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  #651  
Old 01-07-2019, 10:25 AM
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MINE WORKERS

https://wtkr.com/2019/01/05/warner-k...a-coal-miners/

Quote:
Warner, Kaine introduce legislation to secure pensions and healthcare for Virginia coal miners

Spoiler:
WASHINGTON, D.C. – 500 Virginians affected by the bankruptcy of the Colorado-based mining company will benefit from the American Miners Act of 2019 that U.S. Sens. Mark R. Warner and Tim Kaine (both D-VA) recently introduced.

“Congress made a promise in 1946 to protect coal miners after a lifetime of arduous and dangerous work to help power this nation,” said Sen. Warner.

“This legislation would ensure that we fulfill that promise by protecting retired coal miners across the country, including in Virginia, where roughly 500 miners and their dependents are at risk of losing their healthcare following the bankruptcy of Colorado-based Westmoreland Coal Company. This bill will also protect miners’ hard-earned pensions, and makes important changes I’ve been pushing for to defend and strengthen the Black Lung Disability Trust Fund, which provides healthcare and benefits for thousands of retirees suffering from this deadly disease.” Sen. Warner also stated.

“Virginia’s miners earned their pensions and health care benefits after years of difficult and dangerous work to provide us energy,” said Sen. Kaine. “I hope that Congress will quickly act on this legislation and give miners peace of mind.”

Currently, the 1974 UMWA Pension Plan is on the road to insolvency due to coal company bankruptcies and the 2008 financial crisis. The American Miners Act of 2019 will shore up the 1974 UMWA Pension Plan to make sure that 87,000 current beneficiaries and an additional 20,000 retirees who have vested won’t lose the pensions they have paid into for decades. In Virginia alone, there are approximately 7,000 pensioners who are at risk of losing their benefits if Congress does not act.

The bill will also protect healthcare coverage for 500 Virginians. In May 2017, Sens. Warner and Kaine secured passage of bipartisan legislation to protect healthcare for retired miners – including more than 10,000 miners and their families in Virginia – who were orphaned by coal bankruptcies. But the 2018 bankruptcy of Colorado-based Westmoreland Coal Co. has endangered health care benefits for additional miners and dependents – including 500 people in Virginia. Today’s legislation will extend the fix to ensure that miners who are at risk due to 2018 coal company bankruptcies will not lose their healthcare.

Lastly, the bill also calls for an extension of the tax that finances medical treatment and basic expenses for miners suffering from black lung. The Black Lung Disability Trust Fund was established in 1978 to pay benefits to disabled miners suffering from black lung disease when the coal company responsible for paying benefits is bankrupt, closed or otherwise not able to pay. More than 25,000 coal miners and their dependents rely on the fund.

The fund, which is currently more than $4 billion in debt, is supported by an excise tax that automatically expired at the end of 2018. The American Miners Act of 2019 will extend the Black Lung Disability Trust Fund tax at $1.10 per ton of underground-mined coal and $0.55 per ton of surface-mined coal for ten years.

Sens. Warner and Kaine are strong advocates for coal miners and their families. In August 2018, they introduced and passed into law legislation to improve early detection and treatment of black lung disease among coal miners.

The American Miners Act of 2019 is also sponsored by Sens. Joe Manchin (D-WV), Sherrod Brown (D-OH), Doug Jones (D-AL) and Bob Casey (D-PA). For more information on the American Miners Act of 2019, click here.


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  #652  
Old 01-08-2019, 06:04 AM
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https://www.ai-cio.com/news/pensions...fewest-decade/

Quote:
Pensions in Critical Status Fewest in Decade
The number of multiemployer pensions in critical status has fallen for the sixth straight year.


Spoiler:
The number of US multiemployer pension plans in critical status has declined for the sixth straight year, and has fallen to its lowest level since 2008, according to data from the US Department of Labor.

Under federal pension law, if a multiemployer pension plan is determined to be in critical status or endangered status, the plan must provide notice to participants, beneficiaries, the bargaining parties, the Pension Benefit Guaranty Corp. (PBGC), and the Department of Labor.

In 2018, there were 115 multiemployer pension plans that reported to the Department of Labor that they were in critical status, which is less than half of the number that reported that status just six years ago. That is compared to 127 in 2017, 171 in 2016, 175 in 2015, 220 in 2014, 235 in 2013, and 241 in 2012. It was also the lowest number of plans in critical status since 2008, when 102 multiemployer pension plans reported they were in critical status.

Meanwhile, the number of plans in critical and declining status fell by 30% over the past year to 56 from 80 in 2017, and the number of plans in endangered status fell 31% to 59 from 85 in 2017. The number of endangered plans has been cut by more than half since 2014, when 120 plans reported being in that status.

If a plan is in critical status, adjustable benefits may be reduced and no lump sum distributions in excess of $5,000 can be made. If a critical status plan is also critical and declining, the plan sponsor may file an application with the Secretary of the Treasury requesting a temporary or permanent reduction of benefits to keep the plan from running out of money. Pension plans in critical and endangered status are required to adopt a plan aimed at restoring the financial health of the pension plan.

Under the Pension Protection Act of 2006, a plan is considered in “critical status” if meets one of the following criteria:

Is less than 65% funded and has a projected funding deficiency within five years or an inability to pay benefits within seven years.
Is projected to have a funding deficiency within four years or an inability to pay benefits within five years; or
Has benefits for inactive members that are greater than for active ones, contributions less than carrying costs, and a projected funding deficiency within five years.
A multiemployer plan is considered to be in endangered status if the plan’s actuary determines the plan is less than 80% funded or has an accumulated funding deficiency for a plan year, or is projected to have an accumulated funding deficiency for any of the six succeeding plan years.

And under the Multiemployer Pension Reform Act of 2014, plans are deemed to be in “critical and declining” status if they are within 20 years of projected insolvency, and eligible for approval of a reduction of some benefits.


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  #653  
Old 01-08-2019, 06:06 AM
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MINE WORKERS

https://www.pionline.com/article/201...s-pension-fund

Quote:
Senators introduce bill to help United Mine Workers pension fund

Spoiler:
Six Democratic senators introduced a bill that aims to shore up the beleaguered United Mine Workers of America 1974 Pension Plan, Washington, and ensure that no miners lose their health care due to 2018 coal company bankruptcies.

The $3.14 billion UMWA plan has $3 billion in unfunded liability, according to an analysis by actuarial firm Cheiron released in the fall.

The American Miners Act of 2019 amends 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 UMWA pension plan to prevent its insolvency, which could happen by 2022, according to a news release from the senators, citing UMWA plan actuaries. It also raises the cap on the amount that can be transferred to $750 million from $490 million. The legislation, introduced Jan. 4, would protect the pension benefits of 87,000 current beneficiaries and 20,000 more who are vested but have not yet begun receiving pension benefits, according to the news release.

RELATED COVERAGE
Multiemployer loan program analysis flawed, NCCMP saysCongress introduces legislation to provide loans for United Mine Workers pension fundList of struggling multiemployer plans grows in 2018
The legislation would be paid for through two provisions: First, it would extend for 10 years the Black Lung Disability Trust Fund tax at $1.10 per ton of underground-mined coal and 55 cents per ton of surface-mined coal (up to 4.4% of the sales price). The disability fund, which is currently more than $4 billion in debt, is supported by an excise tax that automatically expired at the end of 2018.

Second, it would permit in-service distributions under a pension plan or 457(b) plan at age 59, thus making the rules for those plans consistent with the rules for 401(k) plans and 403(b) plans.

The bill is sponsored by Sens. Mark R. Warner and Tim Kaine, both D-Va.; Joe Manchin, D-W.Va.; Sherrod Brown, D-Ohio; Doug Jones, D-Ala.; and Bob Casey, D-Pa.


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  #654  
Old 01-09-2019, 02:40 PM
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MINE WORKERS

http://ohiovalleyresource.org/2019/0...r-coal-miners/
Quote:
Ohio Valley Senators Again Aim to Shore Up Shaky Pension Plan For Coal Miners

Spoiler:
Following a failed attempt to address a looming crisis in many multi-employer pension programs, two Ohio Valley lawmakers have introduced a bill in Congress to shore up the shaky pension plan for coal miners. The bill also aims to protect health benefits and restore funding for the federal trust fund providing benefits for thousands of miners sickened by black lung disease.

Sen. Sherrod Brown of Ohio is one of six Democrats sponsoring the American Miners Act of 2019, which seeks to fund the pension plan for coal miners guaranteeing retirement and health benefits from cradle to grave. Brown says the fund is at risk of insolvency due to a downturn in the coal market, the 2008 recession, and coal company bankruptcies.

“Mine workers are in a particularly vulnerable position,” Brown said. “Mine workers and their widows would lose 40 to 50 percent of their pension.”

Sherrod_Brown_FB
Courtesy office of Sen. Brown
UMWA retirees talk pension protection with Sen. Sherrod Brown (D-OH).

Brown and West Virginia Sen. Joe Manchin served on a joint select committee on multi-employer pensions last year. That committee was tasked with finding a solution to pension problems affecting a range of work from teamsters and iron workers to bakers and confectioners. But the committee missed a self-imposed deadline to come up with a solution at the end of November, and concluded the year without presenting a solution

“Well the committee’s out of business legally,” Brown said. “It was set up to run through the end of the year.”

So Brown and fellow Democrats are again pushing a bill similar to one they presented in 2017 dealing with pension and health benefits for coal retirees. The measure extends healthcare benefits for miners who worked for companies that went bankrupt last year.

Senate Majority Leader Mitch McConnell of Kentucky split the issues in 2017, separating healthcare benefits from pensions. Sen. Brown said he hopes it will be different this time.

“However Sen. McConnell wants to do it in the end,” Brown said. “He’s on the ballot in 2020. I think he wants to show the mine workers that he can be on their side and that’s what we will sell to him and to Republican leadership and to the president.”

Sen. McConnell’s office declined a request for comment.

Brown said he’d also like to see support from the Trump administration. As both candidate and president, the coal industry has been a staple of the president’s rhetoric.

“I hope the president of the United States will, for the first time in this, show some interest in supporting the mine workers other than making good speeches about mine workers,” Brown said.

IMG_1076
Aaron Payne | Ohio Valley ReSource
A union miner at the rally for pension protection.

Out of Time
Phil Smith is the spokesperson for the United Mine Workers of America. He wants to see a solution for all multi-employer pensions but says the UMWA is running out of time.

“It’s just not clear that there is going to be a bigger solution,” Smith said. “We hope that there is and to that extent that, that solution would apply to our fund we would welcome that, but again there’s no more time to wait.”

The American Miners Act would transfer excess funds from the Abandoned Mine Land Reclamation Program to shore up pension benefits.

The measure also seeks to extend a tax rate used to fund the Black Lung Disability Trust Fund. Congress allowed that tax rate to expire at the end of 2018, returning the tax to a rate from before 1981. That cuts the industry’s contribution to the fund by roughly half and, according to a federal agency’s analysis, could plunge the fund further into debt.

The trust fund provides monthly payments and medical treatment to coal miners totally disabled from black lung caused by their work in the nation’s coal mines when a responsible mining company can’t be identified.


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  #655  
Old 01-09-2019, 05:17 PM
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https://burypensions.wordpress.com/2...re-introduced/

Quote:
Butch Lewis Act Re-Introduced
Spoiler:
According to an email blast from the Road Carriers Local 707 Welfare and Pension Funds:

Today it is expected the Butch Lewis Act will be re-introduced in the House of Representatives. It is being sponsored by Congressman Richard Neal ( D- Massachusetts) the main Co-Sponsor is Congressman Peter King (R-NY). There are a total of 5 Republicans and 5 Democrats introducing the Legislation. We are hopeful this show of bipartisan support for the Butch Lewis Act will assist in passage through the House of Representatives and continue on to passage in the Senate.

And according to a Teamsters press release:

The Rehabilitation of Multiemployer Pensions Act, offered by Rep. Richard Neal (D-Mass.), was first introduced in Congress in November 2017 by Rep. Neal. A Senate version of the bill, called the Butch Lewis Act, was sponsored by Sen. Sherrod Brown (D-Ohio) during the last Congress. The measure has five Democratic and five Republican co-sponsors.

“With the new Congress now seated in Washington, the Teamsters want to let lawmakers know it is time to work together across party lines to secure the hard-earned retirements of retirees and workers,” Teamsters General President Jim Hoffa said. “These hardworking Americans deserve to receive the benefits they were promised.”

As it stands, there are more than 300 multiemployer plans across the country — including the Teamsters’ Central States Pension Fund — that are in danger of failing. The Teamsters have been fighting for years for a legislative solution and have worked with lawmakers on both sides of the aisle to do so.

The measure would boost financially troubled multiemployer pensions so they don’t fail. It would create a new agency under the U.S. Treasury Department that would sell bonds in the open market to large investors such as financial firms. Those proceeds would then be used to bolster faltering pension plans a part of a 30-year loan program.


https://www.marketwatch.com/press-re...eal-2019-01-09
Quote:
Teamsters Applaud Bipartisan House Pension Reform Bill By Rep. Neal

Spoiler:
Legislation Would Protect Retirements of 1.5M Americans Currently in Jeopardy
WASHINGTON, Jan. 9, 2019 /PRNewswire/ -- The Teamsters are lauding the reintroduction of bipartisan pension reform legislation today that would bolster the solvency of multiemployer pensions covering some 1.5 million Americans that are currently facing an uncertain future.

The Rehabilitation of Multiemployer Pensions Act, offered by Rep. Richard Neal (D-Mass.), was first introduced in Congress in November 2017 by Rep. Neal. A Senate version of the bill, called the Butch Lewis Act, was sponsored by Sen. Sherrod Brown (D-Ohio) during the last Congress. The measure has five Democratic and five Republican co-sponsors.

"With the new Congress now seated in Washington, the Teamsters want to let lawmakers know it is time to work together across party lines to secure the hard-earned retirements of retirees and workers," Teamsters General President Jim Hoffa said. "These hardworking Americans deserve to receive the benefits they were promised."

As it stands, there are more than 300 multiemployer plans across the country — including the Teamsters' Central States Pension Fund — that are in danger of failing. The Teamsters have been fighting for years for a legislative solution and have worked with lawmakers on both sides of the aisle to do so.
X
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The Best Stuff We Saw at CES 2019

The measure would boost financially troubled multiemployer pensions so they don't fail. It would create a new agency under the U.S. Treasury Department that would sell bonds in the open market to large investors such as financial firms. Those proceeds would then be used to bolster faltering pension plans a part of a 30-year loan program.

Founded in 1903, the International Brotherhood of Teamsters represents 1.4 million hardworking men and women throughout the United States, Canada and Puerto Rico. Visit www.teamster.org for more information. Follow us on Twitter @Teamsters and "like" us on Facebook at www.facebook.com/teamsters.

Contact: Ted Gotsch, (202) 624-6911tgotsch@teamster.org

View original content to download multimedia:http://www.prnewswire.com/news-relea...300775791.html


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  #656  
Old 01-13-2019, 02:11 PM
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https://burypensions.wordpress.com/2...ext-and-truth/

Quote:
Bailout Bill: Pretext and Truth

Spoiler:
As reported, the Rehabilitation of Multiemployers Act would establish the Pension Rehabilitation Administration (PRA) within the Department of the Treasury authorized to issue bonds to finance loans to “critical and declining” status multiemployer pension plans, to plans that have suspended benefits, and to some recently insolvent plans currently receiving financial assistance from the Pension Benefit Guaranty Corp (PBGC). Here is the official summary but to see the real impetus you need to go to a few pages from the text:


as a condition of the loan, the plan sponsor stipulates that…in the case of a plan with respect to which a suspension of benefits has been approved the plan will reinstate the suspended benefits (or will not carry out any suspension which has been approved but not yet implemented) [pages 8-9]

The plan sponsor of any plan with respect to which a suspension of benefits has been approved…before the date of the enactment of this Act shall apply for a loan under this section. [page 12]

the loan amount shall be the amount sufficient to provide benefits of participants and beneficiaries of the plan in pay status at the time the loan is made, determined without regard to the suspension, including retroactive payment of benefits which would otherwise have been payable during the period of the suspension. [page 13]

To get the money to pay those (and future) retirees in multiemployer plans their full benefits and take the onus off of the PBGC here is a numerical example of what I see as the plan:

Sell $150 billion in 30-year bonds repaying interest-only for 29 years to ????*
$50 billion goes to retirees in multiemployer plans with $100 billion to run the PRA and make interest payments on the bonds
Go back to step (1) in 5 years.
.

.

.

* If these bonds are sold at 8% interest and the buyer gets to pretend (against all logic) that the principal will be paid back so as to inflate the value it could be the ideal investment for public pension plans.




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  #657  
Old 01-15-2019, 02:41 PM
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https://www.ai-cio.com/news/bill-pro...dministration/

Quote:
Bill Proposes Creation of Pension Rehabilitation Administration
Proposed legislation aims to save critical and declining multiemployer pension plans.


Spoiler:
Rep. Richard Neal, a Massachusetts Democrat, has reintroduced a bill intended to help save struggling multiemployer pension plans.

The Rehabilitation for Multiemployer Pensions Act seeks to establish a new agency within the Department of the Treasury that would be authorized to issue bonds to finance loans to “critical and declining” status multiemployer pension plans.

According to the Pension Benefit Guaranty Corp. (PBGC), projections for its multiemployer program “show a very high likelihood of insolvency” during fiscal year 2025. Additionally, approximately 130 of the multiemployer plans that PBGC insures have declared that they will be unable to raise enough contributions to avoid insolvency within the next 20 years.

“We all know retirees with failing multiemployer pension plans who now find themselves in a devastating predicament,” said Neal in a release. “In fact, there are 1.5 million Americans who are in plans that are quickly running out of money … there’s no time to waste in addressing this crisis.”

The bill proposes to establish the Pension Rehabilitation Administration (PRA), which would be funded from within the Treasury Department’s appropriated budget. The PRA would be authorized to issue bonds to finance loans to critical and declining status multiemployer pension plans, plans that have suspended benefits, as well as some recently insolvent plans receiving financial assistance from the PBGC.

The bond proceeds would be kept in a separate Treasury fund known as the Pension Rehabilitation Trust Fund (PRTF). The PRA would be authorized to make loans from the PRTF to struggling multiemployer defined benefit plans, and the amount of the loan would equal what the plan needs to fund its obligations for the benefits of participants and beneficiaries in pay status at the time the loan is made.

The terms would require any plan receiving loans to make interest payments for 29 years, with final interest and principal repayment due in the 30th year.

The bill also calls for a presidentially appointed director who would have a term of five years, and who would have the power to appoint deputy directors, officers, and employees.

“This is not a bailout,” insists Neal. “These plans would be required by law to pay back the loans they receive from the PRA—the federal government is simply backstopping the risk.”

Neal added that the bill does not allow for any cuts to the benefits workers and retirees earned while on the job.


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  #658  
Old 01-15-2019, 05:45 PM
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BAILOUT
https://www.thinkadvisor.com/2019/01...se-415-319921/

Quote:
Rehabilitation for Multiemployer Pensions Act Introduced in House

Rep. Neal's bill would establish the Pension Rehabilitation Administration to aid pensions in "critical and declining" status.
Spoiler:
In its first action in the 116th Congress, the House Ways and Means Committee introduced a bipartisan bill that would channel loans to collectively bargained pensions destined for insolvency.

Introduced by Rep. Richard Neal, D-MA, the newly minted chair of the House Ways and Means Committee, the Rehabilitation for Multiemployer Pensions Act has a total of 10 sponsors, five from each party.

A rebranded version of the Butch Lewis Act that was first introduced in the Senate by Sherrod Brown, D-OH, in 2017, the bill would establish the Pension Rehabilitation Administration within the Treasury Department.

The PRA would operate the Pension Rehabilitation Trust Fund, which would include proceeds from specially issued Treasury bills sold to institutional investors, and loan and interest repayments made from borrowing pensions. Payments to institutional investors in the Treasury bills would be paid from the Trust Fund.

Pensions in “critical and declining” status that are projected to be insolvent within 20 years would be channeled enough assets to fund pension obligations for all participants in pay status at the time the loan is made.

No benefit cuts would be required to qualify for the loans. Pensions that have already suspended benefits under the Multiemployer Pension Reform Act would be required to apply for loans.



Loans would be extended over a 30-year period. Borrowing pensions would make interest payments for 29 years, and in the 30th year full principal repayment is due.

As was the case with the Butch Lewis Act, the latest iteration of a rescue package for upwards of 130 multiemployer plans includes a provision that allows for loan forgiveness if a plan is unable to repay the principal.

The PRA will have the authority to renegotiate revised repayment terms to avoid benefit suspensions.

The latest action comes after a bipartisan joint select committee failed to advance a rescue package at the end of the 115th Congress.

Democrats on the select committee had lobbied for the Butch Lewis Act as the basis for a rescue package. But Republicans on the committee voiced concerns over the funds’ ability to repay the loans. And negotiations reportedly stalled over the question of benefit cuts.

“This is not a bailout,” Chair Neal said in a statement. “These plans would be required by law to pay back the loans they receive from the PRA – the federal government is simply backstopping the risk. Importantly, my bill does not allow for any cuts to the benefits these workers and retirees earned through years on the job. Americans need our help, and it’s time to answer that call.”

Under the terms of the loans, plans can’t increase benefits, and employer contributions to the plans can’t be reduced. Loan approvals would be made in consultation with the Treasury Department, Labor Department, and Pension Benefits Guaranty Corp.

Assets from the loans would be managed separately from existing plan assets. The borrowed money could be used to purchase an annuity from an insurance company with at least an A rating to continue to fund the pensions for participants in pay status. Or the loans could be privately managed and invested in a duration matching portfolio. Asset management firms hired to invest the loans would have to agree in writing to be a fiduciary.

In the last Congress, the Butch Lewis Act had substantial support from Republican members. With Democrats now holding the majority in the House, it is all but certain to pass out of that chamber if it is brought to a floor vote.

Sixty votes would be required in the Senate, as well as a signature from President Trump, to make the Rehabilitation for Multiemployer Pensions Act into law

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Old 01-16-2019, 09:48 AM
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BAILOUT

https://www.freightwaves.com/news/le...n-new-congress
Quote:
Teamsters see new Congress favoring pension reform
Spoiler:
Legislation aimed at saving the Teamsters’ Central States Pension Fund from bankruptcy has a much better chance of making it through the new Congress, the union tells FreightWaves.

The Rehabilitation of Multiemployer Pensions Act, introduced today in the U.S. House of Representatives by Democrat Richard Neal of Massachusetts, was first introduced by Neal in 2017 but did not gain traction. However, with pension reform-friendly Nancy Pelosi leading the Democrat-controlled Congress, the Teamsters are more confident of the bill’s success.

“It’s a different world in this Congress with the Democrats now the majority party in the House,” Teamsters Union vice president John Murphy told FreightWaves.

Murphy said that the bill introduced in 2017 took over a month to get a Republican to sign on. “The significance of today’s filing is that we have an equal number of Democrat and Republican co-sponsors, so right from the get-go there’s bipartisan support. I’m fully confident it will be successfully passed by the House and sent to the Senate sometime in mid- to late 2019.”

Don’t miss it. Register today .
DON’T MISS IT. REGISTER TODAY.

The bill is aimed at helping save more than 300 multi-employer plans across the country in danger of failing, including Central States, which has roughly 400,000 Teamster members. It is estimated to be insolvent by 2025 after years of contributions that were scaled back – or eliminated – by employers such as YRC (NASDAQ: YRCW) and UPS Freight, UPS Inc.’s (NYSE: UPS) less-than-truckload unit.

Central States currently pays out approximately $2.8 billion in pension benefits annually but collects only $700 million in contributions and withdrawal liability payments.

“Couple the effects of trucking deregulation with the decline of organized labor in the U.S. – this all forced pension funds to make up for the decline by going to the stock markets,” Murphy said. “But the recession of 2008-09 was so bad that the recovery we’ve seen couldn’t make up for the assets that were lost.”

Neal’s bill would create the Pension Rehabilitation Administration, a new agency under the U.S. Treasury Department, that would sell bonds in the open market to large investors such as financial firms. Those proceeds would then be used to bolster faltering pension plans as part of a 30-year loan program.

According to the 2017 version of the bill (the current bill’s language, which the Teamsters said is similar, was not yet available), the Employee Retirement Income Security Act of 1974, known as ERISA, would be amended to allow the sponsor of a multi-employer pension plan applying for a loan to also apply to the Pension Benefit Guaranty Corporation (PBGC) for financial assistance if, after receiving the loan, the plan would still become or remain insolvent within the 30-year period beginning on the date of the loan.

Not all are convinced, however, that the loan program envisioned under Neal’s bill would be enough to stave off the inevitable.

Analysis conducted in November by the Pension Analytics Group found that while the legislation would have some positive effects – allowing multi-employer plans to continue paying full benefits for an average of 16 additional years beyond what would be possible without a loan, for example – it doesn’t address the plans’ underlying funding deficits.

“Rather, it temporarily masks the deficits, as opposed to reducing them,” according to the group. “Eventually, taxpayers and the PBGC will face losses associated with the program in the form of Treasury paid-for loan defaults and PBGC assistance payments.”


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  #660  
Old 01-25-2019, 11:37 AM
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BAILOUT

https://www.washingtontimes.com/news...ion-pensions-/
Quote:
A costly way to address the pension crisis

Spoiler:
When both Democratic and Republican lawmakers recently joined together to support a taxpayer-funded, multibillion-dollar bailout of big union pension funds, you didn’t need to be a “swamp” creature to know something has gone terribly wrong in Washington, D.C.

But that is exactly what happened when U.S. Rep. Richard Neal, Massachusetts Democrat, chairman of the Ways & Means Committee, offered a so-called bipartisan plan to address the pension crisis. However, this proposed bailout of organized labor’s retirement plans would cost federal taxpayers billions — while setting a dangerous precedent that would expose taxpayers and laborers to more financial mischief.

The expectation for this type of bailout is presumably why labor unions as well as the public sector still offer traditional pensions, while the rest of the United States has largely moved to 401(k) plans.

In a pension plan, employees earn pension benefits and receive monthly checks when they retire. Corporations have long understood that “over-promising” pensions to their employees is financially reckless and will come back to bite them, and so have embraced 401(k) plans instead. Yet neither labor unions nor state and local governments seem to care as much about the risks of making irresponsible and unfunded pension promises.

Why? First, lighter regulation allows these entities to delay addressing pension problems much more than corporations, by “kicking the can down the road.” Second, with their lobbying operations, they count on congressional lawmakers passing the bill to taxpayers for the promises they cannot keep. Union and government officials are adept at using congressional testimonies and meetings to exploit the workers to whom they have promised unrealistic benefits — and federal politicians seem to have no choice but to give them taxpayer money. Plus, the unions and public employees are powerful voting blocs.

Mr. Neal’s plan to address “multiemployer” pension plans — private-sector arrangements between firms and labor unions such as the Teamsters or United Mine Workers — would be catastrophic to adopt. These pension plans cover around 10 million individuals, and measured properly they faced a funding hole of $722 billion as of 2016.

In their current condition, many of these plans are comparable to Ponzi schemes in how they count on unrealistic investment earnings and future contributions to fund all the employer’s promises.

Mr. Neal’s bill would create a Pension Rehabilitation Administration within the Treasury Department that would be authorized to issue bonds in order to finance loans to multiemployer pension plans on the brink of fiscal disaster.

The loan approach is based on the idea that if the plans get a low-interest loan from the government, and then invest the proceeds in risky assets and target a high return, the loan can be repaid in full. Mr. Neal argues that this proposal does not constitute a bailout because “the federal government is simply backstopping the risk.”

But the loan program is in effect a taxpayer bailout. Ultimately, the taxpayers lose if the plans do not return to fiscal health.

In fact, the proposal now in Congress is similar to disastrous pension obligation bond issues under which state and local governments went on to sell bonds to the public and put the proceeds at risk in investments that they hoped would earn high returns.

Union and employer representatives who serve as trustees of these multiemployer pension plans have chosen not to make the difficult choices. Anticipation of a federal bailout encourages this irresponsible behavior.

Rather than pass pension bailout plans, Congress needs to establish rules that require at-risk pension plans to immediately stop making new promises before any federal assistance is extended. Such rules already apply to single-employer pension plans, so that unlike unions, companies with troubled pension plans have a strong incentive to go with 401(k)’s instead.

If there is federal assistance, it should be as part of a resolution process in which troubled pension plans are wound down. In addition, union plans should be required to measure liabilities accurately.

Mr. Neal’s bailout plan does not require any of these conditions. It sets a terrible precedent for a bigger, looming problem: Underfunded state and local government pensions. These public plans cover around 30 million active and retired cops, firefighters, teachers, etc. and are run by state and local governments.

According to both my calculations and those of the Federal Reserve, these promises were underfunded by $4 trillion as of 2016. States like Illinois, New Jersey and Connecticut, where pension obligations pose a serious threat to public finances, may conclude their pension promises to school teachers and public safety officials will be bailed out, too.

While Congress understandably wants to find ways of protecting hard-working people hurt by pension defaults, the proposed legislation would only exacerbate the pension problems.

Congress should act now to protect taxpayers from the consequences of irresponsible financial behavior by unions and state officials.

• Joshua Rauh is director of research and senior fellow at the Hoover Institution, and a professor of finance at the Stanford Graduate School of Business.


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