WASHINGTON, D.C. - The pension crisis that threatens the retirement savings of 1.5 million Americans also poses the risk of driving the U.S. economy into a tailspin, a panel of witnesses told a congressional panel.
Witnesses from the U.S. Chamber of Commerce and businesses, including UPS, told the Joint Select Committee on the Solvency of Multi-employer Pension Plans that should the estimated 150 to 200 multi-employer pension plans that are in danger become insolvent, the companies that paid into those plans would be held liable. That would drive many of the companies into bankruptcy. Under current rules, employers can’t leave plans in crisis without paying large sums or declaring bankruptcy.
“This is not a future crisis,” Aliya Wong, executive director of retirement policy at the U.S. Chamber of Commerce, said. “It is a current crisis.”
Wong said that the uncertainty has caused employers to lose credit opportunities, receive less-than-optimal lending rates and encounter problems with employee retention. It is also affecting employers who are still in healthy plans, not just the ones in declining plans, and both union and non-union employees.
The chief legal and external affairs officer for Schnuck Markets in St. Louis, Mary Moorkamp, said her company has been forced to continue making contributions into a pension plan that is projected to be insolvent within seven years. Its employees, she said, will be fortunate if they receive a significant portion of their anticipated benefits. The crisis, she said, has caused recruiting problems, stunted the company’s growth and distorted business decisions.
The joint committee — made up of Republican and Democratic members of the House and Senate — faces a daunting task: find a solution to save multi-employer pension plans that are at risk of insolvency.
The plans were created to allow employers to pool resources in providing their workers with retirement benefits.
The pension plans, negotiated by unions, are run by trustees selected by the unions and employers. For years, most of the plans ran at a surplus, but the past two recessions, combined with corporate bankruptcies, have taken a toll on the solvency of the pensions.
Around the country, 10 million workers are served by 1,400 multi-employer plans. Of those plans, 150 to 200, covering 1.5 million workers and retirees, could run out of money within 20 years, according to the Pension Rights Center.
The committee has had one business meeting and three hearings and will hold three more hearings — two in Washington, D.C. and one in the field. Led by co-Chairmen Sens. Sherrod Brown, D-Ohio, and Orrin Hatch, R-Utah, it has until late November to find a solution. Congress must vote up or down on any proposed solution, with no amendments. Sen. Rob Portman, R-Ohio, also serves on the committee.
Brown is pushing a bill he introduced — the Butch Lewis Act, named after a Cincinnati-area retiree who died fighting for his pension — that would create a low-interest, 30-year federal loan to troubled pension plans, with no cuts to retiree benefits.
Brown said that although most people are aware of the threat to pensioners, “the threat to current workers and to small businesses — and to our economy as a whole — is equally real.”
But Hatch made clear that he isn’t convinced that Brown’s bill is the solution.
Portman, meanwhile, said he wants “to keep everything on the table at this point,” but he urged continued research on possible solutions.
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