Multiemployer Plan Bailout Outlook for 2019

The Road Carriers Local 707 Pension Fund is broke, thus being the multiemployer plan most desperate for a bailout. After the failure of the Bailout Committee below is what the Fund administrators are telling plan participants to expect.

  • The Joint Select Committee (JSC) established by Congress in early 2018 did not meet the statutory deadlines for making recommendations (November 30) or enactment of those recommendations (end of calendar year 2018). Currently, there are no plans to reauthorize the JSC in 2019 and consequently any legislation addressing the multiemployer pension crisis next year will be handled under the normal committee process. For multiemployer pension legislation those committees are: House Ways and Means, House Education and Workforce, Senate HELP, and Senate Finance.
  •  Although the Joint Select Committee did not result in the enactment of legislation addressing the crisis, it did develop an extensive hearing record and analysis of options from the Congressional Budget Office (CBO), the Office of Management and Budget (OMB), the Joint Tax Committee (JTC), Treasury Department and the Pension Benefit Guaranty Corporation (PBGC). For those Senators and Congressmen who want to advance legislation next year, they will not be starting from scratch but will have access to that hearing record and the extensive agency analyses.
  • Democrats will assume their majority position on January 3 when the 116th Congress is sworn in. At that time, and barring any last minute drama, Rep. Nancy Pelosi (D-CA) will become Speaker of the House. Throughout 2018, Minority Leader Pelosi had a strong personal interest in the work of the Joint Select Committee and has already made commitments as Speaker that pension legislation will be an early priority for the House of Representatives in 2019.
  • With the Democratic takeover of the House, Rep. Richard Neal (D-MA) will become Chairman of the House Ways and Means Committee and Rep. Robert Scott (D-VA) will become Chairman of the House Education and Workforce Committee. Both Neal and Scott were members of the JSC and perhaps more importantly were primary sponsors of the so-called “Butch Lewis” legislation (H.R. 4444) in the 115th Congress. Throughout the deliberations of the JSC, Neal and Scott maintained their support for a loan program patterned after the Butch Lewis legislation and can be expected to continue that support in 2019.
  • Upon adjournment of the 115th Congress (likely to be this week), all legislation expires and must be reintroduced next year including H.R. 4444 (and its Senate counterpart, S. 2147). H.R. 4444 has 174 cosponsors, 160 Democrats and 14 Republicans. With the support of Pelosi, Neal and Scott, it’s very likely that the House will act on multiemployer pension legislation (patterned after, if not identical to, H.R. 4444) early in 2019.
  • As a result of the November elections, Republicans increased their majority position from 51-49 to 53-47. Consequently, Sen. Mitch McConnell (R-KY) will return as Senate Majority Leader and Sen. Chuck Schumer (D-NY) will return as Senate Minority Leader. Both McConnell and Schumer have strong constituent interests in the multiemployer pension crisis, the latter having that interest from both the Teamster Local 707 Fund and the New York State Teamsters Pension Fund. With the retirement of Sen. Orrin Hatch (R-UT), the chairmanship of the Senate Finance Committee will go to Sen. Chuck Grassley (R-IA). Unlike Hatch, Grassley was not a member of the Joint Select Committee, but he has a more direct constituent interest (Central States) and is very aware of the crisis facing that fund. The situation at the Senate HELP Committee this week became a little more complicated. The current Chairman, Sen. Lamar Alexander (R-TN), announced he will not seek reelection in 2020, thus becoming a lame duck chairman for the next two years. Alexander was a member of the JSC but his status as a lame duck chairman raises questions about his commitment to shepherding a legislative solution through the Republican-controlled Senate in 2019.
  • The two primary Senate sponsors of S. 2147, Senators Sherrod Brown (D-OH) and Joe Manchin (D-WV), won reelection in November and can be expected to immediately reintroduce a version in 2019. Both Brown and Manchin were members of the Joint Select Committee and have strong constituent interests in multiemployer pension plans. S. 2147 has 24 cosponsors but all 24 are Democrats. In the absence of any Republican support for a loan program patterned after S. 2147, it is difficult to envision the Senate moving on multiemployer pension legislation as quickly as the Democratic-controlled House in 2019.
  • The two major takeaways from the work of the Joint Select Committee were: all 8 Democratic members strongly supported some type of loan program but were willing to consider other options in addition to the loan program; a majority of Republican members (though not necessarily all 8) strongly opposed a loan program and preferred a solution that relied on the PBGC to assume a significant portion of the financial crisis (hence the “orphan liability transfer” option contained in the November draft document). Those are two vastly different approaches so it’s not difficult to understand why the Joint Select Committee could not reach a consensus recommendation.
  • Looking to 2019, it’s very likely the House will act quickly on a reintroduced version of the Butch Lewis loan program. It then becomes a question of whether the Senate (under the leadership of Senators McConnell, Grassley, and Alexander) approves that legislation (highly doubtful) or develops an alternative patterned after the “orphan liability transfer” option (more likely) and then goes to a House-Senate conference committee to hammer out a compromise. There is, of course, a third option for the Senate: do nothing. While that might be an attractive option for the more conservative Republicans in the Senate, the Republican leadership has to be mindful that 22 Senate Republicans are up for reelection in 2020, many of whom have constituencies covered by the Central States, Mine Workers, and other multiemployer funds in critical and declining status.
  • It is expected Rep. Richard Neal (D- Massachusetts) and Rep. Peter King ( R- NY) will co-sponsor the reintroduction of the Butch Lewis in the first or second week of  January. Both are committed to lobbying their colleagues on both sides of the aisle to pass meaningful pension reform in the early part of 2019. As always, Senator Chuck Schumer is continuing the fight in the Senate and making sure Local 707 is included in any pension reform. A coordinated lobbying strategy is being developed with the IBT and other pension funds. Shortly you will be asked again to write, email and call key players who will influence any pension reform legislation.

21 responses to this post.

  1. Central States Pension Fund & UPS will be big players in the coming years negotiations…UPS has “25” plans they contribute into, being most widely involved and at the highest cost, which in 2015 was $1,558,542,886 contributed to their participating plans… info here…https://fas.org/sgp/crs/misc/R45187.pdf?fbclid=IwAR0KgRSElbBb-gFR9pAgGfAGVr9rsemppgCEFKnUNvoIyam9qI-3z05Dzp0

    Reply

    • Posted by geo8rge on December 29, 2018 at 4:22 am

      If there is a loan that cannot be paid back by the Teamsters pension, is UPS on the hook? I have to assume UPS made sure the answer is no, but did they?

      Reply

  2. If I bailed you out of jail for copy right infringement and you paid me back, then it’s not a bail out it is a loan!

    Reply

    • Posted by PS Drone on December 28, 2018 at 7:04 pm

      And just how do you propose the bailee is going to pay back the bailor?

      Reply

      • Posted by Davey grubbs on December 28, 2018 at 8:39 pm

        Read the legislation and you would understand how it works. Not too hard to comprehend. It’s much like buying a house. However do nothing and the taxpayers can pick up the tab for billions of tax dollars that we will no longer pay and also put more money into the social programs that millions will become dependent on. The only requirement is to have a government that represents people as well as they do corporations

        Reply

        • Posted by Tough Love on December 28, 2018 at 9:18 pm

          Baloney ……….. It will never be a “loan” (as “loans” are paid back ….. this WON’T, not a snowball’s chance in hell).

          It’s a Taxpayer BAILOUT forcing the Taxpayers …………. who had ZERO to do with the PRIVATE arrangements between the Unions and the participating corporations ……………… to pay for it.

          Reply

          • Posted by NJ2AZ on December 28, 2018 at 9:59 pm

            “(ii) the plan is reasonably expected to be able to pay benefits and the interest on the loan during such period and to accumulate sufficient funds to repay the principal when due;”

            i assume there are relying on a ….’relaxed’ definition of the word ‘reasonable’

          • Posted by Tough Love on December 28, 2018 at 10:29 pm

            NJ2AZ,

            The “problem” with gov’t-contrived arrangements like this ….. and with terms as you quoted ……. is that the is NEVER any collateral to back up those “reasonable expectations”, and of course ZERO consequences (or payback) for failure to meet them.
            —————————

            Someone like ME should write the terms ……..

            E.g. so you want a DROP Plan are your “assuring me” that it will be cost neutral.

            No problem ……. we’ll just include a provision that an CPA firm agreeing to work under a fiduciary obligation to the TAXPAYERS audits it every 3 years, and to the extent it turns out to be less then “cost-neutral”, regular monthly pension checks to DROP-recipients will automatically be decreased to recover (with interest) any neutrality-shortfall over the next 3 years. And if you’re dead, we take it out of your spouse’s pension……. and if you’re BOTH dead, we make a claim with your estate.

          • Posted by NJ2AZ on December 28, 2018 at 11:09 pm

            It would be cool to see an example of how the numbers are supposed to work for an existing distressed plan. If i read the proposed law correctly, they can only purchase annuities? For every billion underwater a plan is, how many billions in loan principle are required to purchase sufficient annuities to cover benefit payments AND generate the excess interest so that the principle is repaid? Can the annuities market even meet this demand without gross distortion?

            something tells me the ‘tens of billions’ order of magnitude i’ve seen thrown around as the cost is compete garbage.

          • Posted by Bernman on December 29, 2018 at 12:10 am

            I beg to differ. The government was up to its neck in the multi employer pension system. Between the tax laws and the Concent decree of 1982 and the ERISA laws. Congress had the explicit responsibility to set premiums for the PBGC. Call your congressman and ask him why they couldn’t set the premiums like they did for single employer pension funds. Besides the Segal group of Washington DC believes it will work.
            Thanks

          • Posted by Tough Love on December 29, 2018 at 12:11 am

            NJ2AZ,

            From the standpoint of the Plan beneficiary, MEP participant mentality is little different than that of Public Sector workers (although the pensions granted the latter are FAR more generous).

            It’s simply ………… I want what I was promised. I don’t care who has to pay for it, or if doing so is “fair” to THEM.

        • Posted by geo8rge on December 29, 2018 at 4:40 am

          A loan assumes that there will be future income to repay the loan principal & interest. I have seen no evidence that the Teamsters will have much future income. The loan idea seems to be modeled on the Fed’s bank bailout, which in a sense worked while making everything worse in the long run.

          The root cause the Teamsters pension crisis is the failure of the Teamsters as a Union. The Teamsters failed to protect their Union from private sector competition and failed to attract new members.

          Somewhat off topic but I wonder how the Sears bankruptcy will change things. Will single employer retirees be added to the multi employer package? Would that increase or decrease the chance of a bail out.

          I could also see ghosts of pension failures future haunting the process. Will Sears be joined by any other private pension scheme? Will a major public scheme go bust? Will Chicago or California ask to get into the bailout? Will Chicago and California work behind the scenes to stop it so they can get a bigger bailout? Are state and local government retirees better or worse off from a Multi employer bailout? They are better off because of a precedent set for bailouts, but worse off because there will be fewer assets for a state and local bailout.

          A compromise might be an appropriation for yearly bailouts. This would create a yearly allocation for bailouts, but would eventually mean Teamsters and Police will have have to ask for money at the same time from a possibly more bankrupt fed future Congress.

          Reply

        • Posted by Davey grubbs
          Read the legislation and you would understand how it works. Not too hard to comprehend. It’s much like buying a house…The only requirement is to have a government that represents people as well as they do corporations.
          1-Everyone here HAS read the “legislation”, and it is a JOKE. Or Scam/Fraud/Rip Off is is better used IMO.
          2. It is nothing like “buying a house”unless you plan on foreclosing without one single payment ever mad on the “house”.
          3. At least you hit on one comment, the last one. TARP should have never passed. A scam is a scam no matter who pulls it, Wall Street or Teamsters.

          Reply

      • Posted by Johnny Walle
        And just how do you propose the bailee is going to pay back the bailor?
        By Johnny Waller moving to Fantasyland 🙂

        Reply

    • Posted by Anonymous on December 29, 2018 at 1:17 am

      Wow, you are still on that kick that the Butch Lewis Act is not a bailout!! To reiterate: THE BUTCH LEWIS ACT IS A BAILOUT!!!!!!!

      Reply

      • Posted by mark nice on December 29, 2018 at 10:34 am

        Any concern that you have for taxpayers is pure hyperbole. The actual cost to taxpayers will be far more significant if H.R.444 / S.2147 isn’t passed. Four prominent actuarial firms have calculated the statistical risks and all have come to the same conclusion, which makes the Butch Lewis Act the least expensive while preserving all that will be lost if the multi-employer pension funds aren’t given this opportunity to survive this crisis. Those of you with concerns about bail-outs should understand that the banks responsible for over 12 billion of lost funds were indeed bailed-out as they were appointed via consent decree buy our government the fiduciary responsibility to oversee the handling of Central States Pension Fund. The taxpayers deserve to understand the economic consequences of this crisis which the hard-working retirees had nothing to do with. We need our government to step in now, just as they did in 1982 and act on behalf of their constituents for we are taxpayers also. We are too old to consider going back into the workforce and many members have served their country which should be of concern to our representatives.

        Reply

        • Posted by Tough Love on December 29, 2018 at 10:57 am

          All self-interested gobbledygook from a MEP participant.

          No, how about we DO NOTHING and let the PBGC pay UP TO the current MEP guarantee (about $11K annually). The rest you lose.

          I suspect that for MOST ………….. noting that they get SS as well ………. it will just mean cutting back, less trips and presents for the kids, perhaps a home equity loan or reverse mortgage, and likely a smaller estate to leave to the kids.

          That’s the way IT SHOULD WORK, and for the (likely) small number that cannot meet their most basic needs for food, shelter, clothing and medical care, they should have to apply for Social Services (yes Welfare) ………. just like OTHERS in similar straights (but who don’t belong to Unions who organize and scream for money that they are NOT entitled to).

          Reply

        • Posted by stanley on December 29, 2018 at 11:39 am

          “The taxpayers deserve to understand the economic consequences of this crisis which the hard-working retirees had nothing to do with.”

          Sorry buddy. You depended upon your union leadership to look after your interests and you failed to take alternative measures which would cover problems caused by their failure. Actually, the pension difficulties have been cropping up over the past several generations and I suspect that many union retirees had the good sense to put a few shekels aside just in case the pension promises were not wholly fulfilled.

          There are many, many retirees at this time with more on the way. Resources are very limited and some belt tightening is dictated by Mr Reality. MEP is not the only poorly funded pension plan group. The country and world is awash with them. A reduced pension make appear to you as a huge inconvenience, but compared to what many younger people have to look forward to it is really substantial. Don’t give me this crap that it wasn’t your fault. The world that we live in is entirely our fault.

          Reply

  3. Posted by T rhoniy on January 1, 2019 at 1:03 pm

    We can do it we are teamsters!

    Reply

  4. […] (PBGC) is projecting that their multiemployer (union) program will be insolvent by 2025 but a possible bailout could keep it alive indefinitely whereas the PBGC’s Single Employer program just turned a […]

    Reply

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