Protecting Employers Since 1985
Life Raft For Multiemployer Pension Plans
On July 24, 2019, the United States House of Representatives passed a measure designed to rescue troubled Multiemployer Pension Plans. The Rehabilitation For Multiemployer Pension Act (House Bill No. 397) would provide loans and grants to insolvent and near-insolvent Multiemployer Pension Plans. The measure would create a new Treasury Department Agency-The Pension Rehabilitation Administration, to administer the loans and grants. It is estimated that there are over 130 Multiemployer Pension Plans that will run out of money within the next twenty (20) years. In addition, the Pension Benefit Guaranty Corporation (PBGC) the current government agency that insures Multiemployer Pension Funds is expected to run out of money by 2025 without congressional action.
The Congressional Budget Office estimates that the cost of this new Rehabilitation Measure if passed by the Senate and signed into law, would cost in the range of $48.5 Billion Dollars over the next ten (10) years. Obviously, either taxes would have to increase substantially or, in the alternative, the trillion dollar debt level of the United States would certainly be added to!
What the Rehabilitation Measure does not recognize is the fact that the Multiemployer Pension Crisis is not a creature of unknown causes. It is related, in large part, to the catastrophic mismanagement of those Multiemployer Pension Plans over the last few decades and, as well, an increase in the number of individuals who are drawing Pensions.
For a historical perspective, when Social Security was created and in its initial years, in the United States and a retirement age to draw Social Security benefits was pegged at 65, one (1) in ten (10) individuals who could draw on the Social Security Fund lived to the age of 65. Obviously, if you limit the group that can draw benefits, it is difficult to exhaust those benefits. Through medical science and better diet (?), people are living longer and, therefore not only drawing from Social Security but from their Multiemployer Pension Funds and creating a situation were “more money is going out then coming in”, whether from Social Security or Multiemployer Pension Funds.
The decrease in the number of people belonging to unions, currently less than seven (7%) percent of the private business work force are union members, and therefore having contributions made on their behalf has also added to a decrease in the financial resources. While there may be a “Multiemployer Pension problem”, there has to be substantial doubt that a massive bailout like the Rehabilitation Act will solve this problem going forward.
Questions? Contact attorney Walter Liszka in our Chicago office at (312) 629-9300 or by email at email@example.com.
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