‘It’s really over’ for most of us 4,061

USA Today had a story about corporate plans heading for extinction noting:

Most U.S. companies no longer offer defined-benefit pensions, which typically provided guaranteed monthly payments to workers when they retired….[A]ccording to Mercer’s 2020 Defined Benefit Outlook…63% of companies with defined-benefit pensions “are considering termination” of the plan within half a decade…. Alicia Munnell, director of the Center for Retirement Research at Boston College, said in a recent interview: “It’s really over in the private sector. The question is, just when does the last plan close down?” The number of pension plans offering defined benefits – which means the payouts are guaranteed – plummeted by about 73% from 1986 to 2016, according to the Department of Labor’s Employee Benefits Security Administration.

Which got me to thinking where my profession of Enrolled Actuary (EA), which exists solely to certify to the funding of Defined Benefit plans, is headed.

Democrats For Bailouts

The Teamsters Union hosted top 2020 Democrat presidential candidates to talk “about the key issues affecting workers like you and making sure they fight for the Teamsters vote.” The coming collapse of the multiemployer system was topic number one, asked of all the candidates who showed up in Iowa.

The answer all gave was “Butch Lewis” (ie. bailout) though all took their favorite meandering routes.

For the record, here are their responses.

French penison égalité

Spending a long weekend looking for parking spots in Boston gives one time to think, in my case about France and public worker pensions which provide benefits of about 75 percent of pay at age 62 after 43 years of service and presumably would not change. What would change:

[T]here are also 42 “special regimes” for a range of workers including civil servants, dockers, lawyers, and employees of state rail operator SNCF and the Paris public transport operator RATP. They provide for earlier retirement and more advantageous pensions originally offered as compensation for arduous work.

Main objection from the rioters:

Unions say Macron’s proposal for a single-pension system would force millions of people in both the public and private sectors to work well beyond the official retirement age of 62.

After circling Boyston Street for the eight time a couple of things hit me:

Grand Bargain for U.S. Pensions?

Marc Levine, former chairman of the Illinois State Board of Investment, spoke to Barron’s about investing and touched on how to save save U.S. pension systems that included this prediction:
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Full Q&A on pensions:

MARP (12) Compensation Limits

Among the Title III Plan Governance proposals in the Technical Explanation of the Multiemployer Pension Recapitalization and Reform Plan (MARP) is this curious reform:

Under the proposal, multiemployer plans that have successfully partitioned are subject to a 21-percent excise tax on any remuneration in excess of $500,000 paid to covered employees (e.g.,the five highest compensated employees) of the Original Plan and the Successor Plan, for as long as the either the Original or Successor plan remains in Endangered or lower funding status under the revised zone-status rules. The excise tax is calculated in the same manner as under Section 4960 of the Code.

Who could be impacted by this cap?

MARP (11) Union Response

I am now through the first two Titles in the Technical Explanation of the Multiemployer Pension Recapitalization and Reform Plan (MARP) and so are some other people.

Cowden did their own comparison of proposed changes and the AFL-CIO has their take:

The AFL-CIO’s pension panel has roundly condemned proposals made by two leading Senate Republicans to shore up the nation’s endangered multiemployer pension funds that would cut benefits by up to 19%.

The federation’s Retirement Security Working Group said Dec. 2 that the proposals contained in a white paper released Nov. 20 by Finance Committee chair Charles Grassley (R-Iowa) and Sen. Lamar Alexander (R-Tenn.), chair of the Health, Education, Labor and Pensions Committee “will not only injure the retirees and active participants it purports to help, it also will precipitate the collapse of all multiemployer pension plans.”

Then there’s that other sticking point:

MARP (10) Incentive for Mergers

The Technical Explanation of the Multiemployer Pension Recapitalization and Reform Plan (MARP) looks to encourage multiemployer plans to merge because:

Current law generally requires a “Green Zone” plan to restore MPRA benefit suspensions by a critical and declining status plan after a merger of the two plans. Benefit suspensions may be maintained only if a plan is still projected to become insolvent unless benefits continue to be suspended. While the merger of a small weak plan into a Green Zone plan often obviates any further projection of insolvency, additional liabilities resulting from restored benefit suspensions can be a barrier to merger. (page 52)

So to solve that problem…