Bailout Bill Report (1): Summary

Here is what I got from reading the Ways & Means Committee Report on H.R. 397 starting with this blog summarizing the salient points in the bill:

Pension Rehabilitation Administration to be established within the Department of the Treasury.

Pension Rehabilitation Trust Fund to be established consisting of:

  • amounts transferred under section 6 of this act (see entirety of section 6 below)
  • loan interest and principal
  • amounts received from Treasury for operating expenses

Expenditures from the fund:

  • loans to seriously underfunded multiemployer plans
  • payment of principal and interest on obligations issued under section 6
  • administrative and operating expenses

Loans can be made to multiemployer plans in:

  • critical and declining status (73)
  • critical status with modified funded percentage of less than 40% and with a raaio of active to inactive participants less than 2 to 5
  • insolvent per IRC 418E if not terminated and insolvent after 12/16/14

Loan terms:

  • interest only for 29 years with balloon payment in year 30
  • interest rate no lower than rate on 30-year Treasury securities

Plans that have already cut benefits under MPRA must apply for loans and restore benefits.

If a plan is unable to make any payment on a loan when due: negotiation to revise terms.

SEC. 6. ISSUANCE OF TREASURY BONDS. The Secretary of the Treasury shall from time to time transfer from the general fund of the Treasury to the Pension Rehabilitation Trust Fund established under section 9512 of the Internal Revenue Code of 1986 such amounts as are necessary to fund the loan program under section 4 of this Act, including from proceeds from the Secretary’s issuance of obligations under chapter 31 of title 31, United States Code.

 

 

21 responses to this post.

  1. Bernie Sanders should be more careful what he wishes for….(Plans that have already cut benefits under MPRA must apply for loans and restore benefits.)
    and the abuse in future…(If a plan is unable to make any payment on a loan when due: negotiation to revise terms.)

    Reply

  2. Posted by Tough Love on July 20, 2019 at 10:06 am

    Repayment of annual interest ?

    Really ?

    These Plans don’t have sufficient revenue vs expenses. The loans will simply be increased in amount sufficient to ALSO pay the annual “interest”, with the end of term balloon principle repayment almost certain to be unplayable.

    What a bad joke these Officials are playing on the Taxpayers while putting on their “happy face” to appease their base and garner votes.

    Reply

    • Posted by Tough Love on July 20, 2019 at 10:15 am

      Correction ……………….. the 1-st “sufficient” should be “insufficient”.

      Reply

    • Posted by NJ2AZ on July 20, 2019 at 3:07 pm

      months ago i did some back of envelope math and arrived at something like they would need to borrow $13 for every $1 of shortfall and hope for a spread of like 4% between their rate of return on investment and interest on these bogus loans

      i think the real plan is just to ‘lend’ whatever amount now with the hopes that in 30 years we’re too busy nearly with quadrillions to care about a few measly billions

      Reply

      • Posted by stanley on July 20, 2019 at 3:22 pm

        “i think the real plan is…”

        I don’t believe that they are serious about wanting a solution. IMO, their preference is to appear to be working to support some of their constituents but their real need is for more troubled voters who vote democratic. They also gain the advantage of being able to point their fingers at the dirty republicans who stand in the way of bounty for all.

        In 2005, Dubya was willing to pare back social security payouts. Why would democrats go along when they have big Steve’s productivity improvements and Tim’s magic beans to fall back on? Nothing to see here folks, move along.

        I would prefer to be proved incorrect, because my pov implies that there are some seriously evil people in the democratic left.

        Reply

        • Posted by NJ2AZ on July 20, 2019 at 4:30 pm

          there might be some who fit that bill but i believe the bulk of democrats really are just the ‘omnipotent moral busybodies’ described by CS Lewis. its not their fault they can’t (or won’t) consider the secondary/unintended effects of all their heart-bleeding

          disclaimer: this is not an endorsement of the GOP. they suck for their own reasons

          Reply

          • Posted by E on July 20, 2019 at 4:50 pm

            Both suck.

          • Posted by NJ2AZ on July 20, 2019 at 4:59 pm

            agreed

          • Posted by Tough Love on July 20, 2019 at 5:03 pm

            If they “Both suck”, why does your Union (yes, it’s a Union) keep shoveling campaign contributions to the Democrats?

            Answer …………….. because it’s of PRIMARY IMPORTANCE to you that they CONTINUE to do your bidding, meaning granting you more than appropriate wages, ludicrously excessive pensions & benefits, and construction-site traffic details at $125/hr. (ooophs, only $110/hr in your case).

          • Posted by NJ2AZ on July 20, 2019 at 5:08 pm

            It will be interesting to see the ultimate equilibrium reached as the democrats increasingly try to simultaneously be ‘pro union’ and ‘anti police’.

          • Posted by E on July 20, 2019 at 5:53 pm

            Our union backed Whitman twice. Then DiFrancesco. Then a bunch of dems from mcgreevey/Corrzine to Murphy. Many cops were lied to heavily by fatso. He actually had a ton of cop votes the first time around. Many more than Corzine did. Most cops lean right in most things. A conservative group with democratic needs. The federal dems don’t help that by being anti cop as you can. They both suck. None of them cater to the middle class. One does to the rich and one does to the poor.

          • Posted by Tough Love on July 20, 2019 at 6:25 pm

            Quoting El gaupo ………………. “Many cops were lied to heavily by fatso.”

            You demanded ….and received …. his word that he wouldn’t touch you UNNECESSARY, UNJUST, LUDICROUSLY EXCESSIVE pension & benefits.

            You were jackasses to believe a “politician” was telling you something you could trust, especially given how “UNNECESSARY, UNJUST, LUDICROUSLY EXCESSIVE” they indeed were.
            ———————————-

            Quoting …………… “A conservative group with democratic needs.”

            Meaning …………. A conservative group with a oversized sense of entitlement and “moocher” mentality.

          • Posted by E on July 20, 2019 at 9:57 pm

            Wah wah wah. All your windbag comments and whining ain’t changing a thing. Christie was dirtier than just about all of them. Most wouldn’t have had the gall to shut a bridge or a beach. I’m getting what I deserve. Why? Because that’s what my contract calls for. I feel you deserve what you get from your employer. If it is not what you want that’s on you. Don’t come looking my way….just because I got a good deal. Get yer own good deal. 💨💨💨💨💨💨
            I would say the breeze feels good, but you’re really just blowing hot air. As usual. You gotta stop commenting on every post I make. It’s bad for your health. I’m sure your BP rises every time you drive past a cop on a road job. Lol. Not healthy…windy

          • Posted by Tough Love on July 20, 2019 at 10:06 pm

            El gaupo,

            The ONLY thing that you are getting……. but still only a SMALL part of what you DESERVE ………. is having lost your COLAs.

          • Posted by stanley on July 21, 2019 at 9:52 am

            “…there might be some who fit that bill but i believe the bulk of democrats..”

            Please treat me to the arguments that support such a view. Why do they insist on keeping the borders open? Do we really need more Medicaid patients and people to issue EBT cards to?

            Why do they cling to the Butch Lewis Act as a solution to the problem of underfunded pensions? Democrats need a crisis that they don’t let go to waste. That’s their MO. The good news from their perspective is that they will have them in spades.

  3. Posted by geo8rge on July 20, 2019 at 1:52 pm

    My understanding is some employers like UPS are liable for multiemployer pension shortfalls. Are those companies absolved of the debt?

    Who is liable if (when?) the loans cannot be paid. Will UPS need to include the unpaid loan amounts on their balance sheet? You can fudge actuarial balances, but the bond debt is going to be a concrete number owed to the treasury.

    If UPS is absolved of its debt, does it have to pay taxes on that amount? Does FedEx have a complaint due to their own unfair treatment?

    Reply

  4. Posted by The analyst on July 20, 2019 at 7:17 pm

    First, are there companies that have received big tax breaks while their pensions are underfunded ? If so, then those tax benefits should be recaptured.
    Second, The plans need to accept some better oversight if they borrow from this plan. Banks and private equity firms provide oversight and covenants. Maybe dems are waiting for Republicans to promote this as part of a compromise. Oversight is KEY so that bad decisions are allowed to just continue to occur.
    Third, no loan is made without a plan to repay. Each one is case by case. we should all avoid blanket statements.
    Fourth, it is good to see that loan funds can only be used for lower cost and low fee investments such as annuities and bonds. Risk will come from the rest of the portfolio

    Like the X files—– The Solution is out there………..

    Reply

  5. Posted by Anonymous on July 22, 2019 at 12:54 pm

    I haven’t read the whole article plus links yet. Just putting it out there.

    Jane the Actuary…
    “There is no getting around this; back in December, I detailed the ways in which the original pension legislation, ERISA, and subsequent laws, put roadblocks in front of plans trying to properly fund their plans, and suggested that a better framing than “bailout” is that idea that the government would be making “restoration payments” in acknowledgement of these regulatory flaws. ”

    https://www.forbes.com/sites/ebauer/2019/07/17/some-good-news-on-multiemployer-pensions/#392a53d96f4c

    Reply

  6. […] Butch Lewis Act the bill stands little chance of passing in the Republican-controlled Senate…”This is a moral hazard if I’ve ever seen it, because we’ll do this for $100 billion, we won’t fix the problem, we don’t do anything to get at the root cause that brought us here, and there will be a line as long as the eye can see to bail out the next $100 billion, and the next $100 billion,” said Rep Jodey Arrington, R-TX, on the House floor preceding the vote. […]

    Reply

  7. […] now see four inter-related reasons that H.R. 397, the bailout bill for multiemployer plans, is likely to become law. I will get to all four in the next blog but here is my case for the […]

    Reply

  8. […] 397, the bailout bill for multiemployer plans, is likely to become law and here is […]

    Reply

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