Many in the multiemployer pension plan community expected significant developments in 2018 in the ongoing effort to address the multiemployer pension plan solvency crisis. There were higher than usual expectations when the Joint Select Committee on Solvency of Multiemployer Pension Plans (JSC) was formed in early 2018 and tasked with developing legislative solutions to improve the solvency of multiemployer pension plans and the Pension Benefit Guaranty Corporation (PBGC). Unfortunately, after a year-long effort during which several ideas were discussed, the JSC failed to agree on any formal proposal. In the wake of the JSC’s demise, the so-called “Butch Lewis” Act has been reintroduced, which is addressed in Part 2 of this series.
Joint Select Committee Formation and Activities
The JSC had 16 members, equally divided between Republicans and Democrats. Under the terms of the enabling legislation, the JSC was to develop a report detailing its findings and recommendations along with proposed legislative language by November 30, 2018. The House and Senate would then vote on that legislative language before December 31, 2018. The JSC was unable to meet the November 30 deadline for the report and subsequently no vote was taken by either the House or Senate.
Although the JSC was unable to reach a consensus, it did achieve a unanimous understanding among its members that delaying a solution will only increase the magnitude of the problem. JSC members acknowledged that several large multiemployer pension funds are facing insolvency within the next 5-10 years and the PBGC’s multiemployer program will run out of money to pay benefits within 10 years unless some remedial action is taken. The JSC held several days of hearings (co-author Tim Lynch was asked to testify during one of the hearings, and his testimony is available here). Acknowledging the problem did not, unfortunately, lead to consensus on a solution.
Joint Select Committee Proposals
Although it is difficult to ascertain the views of each member of the JSC, it appears there were two primary proposals that emerged. First, all eight Democratic members voiced strong support for some type of loan program and expressed concerns about any solution that would lead to benefit cuts for participants. An alternative solution would have allowed troubled plans to transfer to the PBGC (in what is called a “partition”) those beneficiaries who no longer have a contributing employer making contributions to the plan. These so-called “orphan” participants are a major reason for many troubled plans’ poor financial condition. Among other additional changes, the alternative solution would have significantly increased PBGC premiums for all multiemployer plans.
Please read Part 2 of this series, where we discuss the reintroduction of the Butch Lewis Act and the possible path forward for multiemployer plan reform in 2019.