How ignorant is UPS to the value of these men and women in the 
success of this company OR is the truth they consider these faithful 
employees just throw away commodities more interested in corporate 
profits? It is becoming common knowledge to the general public what 
value corporate UPS puts on their employees and especially so in these 
current contract negotiations. This will be reflective on the quality 
of service the company will get from current and future employees. 
Where did those company signs stating the expected behavior, attitude, 
and presentation of the UPS driver go? This image conveyed respect for 
the UPS label and the public responded. Show these men and women the 
dignity they earned. Give them back their earned and promised pensions 
as UPS did in the New England Pension Fund 2012, where UPS paid and 
negotiated the terms of their liability and partitioned their 
employees; those employees mostly kept their full earned and promised 
pensions. Return to NYSTF the concessions of Schedule E! Of which my 
understanding is less than 2K affected employees. Why should these 
roughly 2K suffer that additional reduction under that sham of a 
rehabilitation plan? I have a reasonable question to ask you, a man of 
your knowledge and stature. Why would UPS allow its continual 
contributions to a pension fund under scrutiny for adopting an 
extraordinarily risky investment portfolio and unrealistic investment 
assumption rates? $85 million paid out annually! It would be fair to 
assume this does not appear to be prudent business practice. Yet you 
suggest 20% cuts plus what actives and recent retirees have already 
taken of nearly 15% under the adopted rehabilitation plan in 2010 
without concern of where did the money go . . . OUR MONEY! Our future 
survival in our last decades of our lives is dependent on this income. 
Not to mention the many with permanent injuries and poor prognosis. 
Shameful! Why is it there is NO UPS representation on our Board of 
Trustees? Mostly Trustees of orphan companies and a soon to be orphan 
company. When you look in the mirror where did the human component 
disappear to? Where did feelings of respect, admiration, dignity and a 
respectful work ethic go? Do those of you who think a 20% cut is 
equitable and fair fail to distinguish these are people no less 
deserving to live in dignity than the reflection you see in the mirror 
on a daily basis? These ``downtrodden in Brown'' are representative of 
those that built this great nation. Shame on anyone to be dismissive of 
these UPS employees and retirees. It is shameful to allow corporate 
greed, mismanagement and government malfeasance to victimize the United 
Parcel Service Employees and Retirees in the New York State Teamsters 
Pension Fund.

    Once again, why are you not considering UPS money for UPS people?

The current Butch Lewis proposal as written was found to be not 
feasible by the authors of it, as many plans would not be able to repay 
the loans. Inherent investment returns as written would not be 
sufficient for repayment, and further rehabilitation cuts could be 
necessary. There was discussion of self-funding surcharge proposal, or 
banking surplus add-on to eliminate the deficiency. Are all options 
being considered? Worth mentioning, in 2017 both Ken Hall and James 
Hoffa supported the UPS proposal (the 20% cut proposal). Shameful!

UPS is the largest stakeholder in this multiemployer pension debacle. 
They are only looking out for corporate interests and not those who 
made the company the financial success it ensues. Their 20% reduction 
is unacceptable when other more respectable and viable options are 
presented.

To the Joint Select Committee, please do not disregard what is 
happening to us in NYSTF. The Central States Pension Fund by sheer 
volume is getting most attention. Yet we here in New York have been 
delivered the MPRA cuts which in reality range from 29% to 42%.

Once again UPS has become the successful company it is by those being 
delivered this travesty in the latter years of their life.

Thank you for your attention to the content of this letter. The 
following undersigned have read and are of same mind in what is 
presented in here.

Respectfully,

David Nadolinski
Retired UPS, Buffalo, NY
Thirty-one years

                                 ______
                                 
                   Letter Submitted by Thomas A. Noon

U.S. Senate
U.S. House of Representatives
Joint Select Committee on Solvency of Multiemployer Pension Plans
219 Dirksen Senate 0ffice Building
Washington, DC 20510

Dear Senators Orrin Hatch, Sherrod Brown, Lamar Alexander, Michael 
Crapo, Rob Portman, Heidi Heitkamp, Joe Manchin, Tina Smith, and 
Representatives Virginia Foxx, Phil Roe, Vern Buchanan, David 
Schweikert, Richard E. Neal, Bobby Scott, Donald Narcross, Debbie 
Dingell.

Thank you for serving on the Joint Select Committee on Solvency of 
Multiemployer Pension Plans. The work this committee performs and the 
legislative solution it ultimately chooses will have an immense impact 
on the lives of millions of retirees, their families, and the country. 
The economic impact of cuts and/or loss of these pensions is both 
personally and nationally enormous. According to a study by the 
National Institute on Retirement Security, in 2015 alone the 
Multiemployer System provided $2.2 trillion in economic activity to the 
U.S. economy, generated $158 billion in federal taxes, supported 13.6 
million American jobs, and contributed more than $1 trillion to the 
U.S. GDP.

As you begin your work in considering the best plan to solve the 
multiemployer pension crisis that this country is currently facing, I 
urge you to give your support to the Butch Lewis Act (H.R. 4444/S. 
2147). The Butch Lewis Act is the only proposed solution that will 
provide a path to financial health for troubled pension plans, 
alleviate pressure on the Pension Benefit Guaranty Corporation, and 
ensure that retirees and active Teamster members receive all of the 
benefits that they earned.

I know the Committee has a difficult mission, but the Butch Lewis Act 
is the best solution to the multiemployer pension crisis, and I 
sincerely hope that it will be the legislation that you ultimately 
adopt.

Sincerely,

Thomas A. Noon

                                 ______
                                 
June 23, 2018

    In October of 2017 the Teamsters Local 292 took a 29 percent cut on 
our pension. To me that is $700.00 per month or $8,400 a year; that is 
a big loss.

    When we went to sign up for the pension they promised it was 
guaranteed, we never had to worry.

    Now I am 71 years old and still working with no end in sight. My 
wife is 62 years old, and still working also, with no end in sight. 
When it comes time when either one of us can no longer work anymore, or 
if we get sick, our hardship will begin. I have worked very hard my 
whole life thinking I will be okay in my later years with my pension. 
Now that they made the cut in October of 2017 everything has changed. 
If something happens to me, my wife is not set with the survivor's 
package. She will have to keep working until she can't anymore.

    Please consider the Butch Lewis Act; my wife and I would be very 
grateful.

            Thank you,

            Thomas A. Noon
            Shirley Noon

                                 ______
                                 
                 Letter Submitted by Mary Lynn Skrabacz

June 20, 2018

Joint Select Committee on Solvency of Multiemployer Pension Plans
219 Dirksen Senate Office Building

To the Attention of: Mr. Chris Langan, Vice President of Finance, UPS, 
Atlanta, GA

Subject: Comments on Mr. Lagan's testimony on June 14, 2018

Dear Mr. Langan,

This is a rebuttal to your testimony in front of the Joint Select 
Committee.

I am a retired 31-year United Parcel Service employee from Buffalo, NY 
Teamsters local 449.

I challenge your testimony and am sickened by it.

You were in the position to give an objective opinion and 
representation of facts in the presence of that committee who are not 
as well informed as you are. Instead you chose to express the slanted 
corporate view with focus on the profits that you and other major 
stakeholders have in the outcome of this multiemployer pension crisis.

For the purpose of this rebuttal and commentary I will focus on the New 
York State Teamsters Pension Fund which you coyly are strongly 
attempting to bundle into the demise of declining and critical status 
funds, most mentioned was the Central States Pension Fund.

I was very disappointed that there was no mention of NYS Teamsters 
Pension Fund (NYSTF) and the cuts sustained to our fund under the 
Multi-employer Pension Reform Act, also known as MPRA.

Roughly 34K Teamsters are affected by these cuts, of which 4K to 5K are 
UPS retirees.

Be assured there will be those that will not stand by and accept 
quietly your proposal for a 20% cut in our retiree's pensions for 
stated reasons that follow:

      Pensions that were promised the day a new hire was spoken to by 
an HR member of Corporate UPS.
      Pensions earned by collective bargaining by both employee and 
Corporate UPS of what is approaching $17/hr. This amounts to 
approximately $35k per employee per year . Of which less than $100 per 
month is benefit bearing for the UPS employee; the remaining going 
towards the unfunded liability of NYSTF. Would it be correct to assume 
the tax write-offs that UPS receives on its pension contributions are 
more advantageous to corporate UPS and their shareholders than the 
consideration of those who made this a Fortune 500 company, the men and 
women in ``Brown'' who gave the best 30 plus years of their lives?
      Would it be accurate to state that OSHA created a special label 
referred to as ``Industrial Athlete'' due to the harsh job requirements 
of the UPS employee?
      Is it a stretch to state that the life expectancy is reduced due 
to the many injuries sustained that are common due to the volume of 
heavy repetitive weight bearing activity required for employment at UPS 
in comparison to the population norm. Associated with these injuries 
are significant decreased options for future employment.
      How is it that UPS can give Stocks and Bonuses of up to 34% and 
beyond of annual wages to management?

     Woe to the downtrodden employee, the UPS representative, of this 
vastly successful company. Cough up the cash, you should be ashamed of 
what this company is asking in concessions! Is there the need to cite 
the many various recent news articles on the popularity of the UPS 
driver? How ignorant is UPS to the value of these men and women in the 
success of this company OR is the truth they consider these faithful 
employees just throw away commodities more interested in corporate 
profits? It is becoming common knowledge to the general public what 
value corporate UPS puts on their employees and especially so in these 
current contract negotiations. This will be reflective on the quality 
of service the company will get from current and future employees. 
Where did those company signs stating the expected behavior, attitude, 
and presentation of the UPS driver go? This image conveyed respect for 
the UPS label and the public responded. Show these men and women the 
dignity they earned. Give them back their earned and promised pensions 
as UPS did in the New England Pension Fund 2012, where UPS paid and 
negotiated the terms of their liability and partitioned their 
employees; those employees mostly kept their full earned and promised 
pensions. Return to NYSTF the concessions of Schedule E! Of which my 
understanding is less than 2K affected employees. Why should these 
roughly 2K suffer that additional reduction under that sham of a 
rehabilitation plan? I have a reasonable question to ask you, a man of 
your knowledge and stature. Why would UPS allow its continual 
contributions to a pension fund under scrutiny for adopting an 
extraordinarily risky investment portfolio and unrealistic investment 
assumption rates? $85 million paid out annually! It would be fair to 
assume this does not appear to be prudent business practice. Yet you 
suggest 20% cuts plus what actives and recent retirees have already 
taken of nearly 15% under the adopted rehabilitation plan in 2010 
without concern of where did the money go . . . OUR MONEY! Our future 
survival in our last decades of our lives is dependent on this income. 
Not to mention the many with permanent injuries and poor prognosis. 
Shameful! Why is it there is NO UPS representation on our Board of 
Trustees? Mostly Trustees of orphan companies and a soon to be orphan 
company. When you look in the mirror where did the human component 
disappear to? Where did feelings of respect, admiration, dignity and a 
respectful work ethic go? Do those of you who think a 20% cut is 
equitable and fair fail to distinguish these are people no less 
deserving to live in dignity than the reflection you see in the mirror 
on a daily basis? These ``downtrodden in Brown'' are representative of 
those that built this great nation. Shame on anyone to be dismissive of 
these UPS employees and retirees. It is shameful to allow corporate 
greed, mismanagement and government malfeasance to victimize the United 
Parcel Service Employees and Retirees in the New York State Teamsters 
Pension Fund.

    Once again, why are you not considering UPS money for UPS people?

The current Butch Lewis proposal as written was found to be not 
feasible by the authors of it, as many plans would not be able to repay 
the loans. Inherent investment returns as written would not be 
sufficient for repayment, and further rehabilitation cuts could be 
necessary. There was discussion of self-funding surcharge proposal, or 
banking surplus add-on to eliminate the deficiency. Are all options 
being considered? Worth mentioning, in 2017 both Ken Hall and James 
Hoffa supported the UPS proposal (the 20% cut Proposal) Shameful!

UPS is the largest stakeholder in this multiemployer pension debacle. 
They are only looking out for corporate interests and not those who 
made the company the financial success it ensues. Their 20% reduction 
is unacceptable when other more respectable and viable options are 
presented.

To the Joint Select Committee, please do not disregard what is 
happening to us in NYSTF. The Central States Pension Fund by sheer 
volume is getting most attention. Yet we here in New York have been 
delivered the MPRA cuts which in reality range from 29% to 42%.

Once again UPS has become the successful company it is by those being 
delivered this travesty in the latter years of their life.

Thank you for your attention to the content of this letter. The 
following undersigned have read and are of same mind in what is 
presented in here.

Respectfully,

Mary Lynn Skrabacz
Retired UPS employee, Buffalo, NY
Thirty-one years

                                 ______
                                 
                 Letter Submitted by Michael R. Strebe
June 11, 2018

Dear members of The Joint Select Committee on Solvency of Multiemployer 
Pension Plans, you take on the task of making right a situation that 
affects the lives of millions of Americans, now, and in the future. 
This task has no easy solution and will not be perfect. I pray that the 
end result will not be putting a band aid on it and kicking the can 
down the road for future legislators! A MAJOR TIDAL WAVE OF FAILING 
PENSIONS, INCLUDING STATE RUN PENSIONS, WHICH ARE CURRENTLY \1/3\ 
UNDERFUNDED, ARE GOING TO THROW OUR SOCIETY INTO CHAOS!

Life isn't fair! Never has been, never will be! But this pension issue 
isn't about fairness at all! The pensions' terrible financial situation 
shouldn't be where it is now! There is plenty of blame to go around! By 
not correcting the system that led to the downfall and just throwing 
money at it, history will repeat itself! THE SYSTEM HAS TO CHANGE OR 
THE PEOPLE THAT STOLE AND MISMANAGED THE PENSION WILL CONTINUE TO DO 
SO!

I have completely watched the two sessions your committee has had and I 
am hopeful something beneficial can be done. I've come away with the 
feeling from the two meetings that the situation is being completely 
looked into and members are understanding there needs to be a 
bipartisan solution. I sense that your committee realizes the magnitude 
of the problem, the terrible negative economic impact and hardships 
that will result, and the fact that employer pension fund systems 
cannot reasonably sustain themselves over a long period of time given 
too many unpredictable factors!

Two of your experts testifying, Mr. Reeder and Mr. Goldman, stated 
there are ``structural problems'' that need to be changed.

PBGC was never set up correctly by trustees and government, 
guaranteeing multiemployer participants a maximum of $12,800 if their 
pension fails. That is only 30% of my pension! Plus the PBGC is so far 
under water it can't possibly recover!

And what about the millions of Americans still working and 
contributing? With the last man standing situation, more companies will 
go out of business and the workers that had been contributing all those 
years will be left with nothing!

Giving a loan to pension funds is only a band aid which we all know 
will never get repaid!

A statement by Congressman Norcross, and confirmed by Mr. Goldman and 
Mr. Barthold, was, ``Pensions are for the exclusive use of 
pensioners!'' Trustees of pensions are ``fudiciaries,'' which means, in 
the best and only interest of the worker! In 2015 an investigation by a 
Washington, DC-based independent review board reported September 25, 
2015 that Cincinnati-based Teamsters misused member funds. The 
President of that conference, William Lichtenwald, is (or was at the 
time) also a trustee of the Central States Pension Fund!

There are too many fingers in the Pension Pie! Goldman Sachs lost 
billions investing our funds at the same time making record profits! 
Trustees of our pension get their salaries (head trustee Tom Nyhan 
makes close to $700,000), health insurance, raises and their pensions 
from our plan. Six hundred thirty Central States Pension Fund employees 
get all their benefits from our fund. TOO MANY LAYERS, TOO MANY FINGERS 
IN THE PIE!

MORE RETIREES THAN WORKERS! This system will not survive!

It was pointed out at your meetings that the government bailed out the 
banks, automakers, etc., so they can surely bail out the backbone of 
American workers! Absolute perfect logic! BUT . . . where does the 
government get the funds from? My sons, my friends, my grandchildren 
for the rest of their lives! I was against all government bailouts and 
still am. My solution is to get rid of the pensions and divide the 
money prorated equally among active and retired workers. The funds 
could be put in a retirement fund such as a 401(k) plan. The problem is 
many pensioners rely on every penny of their pension check which may be 
quite small already and would be devastating to them.

This is our Teamster problem! The problem facing the state-funded 
pensions will be catastrophic, much worse if that's possible, because 
of the greater magnitude of the numbers!

I could go on forever but your time is valuable and short! I would 
gladly come and testify if you wish, at my expense.

I've included a few of my many, many articles on the severity of this 
issue. May God bless you all and grant you wisdom!

Sincerely,

Michael R. Strebe
                                 ______
                                 

                             Pension Crisis

                      (From the Associated Press)
CHERRY HILL, N.J.--A public employee pension crisis for state 
governments has deepened to a record level even after nearly 9 years of 
economic recovery for the nation, according to a study released 
Thursday, leaving many states vulnerable if the economy hits a 
downturn.

The massive unfunded pension liabilities are becoming a real problem 
not just for public-sector retirees and workers concerned about their 
future but also for everyone else. As states try to prop up their 
pension funds, it means less money is available for core government 
services such as education, public safety and parks.

The annual report from the Pew Charitable Trusts finds that public 
worker pension funds with heavy state government involvement owed 
retirees and current workers $4 trillion as of 2016. They had about 
$2.6 trillion in assets, creating a gap of about one-third, or a record 
$1.4 trillion.

While the study looks only at pension funds with major state-government 
involvement, systems run by cities, counties, school districts and 
other local entities have had similar problems. Just this week, the 
Chicago suburb of Harvey, a city with a history of underpaying its 
pension obligations, announced deep layoffs in its police and fire 
departments. Officials blamed their rising pension obligations.

Larger cities and school districts across the country also have had 
service cuts or freezes over the years to pay for rising costs for 
their retirees.

Pew says that pension funds were well-funded until about 2000. Around 
that time, many states increased pension benefits without a way to pay 
for them. In some states, such as California and Illinois, courts 
usually find that the government must honor those commitments.

Also in the early 2000s, the tech stock bubble burst, spiraling 
investment returns downward. Some states, such as New Jersey, made 
things worse by skimping on their contributions.

Many pension funds had not recovered from the dot-com bust by the time 
the Great Recession hit less than a decade later. And many haven't 
recovered from that, either.

``When the next downturn comes, there will be additional pressures,'' 
David Draine, a senior officer at Pew, told The Associated Press.

Colorado, Connecticut, Illinois, Kentucky and New Jersey had less than 
half the assets they needed to meet their pension obligations, 
according to the report. Kentucky and New Jersey have the largest gaps, 
with just 31 percent of the needed funding.

Kentucky has been roiled by weeks of protests over a bill passed by the 
Republican-dominated Legislature and signed by the Republican governor 
that makes changes to the state's teacher retirement system in an 
attempt to close the funding gap. Teachers have packed the state 
Capitol by the thousands to protest the changes. On Wednesday, they 
joined the state's attorney general, a Democrat, in filing a lawsuit 
seeking to overturn the law.

Just four states--New York, South Dakota, Tennessee and Wisconsin--had 
at least 90 percent funding. Draine said those states and some others 
that have repaired pension shortfalls since the Great Recession will be 
in better shape the next time the economy slides.

The Pew report found that lackluster investment returns in 2016 
explained most of why the condition of pensions declined from the 
previous year. Pension administrators were counting on median returns 
of 7.5 percent that year. Instead, they made just 1 percent.

But the study says that even if the investments had met expectations, 
the overall position of pension funds still would have declined because 
state governments were not contributing enough. Only Kansas contributed 
more to its pension system in 2016 than it paid out, Pew found.

In New Jersey, actuaries say it will take around $6 billion a year in 
contributions from the state to shore up its pension system. It's taken 
years to get to less than half that amount in the current budget. 
Maintaining that progress makes it difficult to pay for other 
priorities, such as boosting school funding.

The study finds that states increasingly rely on investment returns in 
an attempt to stabilize their finances, which makes them more 
vulnerable to market fluctuations.

Because of a strong market last year, next year's report, which will 
assess the state of pensions as of 2017, is expected to look better. 
But market slides so far this year have not been encouraging, Draine 
said.

                                 ______
                                 

                   GE's $31 Billion Pension Nightmare

                         (By CNN Wire Service)
January 18, 2018

John Flannery, the man hired to fix General Electric, inherited a $31 
billion ticking time bomb when he replaced longtime CEO Jeff Immelt 
last year.

Like other companies, GE has accumulated a significantly underfunded 
pension. But like most things lately at GE, its pension shortfall is 
much worse.

Not only does GE have the largest pension deficit among S&P 500 
companies, that deficit is $11 billion worse than the next closest 
company, according to Dow Jones S&P Indices. (The $31 billion figure is 
from the end of 2016. Fresher numbers haven't been released.)

GE's pension nightmare is the result of years of inattention, and of 
historically low interest rates that have driven up pension liabilities 
around the world.

This is not just a math problem: More than 600,000 current and former 
GE employees are relying on these crucial retirement benefits.

The pension shortfall is yet more evidence of GE's financial troubles, 
which forced the iconic company to slash its dividend last year for 
just the second time since the Great Depression. GE shares closed below 
$17 on Thursday for the first time in 6 years.

``GE's balance sheet is a mess;'' said Gautam Khanna, an analyst for 
Cowen and Co. ``They don't generate a lot of cash, and they have a 
severely underfunded pension plan.''

GE doesn't owe the $31 billion immediately. Instead, the company is 
required to make pension payments over time.

Under Flannery, GE announced plans in November to tackle the pension 
problem by taking advantage of cheap borrowing costs. GE said it will 
borrow $6 billion in 2018 to cover mandatory pension payments through 
2020.

But that doesn't fix the problem: It's just swapping one IOU for 
another. ``It just buys you time,'' said Deutsche Bank analyst John 
Inch.

Related: GE could break itself apart as cash crisis deepens

Immelt inherited a huge pension surplus

GE's pension shortfall is even more glaring when you consider that the 
company was sitting on a pension surplus of $14.6 billion in 2001, when 
Immelt replaced Jack Welch as CEO.

Then GE decided to put money into mergers and acquisitions instead of 
socking it away for what it owed its employees, Inch said. Many of 
those deals were poorly timed, contributing greatly to GE's current 
cash crunch.

By the end of 2008, GE's pension was running a deficit of $7 billion, 
and it exploded from there. Despite that shortfall, Immelt rewarded 
shareholders with stock buybacks, which are aimed at boosting the share 
price. Between 2010 and 2016, GE spent about $40 billion to buy back 
its own stock, according to FactSet.

``The company was debatably mismanaged,'' Inch said. ``It didn't fund 
the pension properly, and now you've got a massively unfunded 
pension.''

Immelt declined to comment, directing questions to GE. The company 
declined to comment.

Related: How decades of bad decisions broke GE

Low rates pose pension risk

To be sure, other major companies have large pension shortfalls. Boeing 
listed a $20 billion pension deficit at the end of 2016, and General 
Motors faces an $18 billion liability.

Corporate pension funds typically invest 40% or more of their assets in 
bonds like low-yielding government debt, according to the OECD. And a 
decade of near-zero interest rates has forced companies to assume lower 
returns.

In an SEC filing last year, GE said the increase in its pension deficit 
is ``primarily attributable to lower discount rates'' as well as higher 
liabilities.

GE warned that one financial risk it faces is ``sustained increases in 
pension'' costs caused by market turbulence or a ``continued 
environment of low interest rates.'' Yet GE also said that its pension 
liabilities could go down significantly if rates rise.

GE has a huge family of current and former workers to support. The 
company's various pension plans support about 619,000 people: about 
298,000 retirees and beneficiaries, 227,000 vested former employees and 
94,000 active workers.

GE also sponsors post-retirement health and life insurance benefit 
plans that cover about 187,000 people. The company tried to ease its 
pension liabilities by closing the pension plan in 2011 to new salaried 
workers.

But the problem still hangs over GE as it considers a radical shift in 
the coming months. Flannery confirmed on Tuesday that GE is 
contemplating what was once unthinkable: breaking the conglomerate up 
into smaller pieces.

But analysts warned that GE's pension liabilities are so large that it 
could make dismantling the company very messy, if not impossible.

``It only makes sense if you ignore GE's pretty massive liabilities--
like the underfunded pensions,'' said Cowen's Khanna.

                                 ______
                                 

         Infrastructure Costs: States Can Afford More of it if
                          They Reduce Pensions

                       (From The National Review)
Two hundred billion dollars in federal funding is especially inadequate 
when one considers these numbers against the state and local crisis 
that could define the next generation: pension and health-care costs. 
As of 2015, the last full year for which complete data are available, 
states had funded only 72 percent of their future obligations to 
government workers, according to the Pew Charitable Trusts. That leaves 
a $1.1 trillion deficit. On health care for public-sector retirees, 
states owe $646 billion.

In states from New Jersey to Kentucky, these numbers mean real, looming 
cash calls of billions of dollars a year. New Jersey, for example, has 
set aside just 30 percent of the money it needs to fund pension 
payments, according to a new Manhattan Institute study. New Jersey 
taxpayers face a grave risk. A mild recession could mean that in a few 
years it would have to triple, or more, its current $2 billion annual 
pension contribution just to pay current retirees, let alone set aside 
money to grow for the future tab. This is a state that, along with New 
York, is supposed to come up with new revenues, under Trump's proposal, 
to fund the Hudson Tunnel. And it's not just blue states that are 
distressed by retirement liabilities: Kentucky, for example, has funded 
just 38 percent of its pension obligations, and South Carolina, 58 
percent. States that have funded their pensions in the range of two-
thirds or so--Alabama, Alaska, Indiana, Louisiana, and New Hampshire 
among them--could benefit from some modest shoring up.

There is a way, though, for the White House and Congress to ease, if 
not solve, this crunch: Offer states credit, in the form of more 
federal infrastructure money, if they pare back their pension and 
health-care obligations to future retirees. States that gradually move 
newer workers to 401(k)-style accounts with low-fee investment options, 
for example, should get some percentage of that money now, to invest in 
projects that will pay off in the future. States that pare back future 
health-care liabilities would receive a similar reward.

Of course, paring back future health-care costs over time is easier 
than cutting pension costs. America already has a public-sector health-
care program for people deemed too old to participate in the workplace: 
Medicare. Most private-sector retirees are happy with it. There's no 
justification for those who pay state and local taxes to subsidize 
private health care for government workers who choose to retire before 
65, a big driver of future liabilities. And there's no justification 
for some states and cities to force their taxpayers to pay for private 
health care for older retirees when the federal government set up 
Medicare for just that purpose.

When it comes to retirement income, though, private-sector efforts to 
supplement Social Security are a mess. As AARP reports, half of 
American workers don't have a workplace retirement plan, even a 401(k). 
Only 22 percent of Americans with such access have saved $100,000 or 
more, according to the Employee Benefit Research Institute.

To address this problem, Washington should return to an old idea: 
creating a way for workers and spouses to create voluntary private 
savings accounts alongside their Social Security contributions, via an 
extra payroll deduction. A good start would be to give people the 
option of diverting the extra money most will soon see in their 
paychecks thanks to the Christmas tax cut. Private-sector managers 
could invest such money broadly, on a low-fee basis, in a range of 
stocks and physical assets--including infrastructure--designed to track 
the larger economy. With such savings plans, state and local unions 
would have no reason to use their political power to insist on a 
separate and unequal system for their workers: Why isn't what taxpayers 
get good enough for them, too?

The climate in Washington is hardly ripe for bipartisan, big-picture 
thinking. But a real possibility exists here. Blue states with some of 
the worst pension woes--Connecticut and Illinois, in addition to New 
Jersey--need a constructive way to reduce their obligations before they 
run out of money to provide even basic public services. Some supporters 
of the tax law's elimination of the federal deduction for state and 
local taxes above $10,000 annually claim that cutting off the money is 
how to do it. But that radical change did nothing to address the long-
term nature of these entrenched liabilities.

                                 ______
                                 
                Letter Submitted by Dr. Irene Trzybinski
June 20, 2018

Joint Select Committee on Solvency of Multiemployer Pension Plans
219 Dirksen Senate Office Building

To the Attention of: Mr. Chris Langan, Vice President of Finance, UPS, 
Atlanta, GA.

Subject: Comments on Mr. Lagan's testimony on June 14, 2018

Dear Mr. Langan,

This is a rebuttal to your testimony in front of the Joint Select 
Committee.

I am the wife of a 31-year United Parcel Service employee from Buffalo, 
NY Teamsters local 449.

I challenge your testimony and am sickened by it.

You were in the position to give an objective opinion and 
representation of facts in the presence of that committee who are not 
as well informed as you are. Instead you chose to express the slanted 
corporate view with focus on the profits that you and other major 
stakeholders have in the outcome of this multiemployer pension crisis.

For the purpose of this rebuttal and commentary, I will focus on the 
New York State Teamsters Pension Fund which you coyly are strongly 
attempting to bundle into the demise of declining and critical status 
funds, most mentioned was the Central States Pension Fund.

I was very disappointed that there was no mention of NYS Teamsters 
Pension Fund (NYSTF) and the cuts sustained to our fund under the 
Multi-employer Pension Reform Act, also known as MPRA.

Roughly 34K Teamsters are affected by these cuts, of which 4K to 5K are 
UPS retirees.

Be assured there will be those that will not stand by and accept 
quietly your proposal for a 20% cut in our retiree's pensions for 
stated reasons that follow:

      Pensions that were promised the day a new hire was spoken to by 
an HR member of Corporate UPS.
      Pensions earned by collective bargaining by both employee and 
Corporate UPS of what is approaching $17/hr. This amounts to 
approximately $3Sk per employee per year. Of which less than $100 per 
month is benefit bearing for the UPS employee; the remaining going 
towards the unfunded liability of NYSTF. Would it be correct to assume 
the tax write-offs that UPS receives on its pension contributions are 
more advantageous to corporate UPS and their shareholders than the 
consideration of those who made this a Fortune 500 company, the men and 
women in ``Brown'' who gave the best 30 plus years of their lives?
      Would it be accurate to state that OSHA created a special label 
referred to as ``Industrial Athlete'' due to the harsh job requirements 
of the UPS employee?
      Is it a stretch to state that the life expectancy is reduced due 
to the many injuries sustained that are common due to the volume of 
heavy repetitive weight bearing activity required for employment at UPS 
in comparison to the population norm. Associated with these injuries 
are significant decreased options for future employment.
      How is it that UPS can give Stocks and Bonuses of up to 34% and 
beyond of annual wages to management?

     Woe to the downtrodden employee, the UPS representative, of this 
vastly successful company. Cough up the cash, you should be ashamed of 
what this company is asking in concessions! Is there the need to cite 
the many various recent news articles on the popularity of the UPS 
driver? How ignorant is UPS to the value of these men and women in the 
success of this company OR is the truth they consider these faithful 
employees just throw away commodities more interested in corporate 
profits? It is becoming common knowledge to the general public what 
value corporate UPS puts on their employees and especially so in these 
current contract negotiations. This will be reflective on the quality 
of service the company will get from current and future employees. 
Where did those company signs stating the expected behavior, attitude, 
and presentation of the UPS driver go? This image conveyed respect for 
the UPS label and the public responded. Show these men and women the 
dignity they earned. Give them back their earned and promised pensions 
as UPS did in the New England Pension Fund 2012, where UPS paid and 
negotiated the terms of their liability and partitioned their 
employees; those employees mostly kept their full earned and promised 
pensions. Return to NYSTF the concessions of Schedule El Of which my 
understanding is less than 2K affected employees. Why should these 
roughly 2K suffer that additional reduction under that sham of a 
rehabilitation plan? I have a reasonable question to ask you, a man of 
your knowledge and stature. Why would UPS allow its continual 
contributions to a pension fund under scrutiny for adopting an 
extraordinarily risky investment portfolio and unrealistic investment 
assumption rates? $85 million paid out annually! It would be fair to 
assume this does not appear to be prudent business practice. Yet you 
suggest 20% cuts plus what actives and recent retirees have already 
taken of nearly 15% under the adopted rehabilitation plan in 2010 
without concern of where did the money go . . . OUR MONEY! Our future 
survival in our last decades of our lives is dependent on this income. 
Not to mention the many with permanent injuries and poor prognosis. 
Shameful! Why is it there is NO UPS representation on our Board of 
Trustees? Mostly Trustees of orphan companies and a soon to be orphan 
company. When you look in the mirror where did the human component 
disappear to? Where did feelings of respect, admiration, dignity and a 
respectful work ethic go? Do those of you who think a 20 cut is 
equitable and fair fail to distinguish these are people no less 
deserving to live in dignity than the reflection you see in the mirror 
on a daily basis? These "downtrodden in Brown" are representative of 
those that built this great nation. Shame on anyone to be dismissive of 
these UPS employees and retirees. It is shameful to allow corporate 
greed, mismanagement and government malfeasance to victimize the United 
Parcel Service Employees and Retirees in the New York State Teamsters 
Pension Fund.

    Once again, why are you not considering UPS money for UPS people?

The current Butch Lewis proposal as written was found to be not 
feasible by the authors of it, as many plans would not be able to repay 
the loans. Inherent investment returns as written would not be 
sufficient for repayment, and further rehabilitation cuts could be 
necessary. There was discussion of self-funding surcharge proposal, or 
banking surplus add-on to eliminate the deficiency. Are all options 
being considered? Worth mentioning, in 2017 both Ken Hall and James 
Hoffa supported the UPS proposal (the 20% cut Proposal). Shameful!

UPS is the largest stakeholder in this multiemployer pension debacle. 
They are only looking out for corporate interests and not those who 
made the company the financial success it ensues. Their 20% reduction 
is unacceptable when other more respectable and viable options are 
presented.

To the Joint Select Committee, please do not disregard what is 
happening to us in NYSTF. The Central States Pension Fund by sheer 
volume is getting most attention. Yet we here in New York have been 
delivered the MPRA cuts which in reality range from 29% to 42%.

Once again UPS has become the successful company it is by those being 
delivered this travesty in the latter years of their life.

Thank you for your attention in the content of this letter. The 
following undersigned have read and are of same mind in what is 
presented in here.

Respectfully,

Dr. Irene Trzybinski








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