“The challenges facing multi-employer plans are real and we need to face them head-on because quite frankly they are simply too big to ignore... View Enlarged Image
A quiet battle is brewing over what might be the nation's next big bailout: private union-run multiemployer pension plans. A 2009 Moody's study found the plans underfunded by $165 billion, but Washington is conflicted over what — if anything — to do about it.
Democrats such as Sen. Bob Casey of Pennsylvania are pushing legislation to have the federal government step in and pay the benefits for some troubled plans.
But the administration, already reeling from the backlash over earlier bailouts of Wall Street and the auto industry, rebuffed that idea in a Senate hearing last week.
Republicans are calling for an overhaul of the federal pension insurance system, one that won't increase the taxpayer burden.
'Too Big To Ignore'
All agree that something must be done. The funds in question are rapidly facing insolvency, meaning that thousands of retirees could see their benefits slashed.
"The challenges facing multiemployer [sic] plans are real and we need to face them head-on because quite frankly they are simply too big to ignore," said Sen. Tom Harkin, D-Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee.
As the name implies, several employers pay into the plans. Should one employer leave the plan for whatever reason, remaining employers are liable for the workers that business brought into the plan . Most such plans were created via collective bargaining and are run by unions. They argue that the plans are a better deal for some, like construction workers, who may work for several employers. This lets them stay in the same pension plan while changing jobs. It also makes the worker beholden to the union for his retirement. Those plans are underfunded, as the Moody's study shows. The multiemployer programs tend to be in old-line industries — manufacturing, construction, transportation — that suffered huge job losses and company failures.
All Fall Down
Bankruptcies of some employers in a plan weigh on healthy companies because they become liable for paying out more benefits. And fewer people are employed in those plans today. Businesses would like to get out of paying for failed rivals' pension obligations. The U.S. Chamber of Commerce and several other business groups back the legislation. The conflicts over what to do with ailing plans were revealed at a hearing last week Harkin held on Casey's Create Jobs and Save Benefits Act. The legislation would allow workers in a plan whose employers have gone bankrupt to be spun off — "partitioned," in the bill's language.
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