Congress Considers Funding Failing Pensions
Yesterday, the Senate Committee on Health, Education, Labor and Pensions, or HELP, held a hearing to weigh the costs and benefits of funding certain ailing pension funds. Sen. Bob Casey (D-Pa.) has proposed legislation to aid some pension funds fed by multiple employers, such as some Teamsters benefit plans. Sen. Tom Harkin (D-Iowa), who heads HELP, yesterday argued that allowing the plans to fail or slash benefits would be “catastrophic for working families”:
Although pensions are insured by the Pension Benefit Guaranty Corporation, the payout for insured benefits hasn’t increased in years, so many retirees would see their benefits slashed. Plus, the collapse of any multiemployer pension plan places an incredible strain on an agency already beleaguered by fiscal woes, and the failure of a large plan could cripple the agency.
Congress has already taken steps to provide targeted, short-term relief to ease them through these tough economic times, and funding relief will surely help some of these plans remain afloat. But for a handful of multiemployer plans, short-term funding relief simply isn’t enough. Those are the plans we are focusing on today — the minority of plans that are truly in dire straits. They find themselves bearing costs dumped on them by defunct employers that failed to pay their fair share while, at the same time, watching their contribution base shrink as industries and demographics change over time. Those plans need long-term help and systemic reforms.** The challenges faced by multiemployer plans are real, and we need to face them head-on because, quite frankly, they are simply too big to ignore.**
Casey’s Create Jobs and Save Benefits Act targets hard-stricken multiemployer pension plans, which have suffered during the recession as individual firms paying into the plan have gone belly-up or have withdrawn, leaving the other firms to shoulder bigger burdens. Casey argues that the remaining payees into the fund should not have to cover the “orphan employees” of collapsed firms, and suggests moving them into a new Pension Benefit Guaranty Corp. fund — where the pension liabilities would be backed by taxpayers. But the PBGC is already running deficits. And any new bailouts, even to good causes, will have serious trouble getting past Congress’ deficit hawks.
Sen. Mike Enzi (R-Wyo.) spoke out in opposition to the plan yesterday. “Workers should not be burdened with wondering whether or not their pensions are secure,” he said. “We must come up with a plan to overhaul the multiemployer pension system. But we should not do it piecemeal with just a very small handful of companies. Otherwise, the system will end up a house of cards. Congress is an enabler to this situation because it would rather kick the can down the road than try to resolve the difficult problems today. Instead of providing false hope to a few retirees, we must address this issue with the seriousness it deserves and overhaul the system.”
Multiemployer pension plans cover around a quarter of workers with a pension. Deficit hawks worry that bailing out some pensions would lead to a broader and much more expensive reform, adding tens of billions to the national debt. Casey estimates his plan would cost $8 billion over 10 years.