OUTLOOK FOR MULTIEMPLOYER PENSION PLANS - ABA EMPLOYEEBENEFITSCOMMITTEEMIDWINTER MEETING2021
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ABA EMPLOYEE BENEFITS COMMITTEE MIDWINTER MEETING 2021
OUTLOOK FOR MULTIEMPLOYER
PENSION PLANS
Deva A. Kyle
1
1. Multiemployer Funding Crisis: Understanding the
Problem
OVERVIEW 2. Legislative Solutions Past and Present
3. What’s Next: Budget Constraints and
Multiemployer Relief in 2021
2
“Retirement income is referred to by many as a
three-legged stool: Social Security, employer-
sponsored retirement plans and personal
MULTIEMPLOYER savings… Multiemployer pension plans are
contributing to the wobbly three-legged stools
FUNDING CRISIS for many retirees because these plans are in
crisis. About 10 million Americans participate in
multiemployer plans and about 1.5 million of
them are in plans that are quickly running out of
money…” – Ways and Means Chairman, Richard
Neal (Democrat, MA-1) (2018)
3
Most multiemployer plans– 60% –
are in plans that are generally
considered healthy (Green Zone)
A small number of plans are in
trouble but not yet critically
underfunded (yellow)
30% or so of plans are critically
underfunded (both the light red and
dark red together)
10-15% of the 10 million
participants in multiemployer pension
plans are in plans that are projected
to be insolvent in the next 20 years
(critical and declining– dark red only) Source: Congressional Research Service, “Data on Multiemployer Defined Benefit (DB) Pension Plans updated May 22, 2020
4
MULTIEMPLOYER FUNDING CRISIS:
UNDERSTANDING THE PROBLEM
Pension Benefit Guaranty Corporation (PBGC) is set
to go insolvent in 2026.
• Plans will continue to go insolvent and will
More than
require assistance from PBGC 50% chance
of insolvency in
• PBGC’s multiemployer guarantee is very low (at
2026
best under $14,000 a year with 30 years of
service).
• If PBGC goes insolvent, PBGC will pay about
1/10 of that amount.
Source: PBGC 2019 Projections Report
5
MULTIEMPLOYER FUNDING
CRISIS: NATIONAL IMPACT
“Pension plans provide secure income in retirement and
through that income retirees contribute to the greater
economy as a whole contributing to the local, state, and
national economy through consumer spending.”
DB Pensions Support (Multiemployer only in
parenthesis)
-6.9 million American Jobs (523,000 jobs)
-$394.2 billion in Labor Income ($30b)
-$1.27 trillion in Total Economic Activity ($96.6b)
-$703.9 billion in GDP ($53.8b)
-$102 billion in Federal Tax Revenue ($7.8b)
-$89.8 billion in state/local tax revenue ($6.9b)
Source: Boivie, Ilana and Doonan, Dan, National Institute on Retirement Security, “Pensionomics 2021: Measuring the Economic Impact of DC
Pension Expenditures” (2021) https://www.nirsonline.org/wp-content/uploads/2020/12/Pensionomics-2021-Report-Final-V6.pdf 6
MULTIEMPLOYER FUNDING CRISIS
The number one factor in multiemployer pension plan funding losses was the dual financial crises of 2000
and 2008. Overall, the multiemployer system lost about 30% of its value from 2001-2003 and another
20% or so from 2008-2010.
The economic downturns in the 2000s had two crucial impacts on multiemployer pension plans separate
from the loss in assets all other market investments experienced: Insolvencies cut the number of contributing
employers and layoffs cut the number of active workers.
Financial
Crisis
Financial
Crisis
Source: Munnell et., al. IBID
Source: PBGC 2017 Projections Report 7
MULTIEMPLOYER FUNDING CRISIS
Deregulation, Automation, and maturing workers
Deregulation has led union employers out of business.
Automation led to layoffs and changes in industry
preferences led to insolvencies. For example, Central
States, the largest multiemployer pension plan facing
insolvency, has been public about the impact
deregulation has had on the financial outlook for their
fund. Central States has 380,000 participants in their
plan mostly within trucking. When the trucking industry
was deregulated in the 1980s, tens of thousands of
trucking companies went out of business. 70% of
Central States contributing employers were lost
between 1980 and 2003 and 47 of the top 50
employers who were in the plan in the 1980s have
since withdrawn.
Many of the most troubled plans came to maturity
(i.e., plans with a large number of inactive
participants), at the same time, as the financial crises
hit. Mature plans have fewer resources to recover
from investment losses as the assets grow relative
to the contribution base supporting the plan.
8 Source: Munnell et., al. IBID
SELECT SOURCES
•Boivie, Ilana and Doonan, Dan, National Institute on Retirement Security, “Pensionomics 2021:
Measuring the Economic Impact of DC Pension Expenditures” (2021)
https://www.nirsonline.org/wp-content/uploads/2020/12/Pensionomics-2021-Report-Final-
V6.pdf
•Congressional Research Service, “Multiemployer Defined Benefit (DB) Pension Plans: A Primer
(updated April 3, 2020) https://crsreports.congress.gov/product/pdf/R/R43305
•PBGC, “FY2019 Projections Report” (2020) (https://www.pbgc.gov/sites/default/files/fy-2019-
projections-report.pdf)
•U.S. Chamber of Commerce, Employment Policy Division, “The Multiemployer Pension Plan Crisis:
Businesses and Jobs at Risk” (2018)
https://www.uschamber.com/sites/default/files/multiemployer_report_businesses_and_jobs_at_ris
k_final.pdf
•Munnell, Alicia, Aubry, Jean-Pierre, and Crawford, Caroline, “Multiemployer Pension Plans: Current
Status and Future Trends”, Center for Retirement Research at Boston College (2017)
https://crr.bc.edu/wp-content/uploads/2017/12/multiemployer_specialreport_1_4_2018.pdf
9“[T]he problem is not going away, and only grows worse with inaction... And
if we do not find a comprehensive solution, there will be a devastating
LEGISLATIVE
impact on the entire multiemployer system when the day of reckoning
arrives.
“…Within the multiemployer system, businesses are already being
SOLUTIONS PAST impacted by high contributions and potential withdrawal liability; active
workers are seeing fewer and fewer benefit accruals; and some retirees
AND PRESENT
are already experiencing reduced benefits. As the crisis grows, the impact
will be felt beyond the multiemployer system through a significant drag on
the economy, decreased tax revenues, and possible increased reliance on
social programs. A definitive solution is needed to address a looming crisis
that will affect us all.”
- Aliya Wong, Then Executive Director Of Retirement Policy, U.S. Chamber Of
Commerce, Hearing Before the Joint Select Committee on Solvency of Multiemployer Pension
Plans, United States Congress (June 13, 2018)
10LEGISLATIVE SOLUTIONS PAST AND PRESENT
Bills that • Pension Protection Act of 2006 (PPA)
became law • Multiemployer Pension Reform Act of 2014 (MPRA)
Bills/efforts • Rehabilitation for Multiemployer Pensions Act aka Butch Lewis
• Multiemployer Pension Recapitalization & Reform Plan or
that did not “Grassley/Alexander”
become law • Joint Select Committee on Solvency of Multiemployer Pension Plans
Bills currently • Chris Allen Multiemployer Pension Recapitalization and Reform
under Act of 2020 (CAMPRRA)
consideration • Emergency Pension Plan Relief Act of 2021 (EPPRA)
11PENSION PROTECTION ACT OF 2006
On August 17, 2006 H.R. 4, the Pension Protection Act was signed into law by the President.
The Pension Protection Act is often referred to as the most comprehensive reform of pension
laws since the passage of ERISA.
In response to the first market crash of the 2000’s Congress passed PPA with the following
changes to multiemployer law:
actuaries must certify the funding status of the plan in newly created statuses (green, endangered, or
critically under funded)
For underfunded plans, the plan must notify participants and create a schedule to improve the funding
of the plan within a funding improvement period.
For “critical status” plans, the plans may both increase contributions AND eliminate certain benefits for
participants not yet in pay status
New disclosure requirements for multiemployer plans to bring transparency to the funding of
multiemployer plans.
12MULTIEMPLOYER PENSION REFORM ACT OF 2014
On December 16, 2014, Congress passed, and the president signed, an end of year spending
bill titled the Consolidated and Further Continuing Appropriations Act. This spending bill
included The Multiemployer Pension Reform Act of 2014 (MPRA).
MPRA permitted critically underfunded plans facing insolvency in 20 years (also known as
critical and declining) to apply to:
the Treasury Department to approve a plan for long-term plan solvency achieved through a mix of
benefit cuts (up to 110% of the PBGC guarantee with additional protections for the elderly and
disabled) and increased contributions,
the Treasury Department for maximum benefit suspensions in conjunction with an application to the
PBGC to partition certain liabilities from the plan to further improve the plans’ financial outlook, or
the PBGC for a new facilitated merger between plans for which PBGC could, in theory, provide
funding.
13BUTCH LEWIS, GRASSLEY/ALEXANDER, AND THE
JOINT SELECT COMMITTEE
The Joint Select Committee on Solvency of Multiemployer Pension Plans co-chaired by Senator
Orin Hatch and Senator Sherrod Brown was a bi-partisan, bi-cameral committee established on
February 9, 2018 during the 115th United States Congress. (Section 30422 of H.R. 1892). The
two policy proposals put forward to solve the multiemployer crisis most under consideration
during the Joint committee were:
Rehabilitation for Multiemployer Pensions Act aka Butch Lewis – First introduced in 2017 (and reintroduced in 2019
where in passed in the House) in both the House of Representatives and the Senate, Butch Lewis allows underfunded
multiemployer pension plans to apply to the Treasury Department to get low interest 30-year loans and, if needed,
additional funds in the form of financial assistance from the PBGC to keep their plans solvent. Loan proceeds would be
invested conservatively and, generally, repayment would come via interest-only payments for the first 29 years
followed by a balloon payment in year 30 (other payment options were available).
Multiemployer Pension Recapitalization & Reform Plan or “Grassley/Alexander” – Grassley/Alexander is a white
paper put forward in 2017 by then Senate Chairman of the Finance Committee, Senator Grassley and then Senate
Chairman of the Health, Education, Labor, and Pension Committee, Senator Alexander. The plan called for
underfunded multiemployer pension plans to apply to the PBGC for a partition after receiving 10% benefit cuts and
other plan limitations including changes in governance. The plan also included sweeping changes for all multiemployer
plans including changes to funding rules, and new PBGC premiums.
14CAMPRRA AND EPPRA: NEW CONGRESS, NEW SOLUTIONS (SORT OF)
Chris Allen Multiemployer Pension Recapitalization and Reform Act of 2020 (CAMPRRA) – Introduced by Finance
Chairman Senator Grassley in December 2020, CAMPRRA has many of the same elements of Grassley/Alexander
Partition Amount: Amount needed to pay monthly benefits to participants and beneficiaries in the Successor Plan up to the PBGC
guarantee level
Changes for Partitioned Plans: Requires Restructuring, PBGC appointed as Independent trustee, and PBGC ability to remove trustees
Other Changes: New Increased PBGC Guarantee, New Premiums (flat rate, variable, union, and retiree), Caps discount Rate at 6.5%,
New Zone Statuses and Requirements, New Insurable event: PBGC guarantee when plan is projected to become insolvent in five years
Emergency Pension Plan Relief Act of 2021 (EPPRA) – Introduced separately by Ways and Means Chairman Richard
Neal and Education and Labor Chairman Bobby Scott, EPPRA is very similar to multiemployer provisions included in last
year’s Heroes Act:
Partition Amount: Amount necessary for the plan to remain solvent over 30 years and maintain a projected funded percentage of 80
percent at the end of the 30-year period. Note: PBGC can provide additional assistance to help plans satisfy their funding goals
Changes for Partitioned Plans: additional reporting, limits on plan improvements, and possibility for ongoing funding by the PBGC
Other Changes: New Increased PBGC Guarantee, Removes MPRA, Allows Extended Rehabilitation Period, single employer changes
15SELECT SOURCES
Pension Protection Act of 2006 https://www.congress.gov/bill/109th-congress/house-
bill/4?q=%7B%22search%22%3A%5B%22%5C%22Pension+protection+act%5C%22%22%5D%7D&s=6&
r=1
Multiemployer Pension Rehabilitation Act of 2014 https://www.congress.gov/bill/113th-congress/house-
bill/83/text
Rehabilitation for Multiemployer Pension Plans (also known as Butch Lewis)
https://www.congress.gov/bill/116th-congress/house-bill/397
Multiemployer Pension Recapitalization & Reform Plan or “Grassley/Alexander”
https://www.finance.senate.gov/download/white-paper_-multiemployer-pension-recapitalization-and-reform-
plan
Joint Select Committee on Solvency of Multiemployer Pension Plans https://www.pensions.senate.gov/
Emergency Pension Plan Relief Act of 2021 (EPPRA) https://edlabor.house.gov/imo/media/doc/2021-01-
20%20Emergency%20Pension%20Plan%20Relief%20Act%20Fact%20Sheet.pdf
Chris Allen Multiemployer Pension Recapitalization and Reform Act of 2020 (CAMPRRA)
https://www.congress.gov/bill/116th-congress/senate-bill/5045/titles?r=2&s=1
16"My Republican colleagues used reconciliation to give
WHAT’S NEXT: almost $2 trillion in tax breaks to the rich and large
corporations in the midst of massive income inequality
BUDGET … try to throw 32 million people off the health care
they had … [and] allow for drilling in the Arctic
RECONCILIATION wilderness… You know what? I think we can use
reconciliation to protect the needs of working families.“
-Senate Budget Committee Chairman, Bernie Sanders (I-
VT) (2021)
17WHY BUDGET RECONCILIATION?
Balance of Power: Previous multiemployer relief efforts assumed, in
order to pass (or even get a vote in the Senate), a multiemployer bill
would need strong support from both parties. This, in large part, had
to do with the make-up of Congress. Broadly speaking,
multiemployer relief has been a higher policy priority for Democrats
and, for the last decade, the Senate has been controlled by
Republicans. This changed this year with the Democrats taking
control of both the Congress and the White House.
While Democrats can now control what gets to a vote in the Senate,
they hold a slim 50/50 majority (with the Vice President bringing their
number to 51). Under this composition, Republicans can filibuster
any traditional bill the Democrats put forward in the Senate thwarting
their efforts to move forward with their agenda. One way around this
problem is through Budget Reconciliation.
18WHAT IS BUDGET
RECONCILIATION?
Budget Opportunity: Budget Reconciliation is a process created through the
Congressional Budget Act of 1974. Intended to rationalize the process by which Congress
sets the federal budget, Budget Reconciliation sets out instructions for the Budget
Committees to create a budget resolution by spending category. Once the budget
resolution is passed, the Appropriations Committees pass spending bills on specific topics
with the spending guidelines of the budget resolution.
The Appropriations Committees are charged with discretionary spending (including
defense, transportation, environmental laws, etc.). A much larger portion of the budget
deals with taxes and mandatory spending (including Social Security, Medicaid, Medicare,
etc.). Those programs are overseen by committees that are not the appropriations
committee.
The reconciliation process was created to reconcile the differences in the budget process
that get created in the discretionary, mandatory, and tax committees of Congress.
Source: Congressional Research Service, “The Budget Reconciliation Process: The Senate’s “Byrd Rule””, Updated December 1, 2020 https://crsreports.congress.gov/product/pdf/RL/RL30862 19BUDGET RECONCILIATION PROCESS
Budget Bill General Committees Budget Committees
• House and Senate each pass • Congressional committees in • The Budget Committee
an identical budget bill with the House and Senate bundles the committee
instructions for reconciling create reports on the budget reports together
the budget. in compliance with the
reconciliation instructions.
Full Chamber Conference Committees President
• The Full House and Full • To the extent that the House • The President either signs the
Senate separately consider and Senate versions of the bill into law or vetoes the
the reconciliation measure reconciliation measure are measure.
different, the differences
are ironed one in conference
20LEGISLATING THROUGH BUDGET RECONCILIATION
Because of the relative ease of passing sweeping changes with a simple majority,
Budget Reconciliation has also become an important vehicle for legislative change in
Washington. Since 1980, Budget Reconciliation has been used for:
Spending cuts in 1980
Deficit-reduction packages throughout the 80s and 90s
Welfare reform in 1996
Bush tax cuts in 2001 and 2003
Amend the Affordable Care Act in 2010
Tax cuts in 2017
21BUDGET RECONCILIATION LIMITS
Reconciliation can’t expand mandatory spending, even if The “Byrd rule,” named for late Senator
such spending is offset and can’t be used for provisions Robert Byrd and codified under the
“extraneous” to the federal budget. Congressional Budget Act, was put into place
to limit matters that are “extraneous” from the
Byrd Rule - Section 313(b)(1) of the Congressional Budget national budget for consideration under a
Act sets forth six ways a provision is extraneous under the reconciliation bill.
Byrd rule. Provisions are extraneous if they:
o Have no budgetary effect (do not produce a change in outlays or revenues);
o produce changes in outlays or revenue which are merely incidental to the non-budgetary
components of the provision;
o are outside the jurisdiction of the committee that submitted the title or provision for inclusion in
the reconciliation measure;
o increase outlays or decrease revenue if the provision's title, as a whole, fails to achieve the
Senate reporting committee's reconciliation instructions;
o increase net outlays or decrease revenue during a fiscal year after the years covered by the
reconciliation bill unless the provision's title, as a whole, remains budget neutral;
o contain recommendations regarding the OASDI (social security) trust funds.
Source: Congressional Research Service, “The Budget Reconciliation Process: The Senate’s “Byrd Rule””, Updated December 1, 2020 https://crsreports.congress.gov/product/pdf/RL/RL30862 22RECONCILIATION AND MULTIEMPLOYER RELIEF
Does multiemployer relief have a budgetary impact?
If a provision doesn’t affect outlays or revenues (or the terms and conditions for generating outlays or
revenues), it will not have a “budgetary impact”. Since both CAMPRRA and EPPRA require
governmental outlays through expanded PBGC partition assistance, it seems likely that this would not
be an issue. There is some precedence here. Congress passed two bills that expanded PBGC’s tools
(and increased PBGC’s premiums) through Budget Reconciliation in1985 and1987.
SEPPAA (title XI of P.L. 99-272 of the Consolidated Omnibus Budget Reconciliation Act of 1985) raised
the per-participant single employer premium and created new financial distress criteria for employers
to meet before they could terminate their single employer pension plans. It also expanded PBGC’s
employer liability claim and claim for nonguaranteed benefits.
The Omnibus Budget Reconciliation Act of 1987 (P.L. 100-203) increased PBGC’s single employer
premium again, created a variable rate premium, expanded PBGC’s employer liability claims and lien
authority, and changed some funding requirements.
23RECONCILIATION AND MULTIEMPLOYER RELIEF
Would multiemployer financial assistance be within the “budget window”?
Both CAMPRRA and EPPRA assume an applying plan would continue to get partition assistance throughout
a long-term solvency period (in practice, 30+ years). This would, of course, fall outside of the 10-year
budget window. In past budget reconciliations, the solution has been to end the outlays at the end of the
10-year window. For example, the 2001, 2003 (Bush tax cuts) and 2017 (Trump Tax cuts) all included
cuts that were intended to be permanent but instead sun-setted in 10 years with an expectation that the
bill would be extended at the end of the period. This seems more difficult to achieve for partition
assistance (would the plan merge at the end of the 10-year period? Would the original plan be on the
hook for the benefits of all participants even though they are now two plans?) but not impossible.
24SELECT SOURCES
Congressional Research Service, “The Budget Reconciliation Process: Stages of
Consideration,” Updated January 25, 2021
https://crsreports.congress.gov/product/pdf/R/R44058
Congressional Research Service, “The Budget Reconciliation Process: The Senate’s
“Byrd Rule””, Updated December 1, 2020
https://crsreports.congress.gov/product/pdf/RL/RL30862
U.S. House of Representatives Ways and Means Committee, Green Book Chapter 12:
Pension Benefit Guaranty Corporation Legislative History, https://greenbook-
waysandmeans.house.gov/book/export/html/306 (2008)
Joyce, Phillip G., “Congressional Budget Reform: The Unanticipated Implications for
Federal Policy Making” Public Administration Review, Vol. 56, No. 4 (Jul.0 Aug. 1996)
pp. 317-325 https://www.jstor.org/stable/976372?seq=1
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