Multiemployer Plan Bailout Bill

It is called the Butch Lewis Act and according to a press release by its sponsor, Senator Sherrod Brown of Ohio, is supoposed to ensure Ohio retirees can keep the pensions they have earned in plans like:

How does the Butch Lewis Act work?

This legislation creates a new office within the U.S. Treasury Department, known as the Pension Rehabilitation Administration (PRA). The PRA would allow pension plans to borrow the money they need to remain solvent and continue providing retirement security for retirees and workers for decades to come.

The money for the loans and the cost of running the PRA would come from the sale of Treasury-issued bonds to financial institutions.

To ensure that the pension plans can afford to repay the loans, the PRA would lend them money for 30 years at low interest rates. The 30-year loans would buy time for the pension plans to make smart long-term investments for the future, while continuing to pay benefits owed to current retirees.

The bill would not allow any plan to borrow more than it can pay back to taxpayers. It would also prohibit any borrowed funds from being used to make risky investments. And it requires plans that borrow money to submit reports every three years to demonstrate that the plans are on track to getting back on solid footing.

The PBGC would fill the gap between money borrowed from the PRA and any additional funding needed to pay benefits owed to current retirees while the plans get back on track. The bill provides this money to the PBGC, but any money needed for the PBGC would be a tiny fraction of what it would otherwise be on the hook for if Congress fails to act.

My initial questions:

  1. If this is an arbitrage deal (like Pension Obligation Bonds (POBs) were supposed to be) then isn’t the whole idea to invest the money in riskier investments for profit?
  2. Will these plans be able to consider the Treasury bond money as an asset of the trust without a corresponding liability so as to artificially reduce contributions like what is going on with POBs?
  3. What happens with plans that have already cut benefits?

23 responses to this post.

  1. Posted by Tough Love on November 10, 2017 at 4:06 pm

    Quoting …..

    “The bill would not allow any plan to borrow more than it can pay back to taxpayers.”

    An HONEST measure of that amount would (for MANY of these Plans) would be NOTHING.
    ************************

    Quoting …………..

    “The PBGC would fill the gap between money borrowed from the PRA and any additional funding needed to pay benefits owed to current retirees”

    If not a Taxpayer “bailout”, then what is it ?

    ***************************

    Quoting ………..

    “The bill provides this money to the PBGC, but any money needed for the PBGC would be a tiny fraction of what it would otherwise be on the hook for if Congress fails to act.”

    Baloney, it sounds like we’re just ADVANCING the timing of the inevitable PBGC payments ………… but likely for a MUCH MUCH greater amount, because this bill appears to promise a continuation of the FULL amount of the promised pensions, NOT capped at the PBGC limit (which is very low for Multi-employer Plans).

    Reply

  2. Posted by Anonymous on November 10, 2017 at 6:54 pm

    Fake news outlets suggest the 2% solution, whereby 98% of what is said here and elsewhere is…..well as Ralph would say; bang zoom, straight to the moon!

    Reply

  3. Posted by Anonymous on November 10, 2017 at 8:56 pm

    Murphy’s governor get ready to cross up the dough TL

    Reply

  4. Posted by skip3house on November 11, 2017 at 4:47 am

    How/why do the people running these plans blindly follow stupid advice from so-called ‘Actuaries’?

    Reply

    • Posted by Tough Love on November 11, 2017 at 11:00 am

      The actuaries “recommend” the Elected Officials (sometimes via statutes) “chose” the assumptions.

      It’s the Elected Officials who WANT the annual contribution to be as low as possible, and to accomplish that THEY pick the assumptions that will accomplish that (or very clearly instruct the actuaries as to their goal) …. OFTEN overriding the “recommendations” of their actuarial advisors.

      Reply

      • Posted by skip3house on November 11, 2017 at 11:39 am

        T L ….Hi, your answers are right on. Please continue, and keep in mind many of us agree with our common knowledge/logic. Regards

        Reply

        • Posted by Anonymous on November 11, 2017 at 6:15 pm

          Rumor has it Kim G is on Gov elect short list to head up agency to monitor his tax increases to ramp up pension funding. No double dipping she’ll be a ‘consultant’.

          Reply

  5. Posted by George on November 11, 2017 at 11:19 am

    Should the NJEA support or oppose the ‘Butch Lewis’ act.?

    Support it and resources that could be used to bail out teacher pensions will be dissipated on Teamsters, but may create a Teamster constituency for a bailout of public pensions.

    Is the answer different for people with SS/Medicare? Does inflation adjustment change anything?

    I wonder if Butch Lewis is an intentionally poorly chosen name. Who-z-its? How about Stop Teamster Poverty act, STP act.

    Reply

  6. Posted by stanley on November 12, 2017 at 10:08 am

    If a pension plan cannot cover pension payments presently, how can they expect to repay loans in the future? Most people do not have a defined pension plan. How can they be expected to pay taxes to support defined pension plans paid to the few? Even in the states that have a serious problem with failing pension programs, most of the residents don’t enjoy the benefit of a pension. I can’t see how this is a popular bailout even in those states. I can’t see this making it through congress. The government can’t even afford to keep up medicare and social security. And to think that they can cover failing pension plans! Unbelievable!

    Reply

    • Posted by Tough Love on November 12, 2017 at 10:38 am

      Quoting …………

      ” How can they be expected to pay taxes to support defined pension plans paid to the few? ”

      Because Public Sector worker demand it, have concocted Laws & Regs to back them up, are greedy, and believe they are “special” and “deserving” of a better deal ….on the taxpayers’ dime.

      Reply

      • Posted by S Moderation on November 12, 2017 at 11:46 am

        Mr. Love,

        This particular bill is not for the public pension plans. Theoretically, at least, it is designed so the low interest loans will be repaid to the taxpayers.

        Reply

    • Posted by skip3house on November 12, 2017 at 10:56 am

      Stanley… … My sentiments, also. And explained failures by TL way above @11/11, 11am. Good expressions of no horse sense for our ‘common welfare logic’ by these plans controlling people.

      Reply

  7. the greatest evil is the ability of the federal government to run unlimited deficits and for the FED to create and spend unlimited amounts.

    Reply

    • Posted by skip3house on November 12, 2017 at 1:58 pm

      ‘Earned’ could be defined in Pensions as having worked the time… And been sure enough was funded for your Pension goal each year. Outside advice/auditors/consultants/arithmetic/banking compound interest/…..are responsibility of worker, not taxpayers.

      Reply

      • Posted by Terry Walker on November 17, 2017 at 9:48 am

        I earned my pension working 34 years while my employer paid into the plan monies that would have otherwise gone into my paycheck. The plan (CSPF) was under government CONTROL under the terms of ERISA. During government oversight, the plan FAILED!! Leaving me and 50,000 others without a pension within the next 8 years. If the PBGC is forced to pay out only 30% of pension payments, they will go broke within 3 years. If ANYONE thinks this solution is a “bailout”, that’s just plain stupidity!

        Reply

        • Posted by Anonymous on November 17, 2017 at 10:01 am

          Sorry the gov fails so many….if in 401Ks, every pay stub would be our own value of retirement savings…..not promises of misunderstood great big numbers meaning zilch.

          Reply

    • Posted by Tough Love on November 12, 2017 at 9:29 pm

      Doesn’t hold a candle to the insatiably greedy Public-Sector-Worker “moochers” at the State & Local level.

      Reply

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