Participants in the United Mine Workers of America 1974 (UMWA) Pension Plan are unlikely to see any significant cuts in their benefits primarily because the average retiree receives about $6,900 annually, far less than the PBGC guarantee, so even after exhaustion of all trust assets by 2025, like the Fish Lumpers, the Mine Workers will likely have the PBGC continuing to pay most of their benefits (unless of course the PBGC itself goes belly-up by then too).
There is an emergency, which four senators are desperate to address, but not quite as reported:
As Congress closes up shop for 2016, a group of four Democratic senators is determined to “use whatever means necessary” to secure a special-interest taxpayer bailout for the United Mine Workers of America union.
According to the senators, those “means” will include “blocking other bills” until the bailout is secure.
The UMWA represents roughly 100,000 active and retired coal miners. After decades of failing to set aside sufficient funds to keep the promises it made, the UMWA’s members are on track to see their pension benefits reduced when the union’s plan becomes insolvent around 2025.
Never before in history has the U.S. government bailed out a private pension plan. That’s because bailouts encourage more of the same reckless behavior that led to the bailout in the first place. If the federal government forces taxpayers to back up the promises made by private companies or unions, what incentive will those plans have to make good on their promises?
Pensions are involved but it is those health care benefits that will cease for 22,000 retirees at the end of this year that primarily worries senators like West Virginia’s Joe Manchin who in July spoke in favor of the Miners Protection Act:
According to the Congressional Budget Office (CBO) analysis of S3470:
So this act would be a money-maker with the added fees in 2026. As for the pension aspect the CBO makes some interesting conjectures:
Pension Benefits. Under the bill, if annual payments to the states, tribes, and the UMWA health plans authorized by SMCRA, as amended by the legislation, are less than the $490 million cap, OSMRE would pay the remainder of the amount available under the statutory cap to the UMWA 1974 Pension Plan. As noted earlier, CBO estimates that actual obligations authorized under current law will total about $3.5 billion less than the maximum amount authorized over the next 10 years. We estimate that transfers to the 1993 Benefit Plan by OSMRE for the health benefits of retirees authorized under the bill would total $2.1 billion over the 2017-2026 period. As discussed below under the heading “Revenues,” other provisions of the bill also would transfer money to the UMWA plans; therefore, actual amounts transferred by OSMRE to pay benefits under the 1993 Benefit Plan would be $0.1 billion less than the outlays for the health care costs of the affected retirees. Thus, CBO estimates that new payments to the UMWA pension plan would total almost $1.4 billion over the 2017-2026 period.
Not exactly a federal bailout for pensions but rather an assurance that all that SMCRA money will be spent.
Surface Mining Control and Reclamation Act of 1977 (SMCRA) authorizes the Office of Surface Mining Reclamation and Enforcement (OSMRE) to make annual payments to three multiemployer plans that provide health benefits for certain retirees from the coal industry and to award grants to certain states and Indian tribes that have completed all of their outstanding coal mine reclamation projects. Payments made from the general fund of the Treasury for such purposes cannot exceed a combined annual limit of $490 million (statutory cap).
As for the impact on the PBGC:
Pension Benefit Guarantee Corporation (PBGC) Financial Assistance. Transfers to the UMWA pension plan under the bill would reduce financial assistance paid by PBGC through 2024 and increase it in 2025. On net, total outlays for financial assistance would increase by $40 million, CBO estimates.
PGBC provides financial assistance to insolvent pension plans. The additional funding provided under the bill would reduce the chance that the UMWA plan would become insolvent and need financial assistance from PBGC during the next 10 years. Based on a model that estimates the probability that the UMWA plan will become insolvent in any given year, CBO estimates that enacting the bill would result in net savings of $375 million through 2024.
CBO projects that under current law, PBGC’s multiemployer revolving fund will be exhausted in 2025. If that fund ran out, PBGC’s financial assistance would be limited to its current income and PBGC would not be able to pay claims in full. Any policy that reduces the need for financial assistance from the revolving fund in the period before the exhaustion date would allow the fund to pay additional financial assistance in 2025 (and potentially in later years, if the savings were sufficient). In addition, the revolving fund is credited with interest on its holdings, so the estimated additional spending in 2025 would equal the sum of any savings from earlier years plus credited interest.
CBO estimates that the sum of the reduced financial assistance to the UMWA pension plan and the associated interest credited to the revolving fund would total $415 million by 2025—$375 million from reduced spending in earlier years and $40 million in credited interest. Thus, PBGC would be able to pay an additional $415 million in financial assistance to insolvent plans that would otherwise go unpaid under current law.
The CBO thus estimates that it will be 2018 when the PBGC would have to start propping up the UMWA 1974 Pension Plan but with the new SMCRA money those PBGC funds would not be necessary through 2025 at which time the $415 million in accumulated savings would presumably pay a portion of the $1 billion in benefits due UMWA retirees then (annual payouts in 2014 were $618 million). Then we come to estimated PBGC costs for 2026: $0, as the CBO does not seem to believe the PBGC will be around then and there is no column for Taxpayer Bailout in their analysis…..yet.
All conjecture though since yesterday the Act failed.