According to an article in Forbes, “There is an emerging financial crisis among multiemployer pension plans in America.”
Now, a bipartisan proposal for changes to multiemployer pensions is taking shape on Capitol Hill. A bill expected to be introduced next week by Rep. Donald Norcross, D-N.J., and Rep. Phil Roe, R-Tenn., would allow some multiemployer plans to move to a hybrid structure. Their proposal, called the Give Retirement Options to Workers Act (GROW Act), could be part of an omnibus fiscal year (FY) 2018 federal spending bill.
As the Forbes article notes and according to the law makers, many multiemployer plans are currently struggling with funding. Two years ago, the House Education and Workforce Committee cautioned that the Pension Benefit Guaranty Corporation (PBGC) is expected to run out of funds to pay multiemployer benefits around 2024. At that time, a similar composite approach was debated in the committee.
Hybrid approach
The hybrid approach (also known as a “composite” approach or plan) includes elements of defined contribution (DC) plans and defined (DB) benefit plans. According to Rep. Norcross, “The GROW plan offers another tool in the toolbox for workers to grow their retirement savings and employers to grow their businesses,” The bipartisan proposal is expected to provide a new voluntary vehicle for retirement savings that combines the more beneficial components of defined benefit and defined contribution plans.
Opposition
Participants in the current multiemployer plans are not all in favor of the new bill and the hybrid/composite approach has generated opposition. “The proposal would allow relatively healthy multiemployer plans with secure and adequate benefits to transition to inferior plans,” the Pension Rights Center cautioned. “This proposal would shrink the number of defined benefit plans, and since fewer plans would be paying premiums to the PBGC, it would also hurt solvent plans,” the International Association of Machinists and Aerospace Workers, said.
Grossman Yanak & Ford LLP will post the bill as soon as it is introduced and keep our clients and friends up to date as the bill advances through Congress.
Should you have questions or comments, please contact Bob Grossman or Don Johnston.
