AGC Sets the Record Straight on Multiemployer Pension Relief

AGC last week signed a letter with over 30 business groups to express concern about misinformation circulating regarding multiemployer defined benefit plan relief proposals before Congress.  Recent press stories have referred to the Preserve Benefits and Jobs Act being debated in the House, and the Create Jobs and Save Benefit Act being debated in the Senate, as a "union bailout" and to multiemployer plans as "union plans."  The letter states that contributions to multiemployer plans are funded entirely by employers and not unions. The majority of defined benefit plans have been negatively impacted by the recent financial crisis, and the median investment loss by multiemployer plans has exceeded 20 percent.  The losses occurred in the first year of new aggressive funding rules required by the Pension Protection Act, giving rise to concerns for potential additional contribution increases, deep benefit cuts, or both.  The financial crisis also exacerbated funding problems that certain multiemployer plans were already facing prior to the market downturn. The House proposal aims to protect employers contributing to multiemployer plans from the immediate funding crisis by providing plans additional time to make up for the losses beginning in 2008.  Both the House and Senate proposals also seek to correct problems associated with joint and several liability rules that govern multiemployer plans and require employers in the plan to become responsible for paying the accrued benefits of all the workers in the plan, including those who never worked for them.  This situation is particularly acute in the Teamsters Central States Plan where several trucking industry employers have gone out of business over the years, leaving the remaining employers responsible for paying benefits to those firms' former employees. As part of a package of tax provisions, infrastructure programs and unemployment payments, the U.S. House of Representatives Friday passed a number of provisions designed to provide multiemployer plans with immediate funding relief.  The American Jobs and Closing Tax Loopholes Act, H.R. 4213, would allow multiemployer pension plans to elect a 30-year amortization period for certain losses incurred in 2008 and/or 2009. The bill also extends the smoothing period from five to 10 years and allows plans the option of up to a five year extension of their funding improvement or rehabilitation periods.  H.R. 4213 now goes to the Senate for its consideration. The Senate Health, Employment, Labor, and Pensions Committee last Thursday held a hearing on multiemployer pension plans, including the Senate proposal.  The hearing was a first step towards Congressional action on additional multiemployer plan relief called for in both the House and Senate proposals that would facilitate mergers and alliances of funds and allow the Pension Benefit Guarantee Corporation (PBGC) to provide assistance to certain plans (e.g., Central States) through a process called "partitioning" to lower long-term costs.  The bill would also update PBGC benefit guarantees. For more information, contact Karen Lapsevic at (202) 547-4733 or lapsevick@agc.org.