WHY THE NCCMP HELPED CRAFT MPRA
Updated: Oct 18, 2018
There has been a lot of half-reported information and innuendo about the AFM pension fund for the last year and a half. We examine a half-truth here:
“Our trustees work with the NCCMP which is working to cut our benefits.”
Since 1974 the National Coordinating Committee for Multiemployer Plans (NCCMP) is the only organization that advocates and lobbies exclusively for multiemployer plans.
Recently, the NCCMP has come under fire from some quarters for its role in crafting the 2014 Multiemployer Pension Reform Act (MPRA) with some calling that law “a rush to cut our benefits.” It was actually more of a last resort, a Hail Mary pass.
A little background may be in order. Many multiemployer plans including our own AFM-EPF turned upside down in the 2008 financial meltdown. This presented two threats: the possible insolvencies of the funds themselves and the increasing liability those funds imposed on the Pension Benefit Guaranty Corporation (PBGC) which is supposed to step in and loan enough money to insolvent funds to provide very low guaranteed payouts to their pensioners. The biggest threat was the looming insolvency of the massive Central States Teamsters fund with its 400,000 participants. Insolvency of that fund would bankrupt the PBGC. The top priority for the NCCMP was to prevent the insolvency of Central States and in doing so, remove it from the liability docket of the PBGC.
In 2009 the bipartisan Preserve Benefits and Jobs Act was proposed in the House by Representatives Earl Pomeroy, D-ND and Pat Tiberi, R-OH. A companion bill was proposed in the Senate in 2010 by Senator Bob Casey, D-PA. Troubled pension plans would have had an easier time merging and cash would have been infused into the struggling PBGC, lifting the maximum payout from $12,870 to $20,000 a year. Though both houses were controlled by Democrats, not a single hearing was held on either bill.
Meanwhile, the bill’s opponents like the Wall Street Journal editorial page and the National Legal Policy Center had a field day, calling it a “taxpayer bailout” of union pension funds.
The House shifted to Republican control in the 2010 elections—Rep. Pomeroy was one of the political casualties in those midterms—and that was the end of these two bills. Meanwhile, the condition of distressed plans, including Central States, continued to deteriorate. As hearings on troubled multiemployer funds continued, opposition to a “bailout” mounted.
In one particular hearing held by the House Subcommittee on Health, Employment, Labor and Pensions hearing, February 2, 2012, House members from both parties declared there would be “no more bailouts--no more bailouts of anybody.”
By 2013 the NCCMP had gotten the message. Failing at winning government help, and with pension funds unable to earn their way out of trouble, they formed a task force which produced a series of proposals for plans to rescue themselves and by extension, the imperiled PBGC. The proposals were called “Solutions Not Bailouts” and it led the way to MPRA, which allows deeply troubled funds to apply to the Department of Treasury for authorization to cut accrued benefits in order to stave off insolvency. This had been prohibited under the Employee Retirement Income Security Act (ERISA).
Central States applied to make benefit cuts under MPRA almost as soon as the law was passed. According to Adam Beck, a former official with Treasury, that department was unprepared to handle MPRA applications and the Central States application arrived before they had finished writing the regulations.
Central States’ application was denied and that fund is now projected to be insolvent by 2024. The PBGC has $2 billion in assets and a liability of $65 billion, much of that owing to the imminent failure of Central States, according to the PBGC director Thomas Reeder in his May 17 testimony before the Joint Select Committee on the Solvency of Multiemployer Pension Plans (JSCSMPP). The PBGC itself is projected to be insolvent by 2025. Twenty-two plans have applied to Treasury for the authority to cut benefits, five have been denied, six have been approved, two have been withdrawn and nine are under review.
More bills have been proposed since 2014. The bipartisan JSCSMPP, which is made up of Senate and House members, is charged with finding a solution by the end of 2018. The NCCMP has put out a range of proposals, hoping that something will pass Congress, be signed into law and then implemented quickly by the current Treasury. But the 800 pound gorilla is the fact that the most deeply troubled plans, including Central States, cannot recover without an outside source of funding.
But Chris Allen, a senior advisor to Sen. Orrin Hatch, co-chair of the Committee says any loan programs or cash infusions would “come with considerable strings attached.” Senator Hatch himself has expressed deep skepticism of the idea of a taxpayer-funded solution, and White House Budget Director Mick Mulvaney is downright hostile to the idea.
As recently as the JSCSMPP hearing on July 25 we were treated to the testimonies of James P. Naughton and Joshua D. Rauh, both of whom argued vigorously against a loan program, calling it a “bailout,” while failing to offer another solution that ensures thousands of people won’t go bankrupt.
Any way you look at it, it’s a steep climb to get to a solution to the problem that will pass this Congress and White House. We have now seen evidence of this in the recent trimming of Sen. Brown’s Butch Lewis Act in the face of Republican skepticism and a desire to at least salvage the most troubled plans even if it means leaving funds like ours to fend for themselves. There are some people myopically blaming that on the NCCMP as it struggles to get some kind of loan program passed along with a more permanent voluntary fix that some funds are asking for.
We may need to re-evaluate attitudes towards the NCCMP, a group that is trying to find a way to prevent utter disaster in a hostile political climate.
Sources: Pomeroy-Tiberi Act https://www.congress.gov/bill/111th-congress/house-bill/3936
Wall Street Journal opinion https://www.wsj.com/articles/SB10001424052702303491304575188263180553530
National Law Journal http://nlpc.org/2010/08/27/casey-pomeroy-bill-would-bail-out-pbgc-union-pensions/
Hearing by House Subcommittee on Health Employment Labor and Pensions, February 2, 2012 https://www.gpo.gov/fdsys/pkg/CHRG-112hhrg72494/html/CHRG-112hhrg72494.htm
Solutions Not Bailouts https://www.ilr.cornell.edu/sites/ilr.cornell.edu/files/Solutions-not-Bailouts.pdf
Senator Hatch https://www.finance.senate.gov/imo/media/doc/23589.pdf