[Congressional Record Volume 165, Number 186 (Wednesday, November 20, 2019)]
[Senate]
[Pages S6696-S6698]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
Pensions
Mr. GRASSLEY. Mr. President, the financial crisis facing the private
sector multiemployer pension system calls for comprehensive reform and
getting it done soon.
The crisis is severe and growing worse every day. Would you believe
about 125 multiemployer plans are in so-called critical and declining
financial status? These plans report that they will become insolvent
over the next two decades. There will be a lot of people without a
retirement plan if we don't act.
Several large plans, including the United Mine Workers Pension Fund
and the large Central States Pension Fund, predict these plans will
become insolvent in the next few years. That is not a very comfortable
environment for those retirees.
This will leave more than 1.3 million participants without the
pension benefits they have been promised and, of course, worked for
probably throughout their whole lives.
In just my State of Iowa, the benefits of close to 10,000
participants of multiemployer plans are at risk if the system fails.
Ten thousand Iowans being affected by what we do or don't do,
obviously, gets my attention. That figure of 10,000 will represent over
$70 million in benefits paid out annually that these individuals rely
on in retirement.
More broadly, another large group of multiemployer plans are in
critical status. They report that no realistic combination of
contribution increases or allowable benefit reductions--options
available under the current law
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to address their financial condition--will enable these plans to emerge
from their current, poorly funded financial condition. So it is very
important that Congress act to save these retirement plans. These plans
cover millions more workers and retirees across the Nation, and those
workers and retirees face significant benefit cuts under existing law.
We should also be concerned about the financial health of the Federal
insurance system that backs up these retirement benefits. The Federal
insurance system goes by the name of the Pension Benefit Guaranty
Corporation. The PBGC's multiemployer pension program may itself become
insolvent if only one or possibly two larger multiemployer plans fail.
One of these plans, the United Mine Workers, just lost its last large
contributing employer to bankruptcy. Without reforms, the Federal
guaranty system, the PBGC, reports it will be insolvent no later than
2026. When that happens, the PBGC will not be able to pay either
current or future retirees more than a very small fraction of the
benefits they have been promised.
Consequently, substantial reductions in retirement income are a very
real possibility for the millions of workers and retirees who depend on
benefits from these plans. We need to act very soon to protect the
hard-earned pension benefits of the workers who participate in these
plans.
As chairman of the Senate Finance Committee, I am on the floor today
to join with Chairman Alexander from the Health, Education, Labor, and
Pensions Committee to release a responsible reform plan to address the
immediate financial challenges of a number of plans in critical
financial condition and also at the same time to secure the
multiemployer pension system over the long term, not just a quick fix
that is going to last a short period of time.
As we looked at options for reforming the current system, we relied
on several important reform principles. I will go through these
principles.
First, a reform plan should provide balanced assistance to the most
poorly funded plans.
The second principle is that Federal assistance to the failing plans
should rely on as little taxpayer dollars as possible.
The third principle is that reforms must promote long-term stability
of the multiemployer pension system and the long-term solvency of the
PBGC.
To help the sickest plans recover their financial footing, our
proposal creates a special partition option for multiemployer plans.
I want everybody to know that this is not a new concept. In fact,
quite simply, it expands on the PBGC's existing authority. It is based
on banking industry reforms that Congress enacted after the Great
Depression and at other times.
The partition option permits employers to maintain a financially
healthy multiemployer plan by carving out pension benefit liabilities
owed to participants who have been ``orphaned'' by employers who have
exited the plan without paying their full share of those liabilities.
By removing these liabilities, we allow the original plan to continue
to provide benefits in a self-sustaining manner by funding benefits
with contributions from current participating employers. In effect,
partitioning creates a healthy pension that continues to meet all of
its obligations to retirees and a separate ``sick pension'' that
requires attention and assistance from the PBGC.
For this partition program to operate effectively and address the
plans that are in immediate danger, a limited amount of Federal
taxpayer funds will be needed to support the PBGC. We expect the
necessary Federal resources to comprise only a small--I should say very
small--portion of the financial assistance provided to the faltering
multiemployer plans, and it is our intent, as we should be fiscally
responsible, to offset those costs.
We should also acknowledge the reality that action right now means
lower taxpayer involvement than if we wait for the PBGC to become
insolvent, which would lead to a far larger commitment of taxpayer
funds in the not too distant future. Congress needs to be ahead of the
real catastrophe we know is coming.
Over the long run, the reforms we are proposing will be sustained
primarily by shared-sacrifice funding reforms and a new premium
structure for all stakeholders of the multiemployer plans.
Because taxpayer dollars would be at risk if the sickest plans fail
to move to fully funded status, the proposal also includes a number of
plan-governance reforms to strengthen multiemployer plans, to protect
the taxpayers' contributions to the overall reforms, and to shield
taxpayers from future risks.
While partitioning addresses one element needed for reform, Senator
Alexander and I propose to go a step further to make significant
changes to the management and operation of all multiemployer pension
plans. This is something that should have been done years ago so that
plan trustees would have had to act in a responsible way, and maybe we
wouldn't be where we are today, but we want to make sure this doesn't
happen in the future. If we go that way--and we must go that way--
moving forward, the entire multiemployer pension system will be better
funded and more transparent to participants, to sponsoring employers,
and to government regulators.
Providing relief to critical and declining plans is contingent on
making changes to the legal framework of the multiemployer pension
system to ensure that all plans operate, as people would expect, in a
financially sound way in the future.
To help finance the partition relief and to provide a stronger PBGC
insurance guarantee to participants in the system, our reform proposal
creates a new premium structure. That structure includes raising the
flat-rate premium to $80 per participant in a multiemployer plan,
putting the multiemployer program on par with a single-employer
guarantee program. The new premium structure also broadens the base on
which premiums are assessed to more equitably spread the cost of
insuring benefits and to ensure PBGC solvency. The new structure
applies a copayment to active workers and retirees. However, because of
the broader contribution base, the copayments are significantly less
than the amount of the typical benefit cuts retirees face under current
law if their plan should fail. Older retirees and disabled participants
will also be protected.
In addition, our reform package establishes a variable-rate premium.
This variable-rate premium, which parallels the variable-rate premium
that has long applied to single-employer plans, is tied to a plan's
funding status to manage risks stemming from more poorly funded plans.
This also creates an incentive for plans to improve their funding over
time.
The new premium structure not only helps to secure the finances of
the PBGC but also funds an increase in the guaranteed benefit level for
the vast majority of participants in the system. Raising the guaranteed
benefit will greatly reduce the risk to retirees of significant
reductions in retirement income, which would otherwise occur if their
multiemployer plan becomes insolvent.
While the changes to the premium structure will fundamentally
strengthen the financial status of the multiemployer pension system and
the PBGC, the reforms we are proposing make other important structural
changes to the multiemployer system to help ensure that the entire
system moves to a well-funded status over the long haul.
We achieve this goal by addressing key flaws in the current legal
framework governing multiemployer plans. Current multiemployer plan
rules do not serve the best interests of workers and retirees. You can
tell that by the bad condition, financially, some of these plans are in
today, threatening the retirement of our workers who have paid into
them over a lifetime. These rules have not been sufficient to keep
plans in good financial health, and they tend to underestimate
liabilities and result in insufficient contributions to the plans.
To ensure that benefit promises offered in a multiemployer plan are
ultimately met, our proposal strengthens the rules for measuring the
value of promised pension benefits and the amount of employer
contributions necessary to pay them when the worker retires. These
changes will require plan trustees and actuaries to measure and project
plan assets and liabilities in a more prudent and accurate way than has
been required under present law.
These changes also are designed to help move plans toward full
funding
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and at the same time protect the interests of plan participants and the
taxpayers who would otherwise be required to bail out these
multiemployer plans.
Our reform proposal also improves the so-called zone rules. Plans
will be required to look further into the future when estimating their
financial status, and will have to institute a form of stress testing
to check whether a plan can remain financially sustainable through
potential economic and demographic stresses. Depending on its health,
plans will have to bolster the steps they take when signs of financial
hardship arise. That is a pretty commonsense approach.
We will also replace current withdrawal-liability rules with a
simpler, more transparent, and consistent method for determining an
employer's liability if it withdraws from a multiemployer pension plan.
We have to look to the future. In doing so, the proposal includes a
new option for sponsors of multiemployer plans to establish a new
hybrid pension plan that we are going to call a composite plan. We have
heard a great deal of interest from smaller businesses and their
workers about the benefits of a composite plan approach, including less
costly operations and more certainty in the financing of these plans.
In closing, let me say that there are no perfect solutions to the
multiemployer pension crisis. But it is very true that the longer we
wait, the harder and more expensive this problem gets. But it is clear,
our solution is far better than allowing the system to continue on its
current path--to collapse--and far better than merely throwing Federal
money into plans without changing how they operate. The problem is
never going to be solved by waiting or by using taxpayers' money.
The House has essentially advanced a pure, no-strings-attached
bailout plan that throws taxpayer money to the plans in the hope that
they can somehow earn returns sufficient to keep them going. We rely a
great deal on the Congressional Budget Office around here for estimates
of the future, and the nonpartisan CBO has told us that the House's
proposal will not generate sustainability of pension plans or the
sustainability of the PBGC. So we had better not spend our time on
something the Congressional Budget Office says just isn't going to
bring a solution and definitely not a long-term solution to these
issues.
In contrast, the proposal that Senator Alexander and I are releasing
today addresses the immediate needs of the few multiemployer plans
facing immediate crisis in a manner that protects participant benefits
and also ensures a sustainable multiemployer pension system for the
long haul, and it does this all in a fiscally responsible way.
Our proposal is not a giveaway to corporations or to unions, and it
is a better deal for the taxpayers than a future that would be an even
larger problem and PBGC funding needs that will almost surely be met
with a taxpayer bailout.
All participants in the system would make a sacrifice. Let me make
that clear. All participants in the system are going to sacrifice--
employers, unions, workers, and retirees. I am sure each one of those
groups isn't going to consider this fair and responsible, but with a
problem like this, if everybody doesn't give a little bit, it is never
going to be fair and responsible anyway. But with some shared pain will
come significant shared gain that will be to the benefit of over 1.5
million participants in about 125 multiemployer plans that are in
serious financial jeopardy.
Without changes to the current system, we can't say for sure that
people are going to get the benefits that they sacrificed for over a
lifetime of work. But our plan, we are confident, will benefit all
multiemployer plans and their participants by providing a stronger
system for the long haul and by promoting long-term solvency of the
PBGC.
Senator Alexander and I offer this proposal as a path forward for a
multiemployer pension system that we all know is in crisis.
Now, as we turn to getting this job done, I look forward to working
with my colleagues in the Senate and in the House of Representatives to
advance this proposal. We all know that just because you lay something
on the table, that it is not necessarily going to be passed that way.
So maybe there is some compromise needed. But whether it is this
proposal or a little bit of compromise, we have to get this piece of
legislation to the President's desk before more pension holders face
losses of the benefits they have earned and benefits that they were
promised.
I yield the floor.
I suggest the absence of a quorum.
The PRESIDING OFFICER (Mrs. Blackburn). The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. CARPER. Madam President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.