Multiemployer Pension System

Floor Speech

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Mr. GRASSLEY. Madam President, since I reclaimed chairmanship of the Finance Committee at the start of this Congress, one of my top priorities has been to fix the failing multiemployer pension system and to help secure retirement benefits of more than 10 million workers and retirees in these multiemployer plans.

This is especially important since 150 multiemployer plans have failed or terminated, and many others are expected to run out of money in the coming 10 years. In the decade after that, many more plans are expected to fail. In all, more than 1.5 million Americans would be affected by the failure of these multiemployer pension plans.

Now, the coronavirus has had its effect on these plans as well. We don't yet have a firm read on how much the economic downturn has affected plans' funding or even the Pension Benefit Guaranty Corporation's insurance fund backing up those plans that have failed. We expect more details on those issues later this summer.

Now, one thing that we do know for sure is that this problem is only going to get worse and more costly to resolve if we wait longer to solve it. That is why all this concentration at this point. Now we have a real opportunity to get it fixed--and hopefully this year.

Last November, Health, Education, Labor, and Pensions Committee chairman Lamar Alexander of Tennessee and I released a draft plan to reform the multiemployer pension system, protect retirees, and at the same time secure the PBGC's insurance fund. We received many thoughtful and constructive comments, and we worked over the past several months to address those comments to make our reform plan as effective and balanced as possible.

So what is standing in the way? The usual thing: You have got to have bipartisanship to get anything done in the U.S. Senate. The short answer is that the Democratic leadership doesn't seem to be very interested in working to find that bipartisan solution. They seem to think the no-strings bailout which they tried to force into the CARES Act in March and which now appears in the House's HEROES Act is somehow a take-it-or-leave-it proposition. That doesn't work very well, particularly in the Senate, where it takes bipartisanship to get anything done.

I would also hope that they are not playing election-year politics. If they are, then they are playing those election-year politics with the retirement security of millions of Americans. As every day goes on, the prospects of people retiring on what they thought they were going to retire on--these multiemployer plans--is getting less and less. Delaying a solution until next year is only going to make it more costly, and it will still require bipartisan support.

We can and we must do better if we want a healthy multiemployer system for the long haul. We have a chance to fix this problem long term. Otherwise, we will be right back here in 5 or 10 years dealing with the same problem.

To put this in perspective, let's consider what it means to do nothing and to leave the current law unchanged, versus what Chairman Alexander and I propose in several key areas.

First, for retiree benefits, doing nothing means the PBGC insurance fund runs out of money in 2027. If the fund goes broke, that means the PBGC will only be able to pay benefits equal to the premium revenues that it receives, which are minimal compared to the potential claims. That means retirees could receive cuts in the range of 90 percent.

Let me say that another way. If these plans go broke and these people are forced into the government-run insurance backup plan, they are going to potentially get 90-percent cuts in their retirement. That is the necessity for us to work hard now to get this job done

Now, in contrast, the plan Senator Alexander and I are proposing would preserve benefits and ensure solvency of the PBGC's multiemployer system over the long run. It would save many failing plans by having the government pay a portion of benefits earlier than under current law. That would help the plan to stretch its assets much longer and at the same time preserve benefits as promised under that plan.

Second, for plans that aren't able to be saved, our proposal would increase the insurance guarantee amount from the current $12,870 maximum for a retiree with 30 years of service to over $20,000.

Benefits will be preserved with the help of additional support from employer and union stakeholders and a modest retiree insurance premium for retirees in plans that face financial challenges. That premium would be no more than 10 percent and eliminated entirely for older and disabled retirees, as well as for plans that are well funded. That is far better than the 90-percent cut that I already told you about if we just do nothing.

Doing nothing also means more and more plans will become underfunded or maybe even worse, insolvent, resulting in major benefit cuts and then only that very small benefit that is covered by the government's guaranty program, the insurance fund that we call the PBGC.

The Grassley-Alexander plan would provide relief to the failing plans, and, without an upfront benefit cut, it would restore the benefit cuts that some plans chose to make under the Multiemployer Pension Reform Act in 2014. It would also increase the PBGC insurance guarantee amount by more than 50 percent.

Third, for other plans not on the brink, doing nothing would mean that the current minority of multiemployer plans that are better funded would continue to shrink, with many more likely to move into the danger zone in the coming years. Our plan would provide significant funding reforms--with emphasis on reforms--to help prevent that from happening. In other words, those that are in pretty good shape wouldn't get worse.

Key variables, like the discount rate that plans use to estimate future assets and liability values, would be subject to new standards to help ensure that plans are funded to provide the benefits they promised. But we have taken to heart comments we have heard from stakeholders that those changes need to be phased in over a sufficient period of time to allow plans to transition smoothly.

Our plan would institute other changes to improve the early warning system so multiemployer plans can avoid flirting with the underfunding danger zone. It also provides needed oversight for plans in trouble, and it would provide unions and employers the opportunity to set up composite plans--a new type of hybrid retirement plan that enjoys wide bipartisan support.

Something pretty important to note, the fundamental tenet of the Grassley-Alexander reform plan is that all stakeholders have a role in fixing the multiemployer pension system that has been on the current path to failure now for four decades.

Employers and unions have a role in ensuring that adequate contributions are made to the plans to ensure sufficient funds to pay the promised benefits.

Plans have a role in ensuring that the PBGC insurance fund backing up those benefits is adequately funded through reasonable premiums, with higher risk plans contributing more for that insurance backup.

Employees and retirees have a role in contributing to the insurance coverage that protects their benefits, just like they do now for auto, home, and life insurance.

Last, but not least, is the Federal Government. I don't want to shock people, but if you study this, you will know that the government had a role in setting out the rules that have governed these plans and regulating the operation of these plans, so the government has a role in fixing the resulting situation we are in this very day. That means taxpayer funds may be needed to help the PBGC provide the partition relief for plans on the brink of failing, but those funds must come with important reforms to ensure that taxpayers are not back here on the hook again in 5 or 10 years.

This legislation I am talking about looks way ahead, solving two problems: the multiemployer pension plans individually--dozens of them--and also the insurance fund, the PBGC, that the government has for backup so it doesn't go broke by 2027. We take care of two big problems all at once. As I just said, we don't want to be back here in 5 or 10 years.

Unfortunately, no matter how sensible of a reform plan we come up with, it has no chance of success unless our Democratic colleagues are willing to sit down and discuss a comprehensive solution.

The other side has the idea of ``my way or the highway.'' That approach is not the pathway to a successful solution. That was clear when they tried that tactic during the negotiations of the CARES Act in March.

So how many times do I have to say it? We all know it, all 100 Senators know it--nothing happens in Congress without bipartisanship.

I invited our colleagues on the other side of the aisle--I have had more than one conversation with Speaker Pelosi--asking all to join me and Senator Alexander in finding a bipartisan solution. That invitation still stands, and we remain ready to talk. Let's use the time that we have to negotiate a balanced, sensible solution to this increasingly critical problem so that we are ready whenever that opportunity presents itself to enact that solution this year. The retirees in each of our States, the businesses in each of our States, and the unions in each of our States that support these pension plans and our long-term Federal budget deserve no less consideration than what I have laid out.

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