Multiemployer Bailout Bill Coming

According to rolllcal.com, the bill, as advanced by the Ways and Means panel on a 25-17 party-line vote last week though it included no revenue or spending offsets to pay for the legislation, will come up for a vote in the House next week.

The Committee for a Responsible Federal Budget argued the legislation “could ultimately cost substantially more” than $64 billion because of a “relatively gimmicky loan approach” where pension funds get interest-only loans for 29 years and then pay a balloon payment including the full principal in year 30. Their blog hints at the real time bomb and it’s not in this bill.

If future policymakers do forgive or modify the terms of these loans, it could ultimately cost substantially more.

And once a mechanism is in place what’s to keep the loans from getting bigger or the same methodology being applied to public plans? Legislative restraint?

Thank you to the commenter below for the link to the Ways & Means hearing and here is a video of the text in the comment:
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31 responses to this post.

  1. Posted by Friedman, Aharon on July 17, 2019 at 5:23 pm

    Hi,
    I thought you would be interested in this. The mark-up was a very long discussion of multiemployer issues.

    https://www.youtube.com/watch?v=TYp1UpQKQ-k
    video of Ways & Means mark-up

    Rep. Brady remarks as prepared for delivery:

    “Thank you, Chairman Neal, for calling today’s meeting.

    “Republicans agree – we are in a multiemployer pension crisis.

    “Roughly 130 union-managed pension funds covering over 1.3 million workers are severely underfunded; and are set to be completely drained over the next decade.

    “This crisis is not just limited to these failing plans.

    “When all these plans are considered, less than half (43%) of the promises already made are actually funded – meaning there is roughly $638 billion of promised dollars for these workers’ retirement that simply don’t exist. They are imaginary.

    “Folks who worked hard their entire life – and their families – relied on the plan leaders to manage the plans responsibly, to keep their advertised promises to workers.

    “This should be a pretty straightforward task. But instead of delivering on their only obligation, the trustees drastically overpromised – and now can’t deliver for their union workers.

    “This lousy financial mismanagement is the root of this crisis. That is what we should be focused on fixing.

    “I’ve been a construction worker, a meat packer, and a sheet metal worker in a manufacturing plant. I know how hard these men and women work.

    “Listen to me carefully: workers in these insolvent union-managed pension plans deserve a real solution.

    “Unfortunately, this bill today doesn’t make these failing plans more stable, doesn’t end underfunding, or make them more solvent over time.

    “Forcing hand-picked plans to accept crushing balloon payment loans they can never hope to repay – while putting off necessary reforms to make them solvent – hurts workers, businesses, and innocent taxpayers who did nothing to create these failed plans.

    “It’s the workers we worry about the most. It was wrong for some elected union leaders and irresponsible plan trustees to promise what they knew they couldn’t deliver.

    “Didn’t they know every family depends on every dollar in retirement?

    “Not all elected union leaders and plan trustees were irresponsible. But for those who were, it is their workers whose retirement security is now at risk.

    “What workers in this jam need now is for Congress to come up with a serious, bipartisan solution.

    “Today’s bill is well intended. But it isn’t the answer; in some cases, it could make it worse for workers down the road.

    “We cannot rely on the same people who created this mess to not do the same thing they’ve always been doing, hurting the same workers they’ve already let down.

    “Not to mention, this Democrat bill attempts to completely reverse bipartisan 2014 legislation that began to address this crisis.

    “Those reforms allow certain plans to cut benefits in order to regain solvency over time. If we were serious about solving this crisis, we should build on this and other policies to continue to help union workers.

    “Unfortunately, we find ourselves debating legislation that double-downs on the worst aspects of the current multiemployer pension system.

    “To think the government can fully guarantee pension promises based on a 7 or 8 percent annual return – that’s the same fantasy that got us into this mess.

    “Instead of working to fix what is broken in this system, today’s partisan legislation is a pat on the back to elected union leaders at the expense of workers’ retirement and would make the pension crisis much worse.

    “We have tried to kick the can down the road before. In 2006, Congress waived required contributions for plans who claimed they can’t make required contributions.

    “In 2007, plans were $193 billion underfunded; in 2015 plans were $638 billion underfunded.

    “PBGC, the federal insurer of these plans, went from a deficit of $739 million in FY 2006, to a deficit of $54 billion in 2018 – a increase of over 70-fold.

    “Workers deserve better. We should be working to ensure that plans can make good on their promises.

    “This means eliminating the various gimmicks many of these plans currently use.

    “Plans must also accurately measure pension promises in a manner similar to insurance companies making those same promises.

    “Additionally, we must focus on accountability. A promise is a promise, and companies need to be on the hook for every pension promise made to workers.

    “And finally, we need to prevent severely underfunded plans from digging themselves into even deeper holes – under the guise of protecting workers.

    “This means walling off contributions that fund new promises—that almost assuredly will be broken—instead of perpetuating the Ponzi scheme under which retirees are paid out of the contributions that are supposed to fund new benefits for younger workers. That’s double counting.

    “In truth, the underlying problem for these plans is severe mismanagement, not unforeseeable market circumstances. We know that because pension plans for single businesses have fully recovered from the financial crisis . . . plus more.

    “Chairman Neal is right to bring this issue forward. We may strongly disagree with this proposal; but we are committed, and willing, to come together to help these workers, our neighbors.

    “Let’s start over and work together to develop serious bipartisan reforms to this crisis.

    “Thank you.”

    From: Burypensions Blog
    Reply-To: Burypensions Blog
    Date: Wednesday, July 17, 2019 at 5:31 PM
    To: Aharon Friedman
    Subject: [New post] Multiemployer Bailout Bill Coming

    burypensions posted: “According to rolllcal.com, the bill, as advanced by the Ways and Means panel on a 25-17 party-line vote last week though it included no revenue or spending offsets to pay for the legislation, will come up for a vote in the House next week. The Committe”

    Reply

    • Posted by Tough Love on July 17, 2019 at 7:15 pm

      Quoting from your comment……………..

      ““This should be a pretty straightforward task. But instead of delivering on their only obligation, the trustees drastically overpromised – and now can’t deliver for their union workers.”

      Well ……………… if the Plan Trustees “drastically overpromised” ………….. why should Taxpayers (via this BAILOUT) honor a a “drastically overpromised” pension ?

      While I do not believe that Taxpayers should contribute to ANY BAILOUT (given that they had NOTHING to do with these pensions arrangements solely between the Unions and the participating companies), if we can’t muster the courage to say NO, the MOST we should provide is a reasonable but CONSERVATIVE pension ………. not a “drastically overpromised” one.

      Reply

    • Posted by Rex the Wonder Dog! on July 18, 2019 at 2:12 am

      Rep. Brady remarks as prepared for delivery:
      Wow, that was so ON POINT. Who is this Brady guy? That took a few minutes to read, but every union pensioner, or wannabe pensioner, should read it, understand it and accept a reasonable haircut to make their plan solvent for ALL employees.

      Reply

    • Posted by Anonymous on July 19, 2019 at 10:52 am

      “Roughly 130 union-managed pension funds covering over 1.3 million workers”

      I am guessing. If fed gov backed the current PBGC max pension amounts most of those workers would be fully covered. I am guessing most of the pensions range from tiny amounts up to the PBGC maximum. So one solution is turning the pensions over to the PBGC and then funding the PBGC yearly. I guess like 350,000 retirees get benefits beyond the PBGC max. My guess is based on voting for the PBGC cuts. 1/3 don’t care enough to vote (small pensions), 1/3 vote in favor (modest pensions and maybe some healthcare), 1/3 vote against (healthcare + large pension)

      The PBGC does not handle healthcare, so maybe congress could fund some sort of enhance medicare for multiemployer retirees. Or even raise the PBGC maximum pension for these multiemployer plans.

      Reply

      • Posted by Tough Love on July 19, 2019 at 4:02 pm

        They participate in Medicare if already 65.

        There is no justification for a taxpayer-funded “enhancement” or to give it to those below 65 when nobody else gets it.

        Reply

  2. Posted by Carl Mason on July 17, 2019 at 7:53 pm

    The Government has no money, the taxes payers shouldn’t pay for this. Take the money that is being used to give the Illegals free stuff and pay for it that way. Which includes the money for lawyers to defend them. Deport every one of . Even Obama’s Uncle Omar that was to self deport in the 1980s.

    Reply

  3. Posted by Anonymous on July 17, 2019 at 11:57 pm

    One possible compromise would be yearly appropriations instead of one big bailout.

    Reply

  4. Posted by stanley on July 18, 2019 at 7:53 am

    Congressman Kevin Brady (R) from the north Houston, TX area. Brady is correct: Kline-Miller was a good plan that should be used for all over promised, under funded pension plans. I can’t for the life of me see how older Americans want to cling to over promised, doubtful pension and health care promises. Promises that if they are kept will almost assuredly trash the currency. There are people in Congress who seem to think that anything and everything is perfectly affordable.

    Reply

    • Posted by NJ2AZ on July 18, 2019 at 9:10 am

      older Americans can cling to it because the boomers,for all their talk about millenials, are probably the most entitled generation of all

      they honestly believe the fraction of the total cost they’ve paid for all their old age comforts means they shouldn’t have to make any sacrifices

      Reply

      • Posted by Anonymous on July 18, 2019 at 10:57 am

        Any boomers in particular? They’re not all the same, you know. The average retirement age, according to Gallup, has increased from about 59 in the late nineties to the low to mid sixties in the last decade. Still, probably half of new retirees have less than a month’s pay in “savings” and will retire on SS alone. Many keyboard warriors claim they could have done better investing on their own, in lieu of SS, and some probably could, but they would be the minority.

        Reply

        • Posted by NJ2AZ on July 18, 2019 at 11:31 am

          My father in law is one of those who always likes to point out if they had invested all the SS money into ‘the market’ instead of treasuries, there’d be so much money in the system now. He is either unable or unwilling to comprehend that pumping a few extra TRILLION into stocks over the fast few decades could have had some unintended/adverse consequences.

          Still, you’re right. I admit its never right to generalize, and i’m sure not all boomers are as i described. However, it seems the ones who can admit their generation as a whole didn’t contribute enough to SS/Pensions/Medicare are few and far between.

          Reply

        • Posted by Anonymous on July 18, 2019 at 12:36 pm

          My main point was, without forced participation, most people would just never, ever “invest” 12 percent of their wages in the first place, and have the restraint not to dip in when exigent circumstances arise, in the second place.

          Second point, like you, I wonder if all the new state programs for small business with no pensions. If a significant number of currently non pensioned workers opt in, what will those billions do to the market?

          Reply

          • Posted by stanley on July 19, 2019 at 10:31 am

            “If a significant number of currently non pensioned workers opt in, what will those billions do to the market?”

            This raises an interesting point. How can old age pensions and health care be funded. The main point about forced participation doesn’t address the fact that the government also didn’t actually set aside resources to enable retirements and it promised far more than current taxpayers can fund.

            Having a large contingent at war with the economy–making production and trade very difficult to impossible is a huge obstacle. (the enviros) And with governments consuming so much of production capital accumulation is severely hampered. (The financial bubble isn’t real wealth. It will fade away.)

            Everyone seems to think the boomers have the world by the gonies but I”m afraid that when all is said and done the boomers will find they have treated themselves to the short stick.

          • Posted by Anonymous on July 19, 2019 at 11:19 am

            “How can old age pensions and health care be funded.”

            I have one word for you. “Productivity”.

            “Looking at this broader picture tells us that the resources will be there to keep our commitment to retirees. Productivity growth will more than make up for the 8% growth in the total population that working-age people will have to support in coming decades. Political pressures, not excessive economic pressures, will determine whether our society fulfills current commitments for Social Security benefits in the future.”

            Okay, two more words… “Political pressures.”

            https://www.epi.org/publication/ib208/

          • Posted by stanley on July 19, 2019 at 12:47 pm

            I quit reading after I read “Lester Thurow” and “Robert Reich.” If they were correct about anything we wouldn’t be about to tip over from excessive debt and unfunded pension promises.

          • It does make me wonder about who gets to be labeled an expert. The process seems to be that a politician expert at getting elected, but little else, wants to get something done (possibly for his constituency of donors) and so he looks for ideological backup of his position from someone who won’t come off as a complete idiot initially who then gets labeled an expert for his purposes.

          • Posted by Anonymous on July 19, 2019 at 1:51 pm

            Where did you read “Lester Thurow” and “Robert Reich.”?

          • Posted by stanley on July 20, 2019 at 8:02 am

            At the EPI website, where else?

          • Posted by Anonymous on July 20, 2019 at 6:54 pm

            Thank you, although I saw no references there to those names.

            Do you have counterpoints to the article by Springs and Price?

            I did search and scan some articles by Thurow and Reich. And Krugman, of course.

            Do you not agree that, even though the ratio of workers to retirees has decreased, that increased productivity will take up the slack in providing SS and Medicare?

            Any suggestions of what you consider legitimate experts would be appreciated.

    • Posted by NJ2AZ on July 18, 2019 at 9:12 am

      They cling to their benefits because the boomers, despite all their talk about millenials, are the most entitled generation of all.

      they honestly believe that the fraction of the total cost they’ve contributed towards all their old age perks means they shouldn’t have to sacrifice at all.

      Reply

  5. Posted by NJ2AZ on July 18, 2019 at 9:14 am

    my apologies for posting twice. the first one did not show up when i hit REPLY even after refreshing multiple times over the course of a few minutes, so i figured it was lost to the ether.

    Reply

  6. Posted by Anonymous on July 18, 2019 at 12:20 pm

    Quoting Rep. Brady,

    “Let’s start over and work together to develop serious bipartisan reforms to this crisis.”

    (Me) Yes. Same thing for public pensions.

    “Folks who worked hard their entire life – and their families – relied on the plan leaders to manage the plans responsibly, to keep their advertised promises to workers.”

    “This lousy financial mismanagement is the root of this crisis. That is what we should be focused on fixing.

    “Listen to me carefully: workers in these insolvent union-managed pension plans deserve a real solution.
    ……………..

    Face it. There’s plenty of blame to go around. Yes, plan leaders could have been more diligent. And government oversight could have been tighter. If we knew then what we know now. And if government regulations (and deregulation) hadn’t savaged the mining and trucking industries… With the Greatest Recession being the nail in the coffin.

    For the guy or gal busting ass on the road or underground, this is every bit as devastating as a hurricane or other natural disaster. And he had no way to know of or prepare for it. (I was surprised to learn that  the United Mineworkers pension plan was fully funded in 2000, even using the more conservative, government bond-based “current liability” measure.)

    Jane the Actuary detailed some of the MEP history and suggested that…
    (Which means that,)” to a real degree, however unpleasant it may be to contemplate a bailout, Congress owns this problem.”
    ………………..
    A real solution might mean some cuts to existing pensions, taxpayer money, whether it be loans or bailouts, and definitely, reforms to future governance to keep pensions solvent.

    And yes, same thing for public pensions.

    Reply

  7. Thanks, John for writing about HR 397. It is getting no media attention that I can see except for insurance companies drooling over the prospect of annuity sales, such as this one: https://blog.principal.com/2019/02/05/house-multiemployer-bill-emulates-single-employer-db-risk-strategieswith-a-twist/

    Reply

  8. New Jersey’s public schools consistently rank among the top in the nation, yet the educators who help our students achieve their dreams have watched their pay checks go down for the past eight years.

    The unintended consequences of P.L. 2011, Ch. 78 have devastated the morale and the pocketbooks of public school employees for too long. It’s time for Trenton to #FixTheUnfairness and return respect to our public school employees. AD ..Insider NJ’s Morning Intelligence

    Reply

    • Posted by stanley on July 19, 2019 at 10:13 am

      “New Jersey’s public schools consistently rank among the top in the nation…”

      So, I guess you grade on a curve? Is that sound policy?

      Reply

      • Hi stanley, Not my policy or wording. Is an Ad by NJEA,
        What is P.L. 2011, Ch78 that NJEA is complaining of here?
        Never understood how NJEA, etc managed to support unfunded pension promises. Guess they still think a promise is better than nothing in a few years?

        Reply

    • Posted by Tough Love on July 19, 2019 at 4:08 pm

      Quoting ……………

      “The unintended consequences of P.L. 2011, Ch. 78 have devastated the morale and the pocketbooks of public school employees for too long.”

      Baloney………….. the teachers are finally paying a BARELY reasonable premium for extraordinarily generous healthcare coverage. What they got BEFORE Ch 78 was completely unreasonably in it’s richness and cost to the Taxpayers.

      Reply

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