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 Houses $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. Its time to trust our nations 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 dont deserve to receive a bad deal, in which theyve 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.
See also: 11 ERISA milestones
The bill now awaits Senate review.
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