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Meet Your Multiemployer Pension Nightmare: Actuary to Lawmakers

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(Related: Boomer Aging Impact Library: Murmurs From the Silver Tsunami)

Either Congress fixes the program that insures U.S. multiemployer pension plans, or 1 million or more Americans could face cuts of about 90% in their pension benefits payments sometime in the 2020s.

Ted Goldman, a longtime pension actuary, gave the members of a new congressional committee that warning Wednesday, at a hearing meant to give the members a basic primer on the nature of the multiemployer pension plan funding crisis their supposed to try to address.

“Time is of the essence,” Goldman said. “The more time that passes, the bigger this problem will become, and the harder it will be to restore multiemployer pension plans to stability and to sustainability.”

(Related: Lawmakers to Discuss Multiemployer Pension Solvency)

Goldman, a Buck Consultants veteran who is now a senior pension fellow at the American Academy of Actuaries, was testifying at a multiemployer pension crisis background hearing organized by the Joint Select Committee on Solvency of Multiemployer Pension Plans.

Goldman gave committee members a summary of the information they have been getting from other witnesses, at other hearings, for more than a year:

  • The United States now has about 10 million people in about 1,400 PBGC-insured multiemployer pension plans.
  • About 100 of the multiemployer plans appear to be likely to fail within the next 20 years, and those plans have about 1 million participants and beneficiaries.
  • The Pension Benefit Guaranty Corp. (PBGC), the agency that insures pension plans, has only about $2.2 billion in assets backing multiemployer plans. It needs about $67 billion just to support the obligations for participants in the plans that have already failed.
  • The PBGC multiemployer pension insurance fund could run out of the cash it needs to support the pension plans it has already taken over, or is on the verge of taking over, sometime around 2025, even if none of the pension plans now on the critical list fails.

The Joint Select Committee on Solvency of Multiemployer Pension Plans.

Congress created the committee when it passed the Bipartisan Budget Act of 2018 (BBA-2018). The committee is supposed to try to develop recommendations for shoring up multiemployer pension plans by the end of the year.

Members of Congress included special rules in BBA-2018 that could get a bill based on the committee’s recommendations to the Senate floor quickly::

  • Once the recommendations come out, the Senate majority leader is supposed to introduce a bill based on the recommendations the next day the Senate is in session.
  • The full Senate  is supposed to debate a motion to proceed to formal consideration of the bill within seven days — even if the committees that have jurisdiction over the bill reject it.
  • The Senate will then proceed to formal debate if 60 senators approve the motion to proceed to consideration of the bill.

Sen. Orrin Hatch, R-Utah, is the chairman of the committee. Sen. Sherrod Brown, D-Ohio, is the Democratic co-chair. Brown and many of the other committee members come from states or House districts with large concentrations of participants in ailing multiemployer pension plans.

Life Insurance Industry Interests

Multiemployer pension problems could both help and hurt both life insurance agents and life insurers.

Agents could:

  • Benefit from sales of annuities and other retirement products to clients worried about the stability of their pension benefits.
  • Suffer when clients hit by pension benefits cuts have trouble keeping up the payments for products such as Medicare supplement insurance.

Life insurers could:

  • Benefit from government proposals that could create new pension risk transfer revenue for life insurers, by giving insurers a chance to win lucrative multiemployer pension plan bailout contracts.
  • Suffer when the multiemployer plans that already use group annuities to fund their benefits  fail.

The Hearing

Hatch said he wanted the hearing held to give committee members an introduction to the history of the multiemployer pension plan problem.

Goldman and the other witness, Thomas Barthold, chief of staff of the Joint Committee on Taxation, declined to give recommendations about what Congress should do to fix the multiemployer pension plan problems.

Goldman told lawmakers that the problems were caused mainly by factors such as benefits design decisions, low investment returns, the shrinking number of young people contributing to defined benefit pension plans, and increases in participants’ life expectancy.

The problems were not, generally, caused by trustee mismanagement, and were not caused by any wrongdoing or mistakes on the part of the participating workers, Goldman said.

Sen. Joe Manchin, D-W.Va., said he represents a state with 63,000 people affected by the instability of a large, multiemployer pension plan for coal miners that’s on track to fail sometime around 2022. Most of the beneficiaries of the miners’ plan are getting only about $500 per month, and most are widows, he said.

Manchin pressed Goldman for advice about what Congress should do. Goldman declined to make any recommendations.

“Then what the hell are we holding this hearing for?” Manchin said. “This thing is going to come to a head very quickly. We’ve got to figure out how to fix it.”

Manchin pointed to a colleague who represents a district affected heavily by the instability of another multiemployer plan.

“You’re 2025,” Manchin said. “There’ll be nothing left by the time they get done with us; by 2022, we’re all gone.”

Rep. Debbie Dingell, D-Mich., said many people in her district are affected by the instability of another large multiemployer plan.

“I see them every single weekend,” Dingell said. “I’ve had grown men just come to my door and cry in my arms… I have small businesses that are threatened if these pension systems go down.”

Rep. David Schweikert, R-Ariz., said he’s been learning how complicated the issue is. He noted that solvency can be affected by a wide range of factors, including participant life expectancy, and that even efforts made to help stabilize pension plans, such as imposing tougher solvency benchmarks, could increase the likelihood that plans will fail.

Goldman warned that poorly designed efforts to save the system, such as imposing big PBGC premium increases on the employers that still let active employees participate in multiemployer pension plans, could chase more employers out of pension plan sponsorship and lead to the collapse of the whole system.

Request for Comments

In related news, Hatch and Brown put out a request for input from stakeholders.

The committee is asking stakeholders to send input to [email protected] by Sept. 30.

“All submissions will be considered part of the public record; should be clear and concise; directed at the issues that the Joint Select Committee is charged to consider; and provided in the form of an email attachment (either in Microsoft Word or text-searchable PDF file),” the committee says. “The email containing the attachment should clearly indicate the name(s) of the author(s), contact information and any professional affiliation.”

More information about submitting comments is available here.


Links to information about the hearing, including a video recording of the hearing, are available here.

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