On Senate Floor, Portman Urges Swift Action to Reform Multiemployer Pension System
WASHINGTON, DC – Today on the Senate floor, U.S. Senator Rob Portman (R-OH) highlighted the need for Congress to act to address the current multiemployer pension crisis that threatens to eliminate the retirement security of millions of Americans, and to impede the return of strong economic growth in Ohio, if no action is taken. The federally run guarantor of those plans, the Pension Benefit Guaranty Corporation, is set to become insolvent within five years, jeopardizing the retirement security of at least 1.4 million Americans.
Portman also underscored the need for any bipartisan multiemployer pension reform legislation to address both the immediate crisis with respect to the PBGC, and the longer-term structural issues that created the conditions for the persistent underfunding of multiemployer pension plans in the first place. He also emphasized that any solution to address the immediate crisis must involve a shared responsibility approach, with contributions from not just general public funds, but also employers and plan participants within the multiemployer pension system.
transcript of his remarks can be found below and a video can be found here.
“I’m also here on the floor today to talk about another critical issue we should be addressing. As we speak, there continues to be a looming crisis involving what’s called our multiemployer pension system, and without reform, it's going to result in pension benefit cuts of over 90 percent for more than 1.4 million American workers and retirees, and unnecessary bankruptcies for a lot of small businesses, including many in my home state of Ohio.
“Multiemployer pension plans are defined benefit plans, maintained by a lot of different companies, multiple companies, and a labor union that pool together their pension assets to cover all workers and retirees in the plan. The multiemployer system now comprises of roughly 1,400 plans covering almost 11 million participants and their families. Unfortunately, it’s on the verge of collapse. Years of bad federal policy with respect to funding and withdrawal liability rules, losses on risky investments, and failure to take proactive action have led to this crisis, and the current economic slowdown caused by the coronavirus has made the situation even worse. Not only is the system underfunded by about $638 billion, but the federal entity that insures these pensions, the Pension Benefit Guaranty Corporation, is also projected to become insolvent in less than five years. So the multiemployer part of the PBGC, Pension Benefit Guaranty Corporation, is projected to become insolvent in less than five years. We can’t let that happen.
“In my home state of Ohio, we have more than 50,000 active workers and retirees in multiemployer pension plans that are facing deep benefit cuts if we do nothing, with hundreds of small businesses contributing to these plans that could be forced to close if we fail to act. There are about 200 small businesses in Ohio that are going to have huge liabilities, many of whom are not going to be able to continue to operate. We can’t let this happen. Nearly 42,000 of those Ohioans, by the way, many of them veterans, participate in a single plan called the Central States Pension Fund, which is also the largest plan considered to be in what's called 'critical and declining status' and it's projected to become insolvent by 2025. It’s that insolvency that will take down the PBGC if it is not already insolvent.
“The good news is that proactive action now will reduce the cost of fixing the problem, will ensure a secure retirement for these participants and their families, and will ensure certainty for employers to make investments in good-paying jobs. The further good news is that the House Democrat proposal, which passed as part of the HEROES Act -- it’s called the Emergency Pension Plan Relief Act -- is more similar to the Senate version, the Senate Republican structure than the previous Democrat plan. So not only is the Democrat plan in their COVID-19 response bill, called the HEROES Act, but it’s also more similar in structure to the legislation that some of us have been working on over here in the Senate side. That means we have a better shot, I believe, this year than we have in a long time to try and solve this crisis and do it in a bipartisan way.
“In my view, in order to solve this, it’s going to entail three key principles. First, we are all in this together, and that means that we all have a shared responsibility. House Democrats have proposed using only taxpayer money to rescue these plans -- none of the stakeholders are asked to, again, have any shared responsibility. That’s not the way to get bipartisan support in Congress. Employers and participants must also share the responsibility, especially since about 94 percent of taxpayers do not participate in this system, many of whom are struggling with their own retirement security. As an example, somewhat higher employer contributions are required if multiemployer plans are to sustainably provide the benefits they promise.
“Second, we need to ensure that we safeguard the long-term financial health of the PBGC so we aren’t back in this fiscal crisis again soon. Part of that should be a new small variable-rate premium for plans, but we also need participants in federally rescued plans to pitch in with solvency fees paid directly to the PBGC. These do not have to be large payments. The federal government and the taxpayer, I think, are willing to play a role as long as this is viewed as something that’s part of shared responsibility. But it’s important that all stakeholders are contributing to the health of the PBGC in addition to us here in Congress -- and therefore the taxpayers -- because insolvency would be in no one’s interest.
“Finally, we have to ensure that there’s long-term solvency for these multiemployer plans. That entails enacting some restructuring, some structural reforms to the funding rules governing employer contributions to multiemployer plans so that bailing out plans does not become a habit of the federal government. We don’t want to fix this problem and then be right back in a few years having to fix it again. We should gradually phase down the rate of return at which plans assume in budgeting for promises that are made to participants, partly because that keeps these plans from going bankrupt and partly because that’s just fair. Investment risk is a problem in these plans now and we need to give more certainty to workers and retirees.
“The pension crisis is an issue that I – along with Senator Grassley, Senator Sherrod Brown from Ohio, and many other colleagues here in the Senate – have been trying to solve for quite a long time. We had a bicameral and bipartisan solution very close at hand at the conclusion of a committee process that ended about a year and half ago, but we weren’t quite able to get there. I think it is achievable, particularly now, but only if we're willing to listen to each other and are willing to come around the table for a real discussion. Republicans have reached out, I reach out today. We’re ready to find an acceptable compromise. We’re ready to talk, but that discussion needs to be driven by the merits of solving this issue, not just the politics of the moment.
“We owe solving this problem to those beneficiaries, retirees, to workers, the active workers in these plans, and to small businesses participating in these plans. We’ve got to find common ground. We’ve got to deliver a sustainable and lasting solution. I believe we have an opportunity, right now, this month, to be able to try to come together, working with the House and the Senate and the Administration. Everybody has a responsibility to do it. We talked about shared responsibility with regard to the plans. There’s also a shared accountability here in the U.S. Congress. This is our job. We can get this done. I think we’re quite close now with similar structure and having gone through various iterations during the Select Committee process a year and a half ago. Let’s do the right thing, let’s act now.”