The economic crisis no one knows about — but will soon
We applaud Congress for passing bipartisan legislation at the end of 2019 to improve retirement security for millions of workers, but it left millions more Americans in multiemployer pension plans anxiously awaiting security for their own pensions and employers across the country fearing that they will get left behind as “the last man standing” to pay all of the remaining benefit liabilities. Last year’s SECURE Act included an agreement to save miner’s pensions. This year, Congress must finish what it started. It’s past time for a comprehensive solution to a crisis that impacts plan sponsors and employees in all industries and sizes across the country.
The ERISA Industry Committee (ERIC) represents large employers that sponsor benefit plans for their own workforce and through multiemployer pension plan, and as a member of the Retirement Security Coalition, joined with a diverse group of employers, labor unions, and political leaders to urge Congress to solve the multiemployer pension crisis. We are redoubling our efforts working with Congress to act as early as possible this year to reach a bipartisan compromise to repair the broken system.
The scope of the multiemployer pension crisis is almost unfathomably large, leaving everyone from workers to retirees, employers, federal and state governments, and everyday people worse off. More than 6 million retirees and 4 million hard-working Americans rely on multiemployer pension plans, many of which are running out of money. In fact, more than one-third of workers participate in plans that are on the path toward insolvency. To make matters worse, the federal backstop that financially supports failing plans (the Pension Benefit Guaranty Corporation or PBGC), is also projected to dry up by 2025. According to a recent PBGC report, the projected loss to the U.S. economy could be about $66 billion.
Thousands of people have already been forced to endure severe cuts to their retirement benefits, and thousands more could face the same reality soon. For instance, some retirees and workers in New York now receive less than half of their monthly pension benefit, with similar situations unfolding in New Jersey, Pennsylvania, Tennessee, Michigan, Oregon, and beyond. What’s more, the amount employers must pay to withdraw from these plans is starting to exceed the actual value of many businesses and impacting their ability to obtain credit.
If Congress fails to reach a bipartisan compromise this year, the risk of losses to workers, retirees, employers and the economy grows exponentially. The largest multiemployer pension plan, the Central States Pension Fund, is on the verge of collapse. With over 400,000 participants, this multiemployer plan is predicted to become insolvent in just five years. While 15 states will assume the brunt of its failure, the entire country will be affected by a crippling domino effect that includes job losses in all 50 states, rising unemployment, and the loss of billions of dollars in tax revenue.
In a recent statement, PBGC Director Gordon Hartogensis called on Congress to act, saying, “Only bipartisan compromises have a chance of succeeding and it is time to renew such bipartisan efforts to find serious solutions.” We could not agree more.
Americans around the country are also calling for a bipartisan compromise. In fact, a new poll commissioned by the Retirement Security Coalition found nine out of 10 voters say that protecting America’s retirees is essential to our economy. They understand how detrimental pension failure would be to U.S. employers’ ability to not just thrive or compete, but simply to survive. Results also show broad voter support for a comprehensive, shared proposal and changes that will protect retirees, workers, and employers for the long-term.
Fortunately, there are paths forward to reach bipartisan compromise that solves the crisis for all multiemployer pension plans. Senate Finance Chairman Chuck Grassley (R-Iowa) and Senate Health, Education, Labor and Pensions Chairman Lamar Alexander (R-Tenn.) recently have proposed comprehensive reform that will strengthen the entire multiemployer pension system. Last year, the House passed its legislative solution to the multiemployer pension crisis. The right legislative solution will not only protect retirees, current workers, and communities from the effects of this crisis for generations to come, but also maintain the solvency of the PBGC and add new tools to reduce plan liabilities. It is on all of us to come together to support those who are already suffering, and make meaningful, lasting change.
The support for a solution is clear, and even in a politically divided environment, both parties can agree on the importance of solving the multiemployer pension crisis for our retirees and the long-term success of our economy. Americans cannot afford to bear the burden of inaction. Congress must seize the opportunity to use the latest legislative developments as a launchpad for negotiations toward a resolution that will protect the millions of Americans who are depending on it – without hanging American businesses out to dry.
Aliya Robinson is the Senior Vice President for Retirement and Compensation Policy at The ERISA Industry Committee (ERIC), a national advocacy organization that exclusively represents large employers that provide health, retirement, paid leave, and other benefits to their nationwide workforces.