Senate Passes Pension Relief Plan
As part of the COVID stimulus bill, $86 billion will be used to shore up union pension plans
On Saturday, the United States Senate passed a mammoth COVID relief bill. This $1.9 trillion bill will provide a new round of $1,400 stimulus checks, extend unemployment benefits, provide billions in aid for state and local governments, and increase the child tax credit. It will also rescue the pensions of more than 1 million workers and retirees.
The pension section is essentially the Butch Lewis Act, a bill that Senators like Sherrod Brown (D-OH) have been pushing for the last six years. It would address the financial crisis among multiemployer pension plans which have fallen on hard times as industries changed and union jobs were lost. With fewer workers, there was less money going into the pension system than coming out, creating a financial crisis. More than a hundred multi-employer plans are in bad fiscal shape and this is having a cascading effect by moving the costs of benefits to the plans’ insurer, the Pension Benefit Guaranty Corporation (PBGC). This is a government-run entity that insures pension plans in the private sector. With so many plans in trouble, the PBGC predicts that without help, they would become insolvent in 2026, leaving many current workers and retirees without the pensions that they worked for decades to accumulate.
The provision in the stimulus bill would provide $86 billion in direct aid to the pension funds, although that cost would be partially offset by increased insurance premiums to help ensure that the PBGC doesn’t become insolvent. The $86 Billion is higher than the $65 Billion offered in the Butch Lewis Act.
“This does allow a narrow subset of troubled plans to avoid having to make the painful move of reducing benefits for already retired participants,” said pension expert David Brenner in an email to HuffPost. “It also provides the option for plans that have made that move to possibly reverse that decision.”
The bill had the support of many unions, including the Teamsters. According to HuffPost, more than 50 of their pension plans would be eligible for help under this plan, including their Central States plan which has 400,000 participants. The Teamsters say that this bill will allow their members to receive 100% of their earned pension benefits instead of having to take a benefit cut.
“For more than two decades, Teamsters members, retirees, and officials have worked tirelessly to make sure the hard-earned retirements of its members are protected,” Teamsters President Jim Hoffa said. “Now, as part of this bill, more than 50 Teamster pension plans – including its largest, the Central States Pension Fund – will be eligible for assistance at the outset of the bill’s enactment, with more of the union’s plans becoming eligible in 2022.”
Studies have shown that these pension payments have a huge impact on the economy. The Teamsters cited a study from the National Institute of Retirement Security that found that the $44.2 billion in private pension benefit payments paid to retirees of multiemployer plans in 2018 supported $96.6 billion in overall economic output in the national economy and an estimated $14.7 billion in total tax revenue.
"I don't think politicians in Washington understand collective bargaining that you give up dollars at the bargaining table today as a worker, you and your company put dollars aside for a pension, then we honor that commitment," says Sen. Brown. "That is what this bill does. To make sure that people that put those dollars aside, they did the right thing for themselves, their families, and their community by putting those dollars aside for the future. Now they are going to see those dollars in their last many years of life."
The bill now heads back to the House of Representatives where they will vote on the changes that the Senate made to the bill. It is expected to pass the House and be signed by President Biden this week, before extended unemployment benefits run out on Sunday, March 14th.