STUMP » Articles » Multiemployer Pension Plans: The Politicking » 16 May 2017, 18:17

Where Stu & MP spout off about everything.

Multiemployer Pension Plans: The Politicking  

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16 May 2017, 18:17

And there’s a lot of politicking. Because that’s what you do when there are no good options left.

Bury has the video:

This week saw the re-rollout of the Keep Our Pension Promises Act (KOPPA) which will likely go nowhere but it does give us an insight into how a law might get passed these days.
First, start off with a false premise:

My transcription:

BERNIE SANDERS: Bottomline is, when the federal government makes a promise to millions of workers, that promise must be kept.

Back to Bury:

The federal government made no promises to protect the full pensions of employees in multiemployer plans and nobody is suggesting cutting benefits below the PBGC guarantee. If anything it is the federal government that created the mechanism to cut benefits while allowing the union/management/actuary cabal to manipulate funding levels that necessitated this ploy:

My transcription:

SANDERS: The legislation that Senator Baldwin and I are introducing in the Senate and Congresswoman [something] is introducing in the House would prevent the retirement benefits of about 10 million workers and retirees from being cut by repealing the anti-pension rider that was included in an appropriations bill two years ago.

It establishes an emergency fund within the PBGC to make sure that the MEPs can continue to provide every pension benefit owed to every eligible American for decades to come

[applause]

And at a time of massive income and wealth inequality, this program, this legislation is fully paid for by closing two tax loopholes that allow the wealthiest Americans in this country [as opposed to wealthiest Americans in other countries] to avoid paying their fair share of taxes.

Sorry, I couldn’t help myself. There is this polito-speak autogenerator that sets my teeth on edge. Or possibly flat.

In short, I don’t like it.

I’m going to skip over the “loopholes” video, but this is what Bury points to in this promo from the Pension Rights Center:

How is KOPPA paid for? The Legacy Fund created by KOPPA would be funded bypartially repealing two tax breaks that ONLY benefit wealthy individuals. One of the measures would change the tax laws to ensure that rich real estate and art speculators would have to pay taxes when they trade one property for another. The second measure would limit to $5 million the amount that individuals can save in 401(k) plans or in IRAs. Both of these proposals would raise enough money to pay for the Legacy Fund on a year-to-year basis.

I am skeptical that an adequate amount of money would be raised in repealing these “loopholes”.

But let us ignore my skepticism for right now.

WORKERS AND RETIREES POLITICK

Now politicians, of course, politick. The people directly affected also politick.

Machinists, IP Martinez Rally with Senators to Protect Pensions:

Congress needs to act now to save the retirement security provided by pensions, IAM International President Bob Martinez said at a news conference alongside Sens. Bernie Sanders, Tammy Baldwin and Al Franken on Capitol Hill.

Martinez was joined by hundreds of Machinists Union members and other allies to promote the Keep Our Pension Promises Act, or KOPPA. The legislation would restore the long-standing rule prohibiting multi-employer pension plans from cutting benefits to current retirees.

“Too many Americans have already had their earned retirements ripped away from them through no fault of their own,” said Martinez. “Where I’m from in Texas, we call that highway robbery.”

A Republican-controlled Congress did away with what’s known as the “anti-cutback rule” in 2014. Until then, ERISA, or the Employee Retirement Income Security Act, protected retirees in so-called “troubled” multi-employer pension plans from cuts to their earned benefits.

The IAM was a leading opponent of gutting the anti-cutback rule.

KOPPA, which is being introduced by Sanders (I-VT) in the Senate and Rep. Marcy Kaptur (D-OH) in the House, would restore that protection. It would also adequately fund the Pension Benefit Guarantee Corporation, which steps in to pay retirees when pension plans become insolvent.

A comfortable retirement, or a retirement at all, is becoming out of reach for a troublingly large number of middle-class Americans, Sanders said.

“Retirees all over this country are waking up to the reality that the pension benefits they are receiving today may soon be cut by 20, 30, or even 65 percent,” said Sanders. “Imagine that. Imagine working your whole life and sacrificing to ensure that your family has a secure retirement and one day you wake up and find out there are plans to cut your retirement.”

Machinists Union members in Washington, DC for the IAM Legislative Conference packed the room, along with other pension advocates. IAM members are visiting members of Congress all week to promote KOPPA and other legislation that would help working families.

There have been a variety of rallies, because many MEPs are in trouble.

THE MINEWORKERS STILL HAVE TROUBLE

The coal mineworkers plan is a special case, to a certain extent, but it still falls under the MEP umbrella (as far as I know).

A press release from some politicians:

Senators Introduce Bipartisan Miners Pension Protection Act

WASHINGTON (NEWS RELEASE) – U.S. Senators Joe Manchin (D-WV), Shelley Moore Capito (R-WV), Mark Warner (D-VA), Bob Casey (D-PA), Sherrod Brown (D-OH), Claire McCaskill (D-MO) and Rob Portman (R-OH) today introduced the Miners Pension Protection Act, legislation to secure our nation’s retired miners pensions by shoring up the 1974 Pension Plan which is headed for insolvency due to coal company bankruptcies and the 2008 financial crisis.

The Miners Pension Protection Act will amend the Surface Mining Control and Reclamation Act of 1977 to transfer funds in excess of the amounts needed to meet existing obligations under the Abandoned Mine Land fund to the 1974 Pension Plan to prevent its insolvency.

“Now that we have secured a permanent healthcare fix for our retired miners, it’s time to keep the second part of the promise and secure the pensions that they have earned over a lifetime of hard and dangerous work,” Senator Manchin said. “We cannot allow for this issue to be put off until the deadline only to punt it with extensions. Our retired miners deserve better than to receive letters notifying them that they will no longer receive their modest pension, which many rely on for survival. For most of these retired miners, their pension is the difference between paying the bills or being kicked out of their house, putting food on their tables or going hungry. I know my colleagues will stick by them this time just like they did with healthcare and I look forward to working with them to finally keep our promise.”

“Securing permanent health care for our miners and their families was only half the battle. The Miners Pension Protection Act is our commitment to continue the fight for these hardworking men and women,” Senator Capito said. “This legislation will help ensure they receive the pensions they’ve earned through years of hard work. So many West Virginians are still facing uncertain futures. I’m proud to stand with our miners and with my colleagues on both sides of the aisle as we work to deliver the peace of mind they deserve.”

“Now that Congress has finally approved a long-term solution to secure miners’ healthcare, it’s time for us to take care of unfinished business, and that is to protect the retirement benefits that our miners have rightfully earned after a lifetime spent underground. The government made a commitment to these miners many decades ago. Now, through absolutely no fault of their own, the pension benefits that thousands of retired miners and their families rely to make end meet are at risk. It’s well past time for us to hold up our end of the by approving a long-term solution for the underfunded pension plan,” Senator Warner said.
…..
On May 4, 2017, the Senate passed a portion of the original Miners Protection Act of 2016 (S. 175), securing a permanent health care fix for our retired miners who were orphaned by recent coal bankruptcies. The passage of this legislation ensured that 22,600 of our nation’s miners did not lose the healthcare benefits that they earned over a lifetime of hard work and dedication to our great nation. The passage of that bill honored the promise of lifetime health care made by the U.S. Government and coal operators over seventy years ago. The Miners Protection Act of 2016 passed the Senate Finance Committee on a bipartisan vote of 18 to 8, fully offset.

Other cosponsors included Senators Franken (D-MN), Bill Nelson (D-FL), Elizabeth Warren (D-MA), Patty Murray (D-WA), Tim Kaine (D-VA), Joe Donnelly (D-IN), Heidi Heitkamp (D-ND), Sheldon Whitehouse (D-RI), Dick Durbin (D-IL), Martin Heinrich (D-NM), Richard Burr (R-NC), Bernie Sanders (I-VT), Cory Booker (D-NJ) and Tammy Duckworth (D-IL).

An editorial from Kentucky:

Now to save coal miners’ pensions

Mitch McConnell made them sweat until there was no chance that Democrat Barack Obama could get any credit, but finally the Senate majority leader gave a green light to rescuing the health-care benefits owed to 22,600 union coal miners and their widows.

Now McConnell and the rest of Congress must get busy protecting the pensions of miners and thousands of other Americans who worked hard all their lives but are facing impoverishment in old age because of faltering pension plans.

The pension crisis threatens almost 120,000 miners and widows, including 9,000 in Kentucky, and will be thornier than health care to fix because it’s part of a wider problem.

The federal insurance plan for multi-employer pensions, those plans in which a number of employers in the same industry join to pool pension payments, is severely underfunded and likely to run out of money by 2025. Meanwhile, almost a million Americans are in multi-employer pension plans that are classified as in critical or declining status, according to the Pension Rights Center.

The Pension Benefit Guaranty Corporation, the federal agency that insures pensions, would likely be busted by the failure of the miners’ pension plan. The United Mine Workers of America pension plan, which was in good shape before 2008, has been crushed by the double whammy of the 2008 stock market crash and the coal industry’s decline.

In December 2015, McConnell blocked the Miners Protection Act, a bipartisan rescue of miners’ health care and pensions that had the Obama administration’s support.

More recently McConnell, the most powerful Kentuckian in Washington, successfully pushed for a temporary health-care fix and then the permanent plan that cleared Congress and was signed by President Donald Trump last week as part of a big spending bill.

The rescue came just in time as 3,000 Kentuckians whose employers have gone bankrupt were about to be cut off from the health-care benefits on which they depend. (This rescue won’t help miners whose benefits are threatened by coal companies going out of business in the future.)

We join the UMWA in thanking McConnell for protecting the miners and their hometown medical providers from losing $59 million a year in health-care benefits in Kentucky alone.

McConnell, who took credit for the health-care rescue, has said nothing about the related and looming crisis in the coal miners’ pension fund.

But the challenges of securing Americans’ retirements will only grow as work becomes ever more automated and baby boomers age out of the workforce in ever greater numbers. Those combined trends will leave behind a smaller number of workers to contribute to pension funds for the larger senior population.

The average UMWA pension is $530 a month. Even in today’s fast-changing and politically polarized times, Americans surely still agree that decades of hard — and, for coal miners, deadly — work should be rewarded with more than an old age in poverty.

Of course, many people have no pensions at all. If they didn’t save extra money from their working years, then those particular people won’t have anything beyond their Social Security benefits.

So pointing out the travails of the MEPs may not be a winning argument with those people.

Just a thought.

WHO PROMISED, EXACTLY?

As John Bury noted, the federal government promised very little with respect to MEPs. I’ve written about the limits of that promise before, which involved a maximum guaranteed annual benefit of about $13K at the time.

And of course, lots of people will get less than that if their particular pension plan does a belly flop, because they don’t qualify for the maximum annual benefit under the guarantee.

They have one bright side: they are covered by Social Security, just like most other working Americans are (though many public employees/retirees aren’t covered… and they’ve got no backstops when their pensions fail.)

Of course, Social Security doesn’t pay all that much, either. But it’s nontrivial.

I have no good messages for those in failing MEPs. There are many reasons why these plans are failing, but it mainly comes down to:

  • Not enough cash coming in.
  • Too much cash going out.

The first is related to these MEPs covering industries that are not growing, to put it mildly. Employers go bankrupt, and there are fewer and fewer active employees compared to retirees, so there are fewer to provide contributions.

There is the issue of asset returns, but in general, that seems less important than contributions falling off.

That said, asset return assumptions and other valuation assumptions being “optimistic” — that is, people dying younger than they actually do, investments earning more than they actually do, and other optionality assumptions picked in such a way to minimize how much the promises seem to be worth — that leads to calculating contribution rates that are too low.

And then too much going out — compared to what was expected. Having seen the mortality tables being used (forget about the utilization of particular retiree options) in applications rejected by the Treasury Department, I can imagine some of the valuation assumptions for ones that haven’t applied are also off-the-mark.

Note, I don’t know if this is the case. The particular plans that applied to cut current (and future) retiree benefits are not randomly picked. It may be the case that the well-funded plans also have assumption sets that are appropriate, and so their fundedness measures are reasonable.

It seems to be falling out that way on the public pension side, for what it’s worth. The plans that are too optimistic with regards to their valuation assumptions in public pensions, even if they’re making 100% “full” contributions, seem to have ever-increasing contribution rates and ever-falling funded ratios. These items are not independent.

But more on that another time.


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