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TAUC Legislative and Regulatory Update, June 2018

TAUC Legislative & Regulatory Update, June 2018

With a highly competitive mid-term election season on the horizon, Congress is expected to primarily be focused on the FY 2019 appropriations bills and Senate confirmation of federal judges. But despite the anticipated limited legislative agenda prior to the election, there are several ongoing regulatory and policy debates in Washington that will have an impact the unionized construction industry, TAUC members and their customers.

Here is an exclusive update from TAUC on policy and regulatory issues of vital interest to contractors and the union construction and maintenance industry.

Multiemployer Pensions

Joint Select Committee on the Solvency of Multiemployer Pension Plans: The Joint Committee continued working on recommendations and legislation to address multiemployer pension plans and the PBGC. The committee is designed to address failing plans like the Central States Teamster plan and the United Mine Workers pension fund. The committee is charged with providing legislative recommendations by Nov. 30th of this year.

The Joint Committee held a hearing in May examining the structure and financial outlook of the Pension Benefit Guaranty Corporation. PBGC Director Tom Reeder was the only witness at the hearing. Reeder's testimony provided committee members with background on the PBGC structure and financing, and how its programs are designed to work to protect the retirement savings of plan participants. Reeder highlighted the financial challenges facing PBGC's Multiemployer Program, and the reality that the assets and income of PBGC's Multiemployer Program are only a small fraction of the amounts PBGC will need to support the guaranteed benefits of participants in plans expected to become insolvent during the next decade.

Reeder also discussed the limits of PPA and MPRA to address severely distressed plans, and the need for additional legislation to address the looming insolvency of PBGC's Multiemployer Program. He discussed the proposal in the President's FY 2019 Budget to create a new variable rate premium and an exit premium, with a provision for a waiver to avoid accelerating insolvency in the most troubled plans in the Multiemployer Program. He also acknowledged that additional legislation may be necessary to address all the problems facing the broader multiemployer plan system (but did not specify what additional steps this could include), but stated that it is increasingly difficult to craft a solution that is viable and fair the closer we get to insolvency.

PBGC FY 2017 Projections Report: The PBGC released its FY 2017 Projections Report. The report found that the financial condition of PBGC's Multiemployer Insurance Program is expected to worsen over the next decade. Projections made for FY 2027 show an average projected deficit of about $89.5 billion in future dollars - an increase of over $11.7 billion from last year's projection for FY 2026. PBGC projects that approximately 130 multiemployer plans covering 1.3 million people are expected to run out of money over the next 20 years. Absent legislative changes, more and larger claims on the Multiemployer Program will lead to the program's insolvency. The most recent projections show that the Multiemployer Program is increasingly likely to become insolvent during FY 2025. The report highlighted the fact that if the Multiemployer Program were to run out of money, current law would require PBGC to decrease guarantees to the amount that can be paid from premium income, which would result in reducing guarantees to a fraction of current values.

The GROW Act: We also continue to advocate for legislation introduced by Congressman Phil Roe (R-TN) and Congressman Donald Norcross (D-NJ) - both members of the joint committee - to modernize and strengthen multiemployer pension plans by providing local joint labor-management trustees a voluntary tool to ensure the long-term viability of their funds by authorizing more choices in retirement plan models. H.R. 4997, the "Giving Retirement Options to Workers Plan" (GROW Act) would authorize the use of hybrid composite plans and would have no cost to the federal government or pension plan participants. Promotion of the bipartisan GROW Act was a major priority for congressional meetings held in conjunction with the CEA National Issues Conference, which TAUC members participated in. We urge all members to contact their members of Congress to ask them to cosponsor H.R. 4997.

Apprenticeship Task Force

The Task Force on Apprenticeship Expansion, established by President Trump by executive order last year, issued its report regarding opportunities to expand access to and reform apprenticeship programs. The Task Force was headed by the Secretaries of Labor, Education, and Commerce and included 20 members representing a diverse set of industries (including representatives of three building trades unions).

A key aspect of the report is the establishment of the new "Industry Recognized Apprenticeships" (IRAs). These new programs are designed to work outside of the current registered apprenticeship system. TAUC had sent a letter to DOL Secretary Acosta encouraging that any new guidelines for IRAs not apply to or undermine the registered apprenticeship programs in the construction industry. The report is the first step in what is anticipated to be an ongoing effort to develop and implement policies to expanding apprenticeships and training opportunities. Any changes to the current system will require either legislation or new DOL regulations and guidance. We will remain active in ensuring that any policy changes do not negatively impact union construction apprenticeship programs.

Trade and Trade Sanctions

The President has made restoring balance in U.S. trade policy a major focus of his Administration. There has been a lot of activity in this area. While it remains to be seen how this ultimately plays out, many view the President as using tariffs as a means of gaining leverage to negotiate agreements with trading partners.

Steel and Aluminum: In response to a report on the impact of imports of steel and aluminum on national security issued by the U.S. Department of Commerce under Section 232 of the Trade Expansion Act of 1962, President Trump announced that the United States plans to charge a 25 percent tariff on most imported steel and a 10 percent tariff on imported aluminum. Canada, Mexico, the European Union, and other U.S. allies were initially exempted from the tariffs. However, the Administration decided to not to grant exemptions and to fully implement the tariffs beginning on June 1. In response to the tariffs, Canada, Mexico, and the E.U. have implemented retaliatory actions against specific U.S. industries, goods and products.

Autos and Trucks: The President has also directed the Department of Commerce to initiate a Section 232 review of the national security impacts of imports of automobiles, trucks, and automotive parts. The Trade Expansion Act of 1962 gives the White House broad flexibility to impose and adjust tariffs based on national security concerns, and provides the president wide latitude in defining a threat to national security. Auto-production rules have been one of the key sticking points in discussions to revise the North American Trade Agreement.

NAFTA: The Administration has been actively revisiting the North American Free Trade Agreement (NAFTA). While there had been reports that progress had been made in renegotiating the trade pact, discussions appeared to have slowed recently. In addition to Canada's and Mexico's concerns over the new tariffs on steel and aluminum projects, a new major sticking point seems to be the U.S. insistence on the new agreement including a specific "sunset" date for when the Pact would expire. Any revision to the agreement would need to be approved by Congress.

China: Efforts to address trade concerns with China have been much more complicated. The President had threatened $150 billion in tariffs on Chinese imports, but the U.S. agreed to suspend the proposed tariffs. In return, China has agreed to buy more energy and agricultural products. The Administration also provided a reprieve for the Chinese telecom giant ZTE Corp by lifting its ban on sales by U.S. suppliers to the Chinese company. In exchange, China offered to remove newly imposed tariffs on U.S. agricultural products, speed up its reviews of deals involving U.S. technology companies, and easing tariffs on imported cars.

Efforts to Preserve Base-Load Power Generating Facilities

The U.S. Department of Energy is circulating plans to use its emergency authority under the Federal Power Act and the Defense Production Act to prevent the premature retirements of fuel-secure generation capacity. To improve the reliability and resiliency of the U.S. electricity grid, DOE plans to direct grid operators to purchase electricity or electric generation capacity from at-risk coal and nuclear facilities. DOE is also making plans to establish a "Strategic Electric Generation Reserve" with the aim of promoting the national defense and maximizing domestic energy supplies. The President has not yet signed off on the plan. Earlier this month, TAUC sent a letter to the President urging action to improve the long-term security, reliability, and resiliency of the nation's energy grid by providing assistance to prevent the closure of baseload power generators.

Opioid Crisis

Congress is continuing to work on developing a comprehensive approach towards fighting the opioid crisis. As part of this effort, the House Energy and Commerce Committee approved 25 bills designed to help combat the opioid crisis. The legislation approved are designed to increase enforcement efforts, strengthen prevention and public health efforts, and address coverage and payment issues in Medicare. Earlier this year, the SENATE Health, Education, Labor, and Pensions (HELP) Committee approved the Opioid Response Act of 2018, which includes a range of bipartisan proposals and policy approaches to allow the federal government to partner with state and local governments, health care providers, law enforcement officials, employers, and others to find solutions for communities to combat the largest public health crisis facing the nation. It is unclear when legislative packages will be considered by the Full House and Senate.

As the legislation advances in Congress, TAUC shared with members of the committee the most recent issue of The Construction User, which focuses on steps contractors are taking to confront the opioid crisis (you can read it online here).

06/05/2018