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Will A ‘Second Stimulus’ Bill Be A Second Chance For Multiemployer Pensions

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Everyone’s talking about a “second stimulus,” it seems, these days.

Here’s CBS News:

“there are signs the White House may get behind additional stimulus funding, with the Wall Street Journal reporting that the administration is working on its own plan. During a press conference last week to discuss unemployment, President Donald Trump said his administration will be ‘asking for additional stimulus money,’ while his economic adviser Kevin Hassett told the Journal this week that the odds of another stimulus package ‘are very, very high.’

“On Thursday, Treasury Secretary Steven Mnuchin said the administration is ‘very seriously considering’ a second round of stimulus checks, according to The Wall Street Journal.”

The remainder of that article, and the focus of reporting in general, is on the prospect of another round of “stimulus checks” — that is, whether and how much cash would be handed out directly to individual Americans, in the manner of the CARES Act’s $1,200. And, indeed, the HEROES Act, passed in the House in May, featured an additional $1,200 per person, with the elimination of some of the CARES Act’s restrictions — along with all manner of other spending, including an extension of the bonus $600 per week unemployment money and nearly a trillion dollars in money for state and local governments, totaling $3 trillion in new spending.

And “money grows on trees” proposals aren’t limited to Democrats, as witnessed by Arizona Republican Sen. Martha McSally’s proposal for the “American TRIP Act,” which would provide a tax credit for the cost of vacation spending, up to $4,000 per adult, $500 per child. Now, reassuringly, this proposal has been criticized in what appears to be a bipartisan fashion, but it’s a reminder of the risk that American taxpayers (of the present or future generations) face, whenever these sky’s-the-limit mammoth bills are assembled behind closed doors, of getting fleeced.

All of which means it’s time to reiterate some key points with respect to multiemployer plans.

First, the Emergency Pension Plan Relief Act included in the HEROES Act is an unacceptable no-strings-attached, reform-free bailout of the system.

This legislation would provide bailout funds without limit. It would double the PBGC maximum benefit level, without any corresponding increase in contributions/premiums. It would not only provide this without the benefit cuts provided for in the Multiemployer Pension Reform Act (MPRA) of 2014, but it would restore the cuts that had been made to plans facing insolvency, in that process. And the reforms to funding regulations now under discussion are completely absent.

Second, there is a place for multiemployer legislation in such a future bill. As I’ve written before, experts on the subject have shared with me that, however far from a resolution the multiemployer pension crisis appears to be, there are bipartisan discussions underway, trying to make headway on the various sticking points, to find a solution with the right mix of bailout money, benefit cuts, contribution hikes, and tighter funding requirements, that is acceptable to all parties, that resolves the pending insolvencies for the most troubled plans while enabling others to stay financially healthy. Perhaps my contacts were indulging in too much wishful thinking; perhaps there is too much dysfunction in Congress for this sort of resolution to emerge. But it’s still vitally necessary for those who are working on this in good faith, to continue to do so, rather than throw up their hands and say, “it can’t be done.”

Yes, the Central States Pension Plan is not anticipated to become insolvent until 2025. (And, yes, this date is close enough, and the plan’s progression of contributions in and benefit payments out stable enough, and the plan’s expected investment income reliable enough — it’s largely in bonds — that this date is unlikely to change.) But that doesn’t mean that decisions can be deferred to that point — the longer the delay, the more costly the process will be; and lack of resolution in the meantime imperils those companies who are trying to do business amid the uncertainty.

Finally, the GROW Act is another crucial piece of the puzzle. Here, too, I’ll go back to the TRIP Act to draw a contrast. It might appear that the GROW Act’s appearance in the HEROES Act comes out of nowhere, that it was pulled together in the same “let’s see what we can get away with” manner as McSally’s TRIP Act. But that’s far from the case, as I explained back in May.

The GROW Act has been under development for multiple years. Though it first was introduced in January of 2018, its history goes back to the original 2014 MPRA legislation. Its designers at the National Coordinating Committee for Multiemployer Plans, working with a range of experts in the field, and looking overseas, for example, to the Netherlands, for successful examples of new plan types, put together a means of offering a hybrid, risk-sharing pension plan (they call it a “composite plan”) which, in my more optimistic moments, I truly believe offers a path forward not merely for multiemployer pension plans, but for all of us who want to have lifetime protection and risk-sharing even after the traditional employer pension plan has breathed its last breath: these plans would be required to target a 120% funding level (in practical terms, are required to be prudent in their calculations) and to follow a set of processes to improve funding level if they fail in this target.

It might appear that these “composite plans” (note to self: time to persuade their advocates to switch to a label of “risk-sharing” or “hybrid” plans!) are a bad deal compared to traditional defined benefit multiemployer plans: traditional plans promise no benefit cuts except for under extreme circumstances (or, if the HEROES Act were passed as-is, never) and fund without that extra 20% requirement. But that’s a very one-sided, narrow perspective. A “plan of the future” has to appeal to the “employer of the future” (or even — someday — “retirement savers of the future”) rather than relying on current employers being trapped into maintaining a plan regardless of required contribution levels. And if these plans establish a successful track record, it would surely open up possibilities for the vast majority of workers who are outside the traditional multiemployer pension system.

Which means, in that spirit, given that Congress loves its acronyms and initialisms almost as much as I despise them, I offer you, and them, a new legislation name: the REFORM Pensions Act, or

Re-

Envisioning

the Future

Of

Risk-sharing

and Multiemployer

Pensions

Act.

Who’s with me?

As always, you’re invited to comment at JaneTheActuary.com!



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