TAUC Applauds Release of Proposed Reforms to Safeguard Multiemployer Pension Plans
After 18 months of work and input from more than 40 stakeholders from business and labor - including The Association of Union Constructors (TAUC) - the Partnership for Multiemployer Retirement Security on Tuesday released a report outlining a series of reforms to ensure that multiemployer plans are able to continue to provide cost-effective and reliable retirement benefits to millions of working class Americans while protecting taxpayers.
TAUC was invited to participate in the reform process by the National Coordinating Committee for Multiemployer Plans (NCCMP) and served on its Retirement Security Review Commission, which worked hand-in-hand with the Partnership to develop the report, "Solutions Not Bailouts: A Comprehensive Plan from Business and Labor to Safeguard Multiemployer Retirement Security, Protect Taxpayers and Spur Economic Growth."
To view and download the full report, go to www.solutionsnotbailouts.com.
Current multiemployer plan funding rules in the Pension Protection Act (PPA) will sunset in 2014. It is vital that a new set of rules be put into place as quickly as possible. Why? The recent economic downturn has exacerbated the cumulative effects of three decades of statutory and regulatory changes to multiemployer pension plans. This is further compounded by the addition of broader financial reporting requirements, tightening credit markets, and unprecedented competitive pressures on contributing employers, leading to an environment of decreased long-term viability of many plans as new employers are discouraged from participating and existing employers are encouraged to withdraw.
TAUC believes the plan from the Partnership for Multiemployer Retirement Security is a serious one and deserving of a hard look from Congress. The private sector recommendations in the report will ensure that multiemployer plans continue their mission of providing effective and reliable retirement security to millions of hard-working Americans.
"These proposals will greatly enhance multiemployer pension plan participants' ability to adequately address the challenges these funds are facing due to the dramatic market fluctuations over the past decade, as well as the regulatory hurdles put in place by Congress, without burdening the American tax payer," said TAUC President Tom Felton.
"This report is the result of the many hours invested by many people to craft solutions to the critical issues facing multi-employer pension plans," added Jake Locklear, a member of the TAUC Board of Directors and our representative on the Commission. "Representatives from both management and labor came together to help shape the Commission's recommendations. Now is the time to act on these recommendations to provide retirement security for our employees and to protect the financial soundness of our contractors."
To confront the challenges facing multiemployer plans, the report recommends a three-pronged approach:
1. Preservation: Proposals to Strengthen the Current System. These recommendations are designed to provide additional security for (a) the majority of plans that have successfully weathered the recent economic crises; (b) those that are on the path to recovery as measured against the objectives set forth in their Funding Improvement and/or Rehabilitation plans; and (c) those that, with expanded access to tools provided in the PPA and subsequent relief legislation, will be able to achieve their statutorily mandated funding goals.
2. Remediation: Measures to Assist Deeply Troubled Plans. Under current law, a small minority of deeply troubled plans are projected to become insolvent. For these plans, the report recommends that limited authority be granted to plan trustees to take early corrective actions, including the partial suspension of accrued benefits for active and inactive vested participants, and the partial suspension of benefits in pay status for retirees. To protect participants against potential abuse of these additional tools, the Commission further recommends the adoption of special protections for vulnerable populations including PBGC oversight and approval of any proposed actions, taking into consideration certain specified criteria.
3. Innovation: New Structures to Foster Innovative Plan Designs. To encourage innovative approaches that meet the evolving needs of certain plans and industries, the Commission recommends the enactment of statutory language and/or promulgation of regulations that will facilitate the creation of new plan designs that will provide secure lifetime retirement income for participants, while significantly reducing or eliminating the financial exposure to contributing employers. While the development of new flexible plan designs including, but not limited to, variable annuity and "Target Benefit" plans would permit adjustment of accrued benefits, in order to protect plan participants from this risk, these models would impose greater funding discipline than is required under current defined benefit rules. The adoption of such new models would be entirely voluntary and subject to the collective bargaining process.
"The additional tools in these proposals help to strengthen the current system, preserving the retirement benefits of employees, while at the same time providing measures to assist deeply troubled plans not currently available to them," said Steve Lindauer, TAUC Chief Executive Officer. "It also offers new innovative plan structures to provide alternatives to the current system in another attempt to ensure lifetime retirement income for participants while significantly reducing or eliminating the risk being shouldered by employers."
Over the next several months, TAUC and its fellow members in the Quality Construction Alliance (QCA) - a coalition of five premier construction specialty contracting associations - will be pressing for consideration of these proposals in the first session of the 113th Congress. QCA has set a target date of enactment for late 2013.
The Partnership for Multiemployer Retirement Security report is dedicated to the late Jim Walker, CEO of the Great Lakes Fabricators and Erectors Association. Jim, who passed away last December, served for many years as a trustee to multiemployer plans in Michigan and was one of TAUC's representatives on the Retirement Security Review Commission. He was deeply involved in the creation of the report. His passion and commitment exemplified the true nature of cooperation between labor and management in improving the lives of multiemployer plan participants now and in the future.