Congress has an uncanny talent for taking a bad situation and making it worse. Before they left for August recess, they did just that.
The Daily Signal posted an article yesterday headlined, “Congress Poised to Give Unions a Massive Bailout.”
The article reports:
A new report from the Pension Benefit Guaranty Corp. shows that the private union pension crisis is only getting worse, and now Congress is poised to make it worse still.
Not only are many multiemployer pension plans rapidly approaching insolvency, but the situation is so bad that even the pension safety net—the PBGC’s Multiemployer Program—will be bankrupt in just six years, leaving pensioners with mere pennies on the dollar in promised benefits.
Unfortunately, the House of Representatives passed a bill just before leaving for August recess that will make the situation even worse. Not only would the Rehabilitation for Multiemployer Pensions Act (H.R. 397), exacerbate the problem, it would put taxpayers on the hook for potentially $638 billion or more in broken pension promises.
This is the summary of the bill posted at Congress.gov:
Rehabilitation for Multiemployer Pensions Act of 2019
This bill establishes the Pension Rehabilitation Administration within the Department of the Treasury and a related trust fund to make loans to certain multiemployer defined benefit pension plans.
To receive a loan, a plan must be (1) in critical and declining status, including any plan with respect to which a suspension of benefits has been approved; (2) in critical status, have a funded percentage of less than 40%, and have a ratio of active to inactive participants which is less than two to three; or (3) insolvent, if the plan became insolvent after December 16, 2014, and has not been terminated.
Treasury must transfer amounts, which may include proceeds from bonds and other obligations, from the general fund to the trust fund established by this bill as necessary to fund the program. The Pension Rehabilitation Administration may use the funds, without a further appropriation, to make loans, pay principal and interest on obligations, or for administrative and operating expenses.
The bill allows the sponsor of a multiemployer pension plan that is applying for a loan under this bill to also apply to the Pension Benefit Guaranty Corporation (PBGC) for financial assistance if, after receiving the loan, the plan will still become (or remain) insolvent within the 30-year period beginning on the date of the loan.
The bill also appropriates to the PBGC the funds that are necessary to provide the financial assistance required by this bill.
No. In 2010, I wrote about this problem at rightwinggranny. One source of my article was Human Events, which stated:
“EPI has published and advocated what we feel would be an excellent national supplemental retirement plan, the Guaranteed Retirement Account, which was authored by Prof. Teresa Ghilarducci, Director of the Schwartz Center for Economic Policy Analysis at the New School for Social Research. In a nutshell, the GRA would mandate employer and employee contributions to a federally administered cash balance plan. The combined 5% of payroll contributions would be invested by a Thrift Savings Plan-like entity in the bond and stock markets, with a guaranteed minimum return of 3% beyond inflation. A $600 tax credit would cover the entire 2.5% contribution for workers earning $24,000 or less, and greatly reduce the effective contribution rate for other lower-paid workers. We calculate that at the end of a normal working life, the average worker would accumulate, along with Social Security, enough to assure a 70%replacement rate of pre-retirement income.”
The Daily Signal article concludes:
Under H.R. 397 (which is similar to the Butch Lewis Act already before the Senate), insolvent union pension plans would receive taxpayer dollars to invest in the stock market, as well as loans to cover their broken pension promises.
Risking taxpayer money in the stock market and making loans to insolvent pension plans is reckless and wrong.
And instead of fixing the underlying problems, this bailout-without-reform proposal would incentivize union pension plans to become more underfunded so they could receive taxpayer funds.
That would be particularly unfair, considering that Congress has not even addressed its inability to pay its own Social Security obligations to taxpayers.
Instead of a costly bailout-without-reform, Congress should improve the Pension Benefit Guaranty Corp.’s solvency, prevent plans from overpromising and underfunding pensions, and help plans minimize pension reductions across workers.
The current House of Representatives will go down in history as one of the most irresponsible governmental bodies ever elected.