U.S. Senator Robert Portman, R-Ohio, issued an opinion piece this week calling on Congress to create a unified and bipartisan stance on the union multiemployer pension crisis.
While many union pensions in the U.S. are healthy, a core group of large pension funds face severe financial hardship. One Society of Actuaries report published several years ago found tens of thousands of employers in the U.S. contribute to multiemployer pension funds that are in critical and declining status. The COVID-19 pandemic has exacerbated this problem, due to widespread unemployment and resulting economic impacts.
In his article, Portman claims that without reforms, his state of Ohio will see “pension benefit cuts of over 90% for more than one million workers and retirees,” along with bankruptcy filings of numerous Ohio small businesses. He also suggests that the troubles faced by union pensions could drive the Pension Benefit Guaranty Corporation into insolvency in less than five years.
While consensus remains elusive, Congress members on both sides have been calling for action on the union pension crisis long before the pandemic. In 2019, the Ways and Means Committee of the U.S. House of Representatives marked up and voted along party lines to advance a bill formally titled the Rehabilitation for Multiemployer Pensions Act—also known as the Butch Lewis Act. The bill, which has since stalled, would have provided funds for 30-year loans and new financial assistance, in the form of grants, to financially troubled multiemployer pension plans.
Democrats, led by Ways and Means Chairman Richard Neal of Massachusetts, generally voiced strong support for the bill. Republicans, headed by Ranking Member Kevin Brady of Texas, cited worries about ongoing mismanagement and maleficence among union leaders and pension trustees.
Last year, Former House Speaker John Boehner and past Congressman Joe Crowley announced the launch of the Retirement Security Coalition, an alliance consisting of diverse groups of employers, labor unions and policy experts “dedicated to finding a common-ground solution to the multiemployer pension crisis in America.”
“We are here to sound the alarm and say that we need to all come together to solve this problem and to protect the hard-earned retirement futures of millions of Americans,” Boehner stated in a 2019 interview with PLANADVISER. “From New York to Ohio and across the country, hundreds of thousands of retirees and workers are already facing deep cuts to their pensions, and if we don’t change course, families will be devastated.”
“If the pension system in this country isn’t stabilized and it continues on its current trajectory, then millions of workers and families will suffer,” Crowley added in the interview. “The impact will have a ripple effect on our national economy and communities across America.”
In his letter, Portman states he believes the union pension crisis could be solved with bipartisan efforts that follow three principles—a shared responsibility approach; safeguarding the long-term financial health of the PBGC; and long-term solvency for all multiemployer plans.
However, in a whitepaper published by the Pension Analytics Group in 2019, many union-sponsored multiemployer pension plans were reported to likely become insolvent even if they had access to subsidized loans. Using its Multiemployer Pension Simulation Model, the group projected that about 200 multiemployer pension plans covering over 3 million participants will become insolvent over the next 30 years, and that the PBGC’s multiemployer guarantee fund will itself be exhausted by 2027.