Rep. Richard Neal (D-MA) on Jan. 9 introduced the Rehabilitation for Multiemployer Pensions Act, legislation that seeks to address the problems facing multiemployer pensions. Neal had introduced the measure during the 115th Congress, but it had been referred to three House committees and was not acted upon. Reintroduction of the bill came less than a week after the new Congress convened.
“There’s no time to waste in addressing this crisis, and that’s why I’ve chosen to make this the first piece of legislation I introduce as Chairman of the Ways & Means Committee,” said Neal in a press release.
Neal is not alone on Capitol Hill in assigning importance to the issue. On Nov. 29, then-Sen. Orrin Hatch (R-UT) and Sen. Sherrod Brown (D-OH), then the co-chairs of the Senate’s Joint Select Committee on the Solvency of Multiemployer Pension Plans pledged to continue working on addressing the matter past Nov. 30, which then was the deadline for action before the end of the last session of Congress. “The problems facing our multiemployer pension system are multifaceted and over the years have proven to be incredibly difficult to address. Despite these challenges and a highly-charged political environment, we have made meaningful progress toward a bipartisan proposal to address the shortcomings in the system to improve retirement security for workers and retirees while also providing certainty for small businesses that participate in multiemployer plans.While it will not be possible to finalize a bipartisan agreement before Nov. 30, we believe a bipartisan solution is attainable, and we will continue working to reach that solution,” they said in a press release.
The Bill
Neal’s bill calls for the establishment of the Pension Rehabilitation Administration (PRA), which would be a new agency within the Treasury Department that would be headed by a director appointed by the president and who would serve a five-year term.
The PRA would 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). The amount of the loan would be the amount of cash needed to fund the plan’s obligations for the benefits of participants and beneficiaries in pay status at the time the loan is made, as identified in the loan application. The bill would not cut any benefits.
Plans that receive a loan would be required to fund the plan’s obligations to those in pay status in one of the following ways:
1. Annuity purchase;
2. Cash Matching or Duration Matching Portfolios; or
3. some other portfolio prescribed by the Secretary of the Treasury in regulations which has a similar risk profile as Cash Matching and Duration Matching and is equally protective of participants’ and beneficiaries’ interests.
Neal notes that the bill is “not a bailout” and that it would require plans to pay back PRA loans. “The federal government is simply backstopping the risk,” he said. The loan terms would require the plan to make interest payments for 29 years with final interest and principal repayment due in year 30.
The bill enjoys bipartisan support: its original co-sponsors include Reps. Peter King (R-NY), Bobby Scott (D-VA), Don Young (R-AK), Debbie Dingell (D-MI), Chris Smith (R-NJ), Donald Norcross (D-NJ), John Katko (R-NY), Marcy Kaptur (D-OH) and Jeff Fortenberry (R-NE).
A summary of the bill is available here.
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