The Joint Select Committee on the Solvency of Multiemployer Pension Plans held its fifth public hearing this morning to gather testimony on the dire financial situation facing the U.S. multiemployer pension system.
Opening the hearing, Senators and co-chairmen Orrin Hatch, R-Utah, and Sherrod Brown, D-Ohio, both spoke to the fact that millions of Americans across the country depend on multiemployer pension plans for their retirement, and, if nothing changes, a growing number of workers face severe financial risks. They also spoke of the real and immediate risk posed by a big run of multiemployer pension plan insolvencies to the wider U.S. economy and taxpayers.
Senator Brown gave a more lengthy opening statement than his colleagues, warning in passionate terms that there are more than 100 multiemployer pension plans on the brink of failure, impacting more than 1.3 million workers and retirees.
“Millions across this country are at risk of losing their retirement security after a lifetime of hard work, and small businesses are in jeopardy of collapsing if they end up on the hook for pension liability they can’t afford to pay,” Brown said.
The hearing provided a platform for stakeholders and experts to discuss issues with the current system, as well as possible policy options that aim to improve retirement security for beneficiaries and shore up the shaky multiemployer pension system. While the tone of the meeting was civil and clearly meant to establish an air of bipartisanship around this vexing issue, Democratic lawmakers on the joint select committee did mildly press their Republican colleagues to push harder for passage of the Butch Lewis Act, which they argue would go quite a long way to solving many of the issues discussed.
Three of the four speakers at today’s hearing were financial gurus, and they offered up detailed, sobering testimony about the truly dire financial state of the multiemployer pension system and the federal multiemployer insurance program run by the Pension Benefit Guarantee Corporation (PBGC). One of the speakers, a skilled and experienced actuary, suggested that he believes less than 1% of multiemployer plans are 100% funded when using reasonable actuarial assumptions. Another speaker pointed out that, when he started working on this issue some 10 years ago, the generally agreed upon figure was that multiemployer pension plans as a whole carried a funding gap of about $200 billion. Today, he said, it is more like $680 billion shortfall, and growing all the time.
While they had different ideas about how to solve this problem, the experts generally agreed that this has been almost a manufactured crisis. For far too long, they argued, multiemployer pension plan trustees have been allowed to make generous promises of pension benefits while asking employers to make nowhere near the necessary level of contributions. It has been a matter of relatively simple math and has been obvious for some time. Decades ago, Congress strengthened the funding requirements in the single employer market, they said, but it failed to do the same for union pensions. In fact, Congress actually eased funding requirements for union pension employers via the Multiemployer Pension Reform Act of 2014 (MPRA), and created an unprecedented pathway for pension to cut promised benefits.
According to the expert testimony, many trustees thought they could simply invest their way out of the fact that they had not made substantial enough contributions, by taking on significantly more equity risk than a pension plan typically would. Others thought they could expect the plans to grow steadily in terms of the number of contributing employees and employers, easing the funding challenge, but neither of these wishful solutions has panned out.
In sum, all the experts agreed it is probably a good idea for Congress to step in and require these plans to have accurate liability measurements and limits on what is to be consider reasonable investment return expectations that are not left up purely to trustee discretion. One expert went a step further and suggested the PBGC should be granted broad discretion to take over plans or otherwise require changes in struggling plans earlier in their decline process.
While the expert testimony was informative, far and away the most powerful testimony came from Kenneth Stribling, a retired Teamster and former truck driver from Milwaukee, Wisconsin, who has dedicated his retirement to fighting for multiemployer pension funding reform. Stribling said that what drove him into advocacy was his pension plan’s application under MPRA to cut benefits by 55%—which came right around the same time that his wife received a terminal stage four pancreatic cancer diagnosis.
“I will never forget that day, or that letter, stating my trustees were seeking a 55% cut to the pension that I earned and that my wife and I depend on,” he said. “I was devastated and so was my family. I needed to do something, and so I joined up with this movement. As union workers, we sacrificed wages for better health care and pensions, and now the plans are breaking their end of the bargain. Make no mistake, we can barely afford my wife’s medical bills now, and a 55% cut to my pension would very likely mean I will lose my home. If Congress doesn’t act to help these plans, there are going to be a lot of pensioners like myself knocking at the door and asking for other forms of public assistance. There is not one more day to waste.”