Study Points Out Benefits of Guaranteed Pensions to Economy

According to a study from the National Institute on Retirement Security, in 2016, each dollar paid out in pension benefits supported $2.13 in total economic output nationally.

The National Institute on Retirement Security (NIRS) has released its latest report about the impact defined benefit (DB) plan pensions have on the economy.

According to the report, “reliable pension income can be especially important not only in providing retirees with peace of mind, but in stabilizing local economies during economic downturns. Retirees with DB pensions know they are receiving a steady check despite economic conditions. In contrast, retirees may be reluctant to spend out of their 401(k)-type accounts if their savings are negatively impacted by market downturns.”

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“Pensionomics 2018: Measuring the Economic Impact of Defined Benefit Pension Expenditures,” says in 2016, $578.0 billion in pension benefits were paid to 26.9 million retired Americans, including:

  • $294.7 billion paid to some 10.7 million retired employees of state and local government and their beneficiaries (typically surviving spouses);
  • $83.0 billion paid to some 2.7 million federal government beneficiaries; and
  • $200.3 billion paid to some 13.5 million private sector beneficiaries, including $41.8 billion paid out to 3.5 million beneficiaries of multi-employer pension plans, and $158.6 billion paid out to 10.0 million beneficiaries of single-employer pension plans.

Expenditures made out of those payments collectively supported 7.5 million American jobs that paid nearly $386.7 billion in labor income; $1.2 trillion in total economic output nationwide; $685.0 billion in value added (GDP); and $202.6 billion in federal, state, and local tax revenue.

According to the study, each dollar paid out in pension benefits supported $2.13 in total economic output nationally. Each taxpayer dollar contributed to state and local pensions supported $8.48 in total output nationally. This represents the leverage afforded by robust long-term investment returns and shared funding responsibility by employers and employees.

“The analysis shows that virtually every state and local economy across the country benefits from the spending when retirees spend their pension benefits,” says Diane Oakley, NIRS executive director. “Pension expenditures are especially vital for small and rural communities where other steady sources of income may not be readily found if the local economy lacks diversity.”

The full report may be downloaded from here.

New House Ways & Means Chair Introduces Multiemployer Pension Bill

Representative Richard Neal has introduced a bill with bipartisan backers that would take several steps towards solving the union multiemployer pension funding crisis.

House Ways & Means Committee Chairman Richard Neal, D-Massachusetts, has introduced his first bill of the 116th United States Congress, dubbed the Rehabilitation for Multiemployer Pensions Act.

The legislation is related to efforts undertaken in the previous Congress to address the severe funding shortfall measured among some union multiemployer pension plans.

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According to Neal and eight bipartisan co-sponsors, there are currently some 1,400 multiemployer plans in existence in the U.S., covering about 10 million people across the country. The legislation is aimed at supporting the 1.5 million Americans who are in plans that are quickly running out of money.

“Although multiemployer pension plans have been successful historically, today, a significant number of these plans have funding problems, and many are almost certain to run out of money,” Neal said. “If they do, retirees, workers, and their families would lose benefits earned over a lifetime of work, through no fault of their own.”

Representative Peter King, R-New York, is an original co-sponsor of the legislation, which has an additional four Democrat and four Republican co-sponsors.

“These are American workers who planned for their retirement, who year after year chose to contribute to their pensions instead of taking a wage increase,” Neal said. “Now, after working for decades, their planned retirements may be taken away from them. And taken away at a time when they’re no longer able to prepare for retirement because they’re now in retirement.”

Taking a slightly different approach from previous proposals, the bill would establish a Pension Rehabilitation Administration (PRA)—an entirely new agency within the Department of the Treasury authorized to issue bonds in order to finance loans to “critical and declining” status multiemployer pension plans, plans that have suspended benefits, and some recently insolvent plans currently receiving financial assistance from the Pension Benefit Guaranty Corporation (PBGC). According to Neal, the PRA would be headed by a director, who will have a term of five years and be appointed by the U.S. President.

In introducing their bill, the lawmakers said this approach is “not a bailout.” Under the terms of the proposed bill, plans receiving financial aid would be required by law to pay back the loans they receive from the PRA—although the federal government would ultimately be backstopping the risk.

“Importantly, my bill does not allow for any cuts to the benefits these workers and retirees earned through years on the job,” Neal emphasized. “Americans need our help, and it’s time to answer that call.”

Additional original co-sponsors of the legislation are Bobby Scott, D-Virginia; Don Young, R-Alaska; Debbie Dingell, D-Michigan; Chris Smith, R-New Jersey; Donald Norcross, D-New Jersey; John Katko, R-New York; Marcy Kaptur, D-Ohio; and Jeff Fortenberry, R-Nebraska.

Read the full text of the legislation here.

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