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July 23, 2019 at 04:22 PM
The House is preparing to vote on a measure that could rewire a major part of the U.S. retirement finance system: H.R. 397, the “Rehabilitation for Multiemployer Pensions Act of 2019″ bill.
The bill drafters want to provide financial assistance that the managers of the 1,400 U.S. multiemployer pension plans could use to transfer pension obligations to private insurers, by purchasing group annuities.
If the bill becomes law and works as drafters predict, a new Pension Rehabilitation Administration (PRA), and the PRA’s new Pension Rehabilitation Trust Fund, could keep more than 1 million of the 10 million multiemployer pension plan participants from losing access to the benefits they were promised.
If managers of most of the eligible pension plans actually use the new assistance to buy group annuities, the bill could also lead to up to about $70 billion in extra group annuity sales over a 10-year period, according to projections from the Congressional Budget Office (CBO).
(Related: Pension Risk Transfer Volume Continues to Head Toward Sky)
Here are five more things to know about H.R. 397, for agents and advisors who sell annuities.
1. The Multiemployer Pension Plan Problem
The Pension Benefit Guaranty Corp. (PBGC) is the federal agency responsible for insuring private pension benefits.
Separate laws govern how the PBGC provides coverage for single-employer pension plansand for multiemployer pensions. Analysts say that typical single-employer plans are reasonably well-funded, but that many multi-employer plans look shaky.
Members of Congress have been talking about the problem for years. They included a provision creating a Joint Select Committee on Solvency of Multiemployer Pension Solvency in the Bipartisan Budget Act of 2018.
Ted Goldman, a pension actuary at the American Academy of Actuaries, testified at a joint select committee hearing in April 2018 that about 100 of the 1,400 PBGC-insured multiemployer plans appear to be likely to fail within the next 20 years, and that those plans now serve about 1 million participants and beneficiaries.
The PBGC has about $2.2 billion in assets available to support all multiemployer plan obligations, and it needs $67 billion just to support obligations to participants in the multiemployer plans that have already failed, Goldman said.
2. H.R. 397 Basics
Rep. Richard Neal, D-Mass., the chairman of the House Ways and Means Committee, introduced H.R. 397, which has been dubbed the Butch Lewis Act, in January.
Top Republicans in Congress have joined Democrats in supporting the goal of multiemployer pension reform.
H.R. 397 has attracted 209 cosponsors. The list of cosponsors includes nine Republicans. Many are in the Northeast, but Rep. Jeff Fortenberry, R-Neb., and Rep. Bill Huizenga, R-Mich., are in the Midwest.
H.R. 397 has already been approved by the House Education and Labor Committee and the House Ways and Means Committee.
Members of the House Rules Committee are meeting at 5 p.m. Eastern Daylight Time today to package the bill for floor action.
House leaders say on their House floor bill consideration website that they could bring H.R. 397 up for a vote on the House floor this week.
3. Objections
H.R. 397 received many votes of support from Republicans at the House Education and Labor Committee, but it received no votes of support from Republicans at the House Ways and Means Committee.
Critics of H.R. 397 have argued that the current version of the bill is not really bipartisan, that it is not funded in a realistic way, and that the amount of assistance it would provide is too small.
