As pensions fail, Congress ponders, and career savings evaporate

Congressional Democrats are seeking to toss a financial lifeline to the growing number of pension plans that are struggling to remain solvent, jeopardizing retirement benefits for more than 1 million Americans.The U.S. House of Representatives is expected to vote next week on a bill under which the Treasury Department would offer low-interest loans to some of the nation’s most underfunded multi-employer pension plans.Nationally, there are nearly 1,400 multi-employer pension plans, which are defined-benefit retirement plans covering unionized workers in a certain industry, rather than a single company. Those plans collectively cover nearly 11 million Americans.But many of those plans are in deep financial trouble, often due to a large company within that pool going bankrupt, reducing the employers sharing in the pension fund’s costs.A growing crisisRoughly one in 10 of those plans is expected to run out of money in the next 20 years, putting at risk the retirement benefits of 1.3 million people. Those plans in critical condition include one that Bethlehem candymaker Just Born exited as part of a new labor deal that went into effect this month.The Bakery & Confectionery Union & Industry International Pension Fund, which covers nearly 110,000 workers and retirees, took a serious blow when Twinkies-maker Hostess Brands closed and liquidated in 2012. The pension fund listed about $4 billion in assets and nearly $8 billion in liabilities in a report to members earlier this year.The mammoth Teamsters’ Central States Pension Fund, which has 1,300 participants in Pennsylvania, faces an even larger unfunded liability of more than $20 billion. It is projected to collapse by 2025 without intervention.Employers participating in underfunded multi-employer plans have paid larger contributions to try to bridge the fiscal gap, but insolvency is still looming for many.These plans are the product of private-sector negotiations between labor unions and employers. But some experts who study the growing crisis say there likely will be public costs whether or not lawmakers decide to step in.“If these plans fail, it’s going to cost more money than if we just fix it,” said Norman Stein, a Drexel University professor who specializes in pension law. “It’s going to have a major impact on the economy. There’s tremendous human cost.”Congress attempted to find across-the-aisle consensus on tackling the pension crisis last year. But a bipartisan joint committee failed to recommend a solution.Now, House Democrats have been advancing what’s known as the Butch Lewis Act. It’s drawn support from labor unions, which say it would avoid reductions in benefits to retirees.Lehigh Valley Congresswoman Susan Wild supported the legislation when H.R. 397 passed the Education and Labor Committee last month. Wild, a Democrat, said the proposal would help workers, employers and taxpayers who will be affected by the pension crisis.“Imagine working for 40-plus years only to see your earned benefits wiped away,” Wild said. “We owe our workers the pensions they have earned.”Proposed fix seen as ‘gimmicky’Some criticism of the bill has come from the Committee for a Responsible Federal Budget, which says the proposal relies on a “relatively gimmicky loan approach” allowing pension plans to make smaller loan payments for years and then a large balloon payment at the end.Last year’s congressional panel reportedly considered an approach intended to bring in support from Republicans who object to giving taxpayer-funded loans directly to union pension plans. That approach would give more federal money to the federal Pension Benefit Guaranty Corporation to pay for benefits for workers whose employers are no longer contributing.While last year’s pension panel stalled, those tracking the issue say they’ve been encouraged by what they’ve seen from federal lawmakers recently.“Congress, on a bipartisan basis, is trying to solve this,” said Joshua Gotbaum, guest scholar at the Brookings Institution and former PBGC director. “That’s a big deal.”Washington correspondent Laura Olson can be reached at 202-780-9540 or lolson@mcall.com.
Source: Morningcall