A bipartisan, yet controversial, effort to help stabilize
the retirement futures for Americans through a substantial reform of the
multiemployer pension plan system passed through the House this week.
On Dec. 11, pension system amendments added to the
House’s $1.1 trillion spending bill – otherwise known as the Consolidated and
Further Continuing Appropriations Act of 2015 – passed in a House floor vote.
According to the multiemployer pension reform agreement, first introduced by
Reps. John Kline (R-Minn.) and George Miller (D-Calif.), the amendments are not
only meant to protect the future of the Pension Benefit Guaranty Corporation –
the primary federal stopgap for high-risk pensions – but also the multiemployer
retirement system.
The PBGC has said its multiemployer insurance program has
the potential to become insolvent over the next decade. Currently, the total
tally is around $1.7 billion in assets and $10 billion in liabilities.
“Tonight a
bipartisan Congress put workers and businesses one step closer toward having
the tools they need to come together and save pension plans that are facing
imminent bankruptcy,” Reps. Kline and Miller said in a joint statement. “Our
bipartisan agreement should become the law of the land to help prevent the
collapse of failing plans and better protect workers’ retirement security. It’s
time to trust our nation’s workers, employers, and union leaders to do the
right thing by enacting this important bipartisan agreement.”
The effort, coined as “Solutions, Not Bailouts” by
interest groups, follows a prior plan conjured by the National Coordinating
Committee for Multiemployer Plans. Representing both labor and management, the
proposed opportunity allows plan sponsors of troubled plans to take action to
save themselves.
Speaking earlier this year at the International
Foundation of Employee Benefit Plans’ 60th Annual Employee Benefits Conference,
Randy G. DeFrehn, executive director of the NCCMP, noted that more needs to
done to improve the future retirement situations for employers and employees in
multiemployer plans by adding to the pension pool.
“We believe as a community that we have some basic
structural issues that we should deal with,” said DeFrehn. “We know how
difficult it is to bring new employers into this system.”
The congressional plan calls for allowing
trustees of severely underfunded plans to adjust vested benefits before falling
into the crosshairs of a needed bailout. Meanwhile, it will also give PBGC the
power to take action for failing plans and allow adjustment to current plan
premium structure. Other modifications include providing protections for the
most vulnerable retirees, which include disabled and individuals aged 75 and
older, all the while requiring plan participant approval on all proposed
benefit adjustments including the “fail-safe mechanism” for needed funding
assistance.
But industry groups such as the AARP, said in a Dec. 10
statement that the Kline-Miller amendment is not a good deal for future
pensioners looking for lifetime income when they leave the workforce.
“This last-minute backroom deal would, for the first
time, amend the pension law to allow the earned vested benefits of retirees to
be cut,” said AARP Senior Vice President Joyce Rogers. “After a lifetime of
hard work to earn their pensions, retirees don’t deserve to receive a bad deal,
in which they’ve had no say, cut behind closed doors and excluding the very
people who would be impacted the most.”
Adding to this angst, Karen Friedman, executive vice
president of the Pension Rights Council, a nonprofit consumer organization,
says the timing of the amendment is also ironic.
“It is a travesty that, in the year of the 40th
anniversary of the landmark private pension law, ERISA, the House has swept
away a fundamental and sacred principle of the law: that once a retiree has
begun receiving a pension, it cannot be reduced unless a plan runs completely
out of money,” Friedman said.
The bill now awaits Senate review.
Source: Employee
Benefit News
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