|
Pension Insurance System for Union Plans Still Faces Train Wreck
The PBGC's pension insurance program for union-negotiated plans is continuing to race toward insolvency. The Pension Benefit Guaranty Corporation's multiemployer insurance program is likely to run out of money in about eight years—by the end of fiscal year 2025 or earlier—the agency said Aug. 3 in its annual projections report. Multiemployer plans result from collective bargaining and include at least two contributing employers.
The latest report, for fiscal year 2016, echoes previous warnings the agency has issued about its multiemployer program, which covers about 10 million workers. More than 100 plans insured by the agency have told their members that their plans will be insolvent within 20 years, the report says. The PBGC's own insolvency could leave the benefits of some 1.2 million participants in those plans without any safety net. “The report is a call to arms for Congress to give the PBGC the resources and flexible authority to do its job and for the Treasury Department to rethink its interpretation” of the Multiemployer Pension Reform Act of 2014 “to allow those plans that could save themselves from being denied the chance to do so,” former PBGC Director Joshua Gotbaum stated.
As the agency gets closer to the projected date of insolvency, now expected to be most likely between 2024 and 2026, the exact date of that happening is coming more into focus, a PBGC official recently explained. To prevent the agency's insolvency, legislative solutions are needed to save plans and to provide more funding to the agency, said the official, who spoke on the condition of anonymity. “While there are no easy solutions, the cost of dealing with this crisis will only increase as action is delayed,” Joshua Shapiro, chairperson of the American Academy of Actuaries’ multiemployer plans subcommittee, announced. Shapiro is also a senior actuarial adviser at Groom Law Group in Washington.
Proposed Solutions Circulating The MPRA, also known as the Kline-Miller Act, was viewed when enacted as a means to rescue many financially troubled plans and as a way to help the overall multiemployer program. Under that law, plans can ask Treasury for approval to cut members’ vested and accrued benefits upon a showing that the cuts will hold off the plan's insolvency for at least 30 years. Only two small plans have received approval thus far. The 400,000-member Central States Southeast and Southwest Areas Pension Fund, which is projecting insolvency in 2024, was the primary focus of the law. Treasury rejected the fund's rescue proposal in May 2016.
Gotbaum, currently a guest scholar at the Brookings Institution in Washington, said there are several thoughtful proposals for legislation that would help resolve the crisis. He said he hoped they will get real consideration. Several bills pending in Congress that would alter the MPRA or provide more resources for the PBGC haven't yet received much traction. New proposals to rescue the multiemployer system from the International Brotherhood of Teamsters and the United Parcel Service have been circulating in Congress. Under the Teamsters’ proposal, Congress would create a nonprofit, private-sector corporation tasked primarily with making loans to poorly funded plans or to employers that participate in such plans. Money for the loans would come from bond purchases by investors, and bond payments would be guaranteed by the U.S. Treasury.
The UPS proposal would provide low-interest, long-term federal government loans to troubled pension plans to cover their cash flow shortage. Plan participants would see benefit cuts of 20 percent across the board.
Construction Financial Management Association To Hold Major Event
The Construction Financial Management Association is holding the 2017 Buckeye Regional Conference in Toledo on Wednesday, September 27th and Thursday, September 28th at the Fifth Third Center At One Seagate. To view the conference schedule and obtain registration information, please click here.
|