Multiemployer Plan Bailout Plan

Today’s hearing of the Joint Select Committee on the Solvency of Multiemployer Pension Plans (Bailout Committee) in Columbus, Ohio to get an “understanding [of] what’s at stake for current workers and retirees” touched on all the expected points:

  • there is a real crisis
  • PBGC premiums are too high
  • withdrawal liabilities are too high
  • something needs to be done now!

But of note was one minute (literally) where Representative Richard Neal (D-MA) laid out the plan:

.

Check my thinking of what this plan appears to be. For simplicity let’s use $500 billion as the amount to make all multiemployer plans whole.

  1. Manulife gives the US Treasury $500 billion in exchange for bonds,
  2. The US Treasury gives that $500 billion to multiemployer plans,
  3. The federal government gives Manulife $550 billion back over time since multiemployer plans are not in the business of generating revenue to repay loans.

15 responses to this post.

  1. Posted by Tough Love on July 14, 2018 at 6:50 am

    From day 1 it’s been nothing but a determined effort to UNJUSTLY give away (NOT Loan) the completely uninvolved (in the MEP arrangement between the Unions and the MEP Companies) Taxpayer’s money for POLITICAL GAIN.

    What’s next, a $2 , $4, or $6 Trillion “LOAN” to guarantee that the Public Sector workers/retirees can get the full amount of the ludicrously excessive pensions that THEY were promised ?

    Reply

  2. Posted by Analyst on July 14, 2018 at 7:42 am

    I didn’t hear the $550 payout you mentioned . What I heard was that the pension funds would repay the loans, but there would be a loan guaranty.

    Using your example , the pension funds repay the loans , if the loan guaranty /reserve fund only has to pay 20% of the loans (100b in your example ) , then perhaps this isn’t such a bad deal. Manulife and others ( who are others ) would buy the loans , 3% over 30 years seems low return unless these are tax free?

    Reply

    • Posted by Tough Love on July 14, 2018 at 8:31 am

      Given the current state (and financial prospects) of the MEP’s that will benefit from this legislation, it is MUCH more likely that 80+% (than 20%) of the Loan will never be repaid.

      It’s a GIFT of someone ELES’s money (the Taxpayers) w/o their consent ………. and clearly just more pandering by self-interested politicians.

      Reply

      • I agree with Tough Love. They’re not going to pay back these “loans”.

        And there is no recourse if the loans are repaid.

        It would be cheaper just to shove $$ in these plans and not pretend they’re loans.

        Reply

        • Sorry, I meant to say

          “no recourse if the loans are NOT repaid”

          Reply

          • Posted by Stanley on July 14, 2018 at 4:02 pm

            May I make a suggestion? How about buying them all a copy of “Baking Cakes for Dummies”. From Thriftbooks of course. It will be cheaper.

            What about the non union truck drivers and the non union coal miners who have no defined pension plan? And what about the taxpayers, many of whom have no defined benefit plan. And dancing with a huuuuuge tar baby. Such foolishness.

            Going over the financial cliff will be much worse than some pensioners tightening their belts a little.

    • Posted by geo8rge on July 15, 2018 at 9:41 am

      What is Manulife bringing to the table? The Treasury is really loaning the money and there will be no underwriting. So Manulife will get fees for doing nothing.

      Tactically this seems wrong to me. I think Mass. will be getting a significant bailout to begin with from its East and Central Teamster retirees. So getting MA on board should not be a problem under any circumstances. While the numbers Bury presents are speculative, I think $50M is too small to get peoples attention in Massachusetts so what’s the point. If they are going to hand money out to a financial intermediary for doing nothing it would be better from a vote-counting perspective if the intermediary was in a state the would gain little from a bailout. I am thinking states that are not Central or East and have small populations like Arizona, Alabama or even Alaska. The smallish fee for doing nothing would probably seem like a big amount in Juneau.

      Reply

  3. Posted by geo8rge on July 14, 2018 at 12:52 pm

    Why a lump sum loan? One compromise is a yearly loan. Each year Congress will vote on making the yearly loan. But yeah, after the first year it would become apparent if the loans will not be paid back.

    Reply

  4. Posted by NJ2AZ on July 14, 2018 at 4:14 pm

    are they even pretending to proclaim how these loans might be repaid (even if the mechanism is completely absurd and stands no chance of becoming reality?), or are they not even bothering?

    Reply

  5. Has ANYONE raised the generational equity question with regard to these issues?

    Aren’t these the very people who voted for Regan in large numbers in 1980, and then voted for multi-tier contracts with lower benefits for new hires in the early 1980s, and then voted for no pensions for other workers every time they went shopping and got a better deal?

    Reply

    • Posted by Tough Love on July 15, 2018 at 9:04 am

      The real “generational” issue is that almost all currently working non-Union Private Sector workers (who represent perhaps 75% of all of America’s workers) do NOT get DB pensions, but only SS and (if lucky) a 3%-of–pay match into a 401K Plan.

      It is preposterous that THEIR Taxes (in the form of a MEP bailout) should go towards the funding of a MEP bailout of DB pensions FAR more generous than what they get from their employers.

      And it would be even MORE outrageous if the follow-up is a bailout of Public Sector Plans with their LUDICROUSLY EXCESSIVE benefit levels.

      Reply

  6. Posted by K J on July 15, 2018 at 11:12 am

    It took him a ‘full year’ to come up with that circular plan that just rotates money from one pocket to another. A fine example of the ‘best politicians that money can buy’.

    Reply

  7. Posted by A watcher on July 16, 2018 at 3:15 pm

    My assumption of this was to be 2 tiered. 1. Generate annuities, and 2 generate bonds. Using both of these pay benefits, and help earn enough interest to pay off the money owed.
    You guys do actuarial stuff, not me. How old does a truck driver live, really?
    if indeed the average age of a retiree receiving benefits, is 75, and a inactive vested in 60 years old, and an active is 50. How much in your thinking would be needed just for Central States?
    I don’t think as much as they say. I’m sorry, but if you get corrupt investors out of all of this, and get some real fiduciaries in this, I believe it can work. Maybe not overnight, but I believe it can be paid back. I think some here don’t get it. If thses funds go insolvent, the Federal Government will be providing in other ways, by foodstamps, bankruptcies, loss of tax revenue yearly, etc. There is to sides to the economic thinking, and we adding the Union factor to this is absurd, when retirees are no longer with the Union.
    If this was Bank of America instead of the MIners, you know it would happen. Even the auto industry was given money, remember?
    So, when billions fly out of this country for everyone else, and I don’t hear any cry out about that particular thing, but your own fellow American especially older people, will be devistated by this? I guess I don’t get the thinking here. My father will lose, because of everything in this that has become so corrupt.
    It’s amazing that this worked for how many decades until when? Now tell me, the focus shouldn’t be on what really caused it, and fixing that, but nope,as much as I beg, no one listens.
    So, be it. Give them the money, don’t address the real issue, and it isn’t accounting that is the problem. It’s the lack of accounting that’s the problem, and I am not just talking about numbers.

    Reply

    • Posted by K J on July 16, 2018 at 5:26 pm

      These were private contracts between employers and unions….not the taxpayers. Something tells me that if my retirement funds run dry, that as an individual, there certainly would not be any bailout of my situation. Who is to say if the contracts were reasonable as there was nobody representing the taxpayers when this was negotiated.

      Reply

  8. […] However this is not how the loan program is going to work according to Representative Richard Neal (D-MA): […]

    Reply

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