By Pension and Benefits Editorial Staff
On July 24, 2019, by a vote of 264-169, the House passed the Rehabilitation for Multiemployer Pensions Act, which would establish a Pension Rehabilitation Administration within the Department of the Treasury and a related trust fund to make loans to certain multiemployer defined benefit pension plans. The bipartisan vote saw 29 Republicans crossing the aisle to join Democrats in passing the bill.
Prior to the vote, lawmakers rejected an amendment (186-245) offered by Representative David P. Roe (R-TN) that would have set the loan interest rates at 5% per annum for the first five years and 9% per annum thereafter.
The motivation behind the bipartisan H.R. 397, also known as the “Butch Lewis Act,” is to head off the imminent catastrophic collapse of multiemployer pension funds while also protecting retirees’ benefits and saving taxpayers billions of dollars.
As the Teamsters Union has pointed out, there are more than 300 multiemployer pension plans across the country that are in danger of failing. The Teamsters said they have been fighting for years for a legislative solution, working with lawmakers on both sides of the aisle to find one.
Loans to failing pension plans. In addition to the Pension Rehabilitation Administration, the legislation would also establish a related trust fund to make loans to certain multiemployer defined benefit pension plans. To receive a loan, a plan would have to be either in critical and declining status, or insolvent, if the plan became insolvent after December 16, 2014, and has not been terminated.
The Treasury Department would issue bonds to fund the loan program and transfer amounts equal to the proceeds to the trust fund established by the bill. The Pension Rehabilitation Administration would be able to use the funds without a further appropriation, to make loans, pay principal and interest on the bonds, or for administrative and operating expenses.
Multiemployer pension plan sponsors applying for a loan under the bill would also be able to apply to the Pension Benefit Guaranty Corporation for financial assistance if, after receiving the loan, the plan would will still become or remain insolvent within the 30-year period beginning on the date of the loan.
Pouring more gas on the fire?. Opponents of the bill do not see the legislation as a solution to the pension plan problem, but rather as a move that would only further fuel the cause of it. Representative Virginia Foxx (R-NC), who called H.R. 397 “a risky, fiscally irresponsible, politically motivated scheme,” said, “My colleague on the other side of the aisle said that we have a house on fire, and we must do something about it. What this bill does is it gives more gasoline to the arsonist who started the fire.”
“For the first time ever, taxpayers will prop up failing, mismanaged union-run pension plans,” according to Foxx. “These plans, all 160 of them, can apply for a government loan. There is no limit to the loan amount and, remarkably, the loans would be completely forgiven if they are unable to be repaid after 29 years. The Chairman of the Education and Labor Committee said, ‘If you can’t pay it back, you can’t pay it back.’ So, by the Chairman’s own admission we are giving failed union pensions a blank check.”
SOURCE: Rehabilitation for Multiemployer Pensions Act (H.R. 397).
Interested in submitting an article?
Submit your information to us today!Learn More