Category: Multiemployer pensions

American Rescue Plan Act of 2021 (1) 9701

Mary Pat Campbell
American Rescue Plan Act of 2021 (1) 9701

Excerpt:

We start with a provision that keeps multiemployer plans who did not have the foresight to designate their plans in bad shape from rushing for the increments.

Option number one for getting the bailout money is to have a multiemployer plan in Critical and Declining status. To avoid having 1,400 plans in Critical and Declining status all at once this provision seems to freeze a plan’s status to what was claimed for the plan year that began on or after March 1, 2019.

Here is the wording. Tell me if you see anything different.

Author(s): John Bury

Publication Date: 11 March 2021

Publication Site: Burypensions

COVID rescue package gives failing pension plans a $86 billion bailout, stirring hope and criticisms

Mary Pat Campbell

Link: https://www.bostonglobe.com/2021/03/13/nation/covid-rescue-package-gives-failing-pension-plans-86-billion-bailout-stirring-hope-criticisms/

Excerpt:

In the shadow of stimulus checks and extra unemployment aid, Democratic lawmakers extended another hand in the $1.9 trillion pandemic relief package: a long-sought bailout for failing private pension plans.

The union-backed provision, touted for years by Representative Richard E. Neal, was signed into law Thursday by President Biden as part of the larger COVID-19 stimulus bill. It promises to set aside an estimated $86 billion — and some say possibly far more — in grants for multi-employer retirement plans that were careening toward insolvency even before the pandemic hit.

Without it, the multi-employer pension plans for more than a million truckers, warehouse and retail workers, and others could collapse, unions and congressional Democrats warn. In New England alone, the measure could help preserve the promised retirements of at least 70,000 Teamster members, union officials said.

Author(s): Matt Stout

Publication Date: 13 March 2021

Publication Site: Boston Globe

Grim COVID-19 Scenario Could Cut Pension Liabilities

Mary Pat Campbell

Link: https://www.thinkadvisor.com/2021/03/09/grim-covid-19-scenario-could-slash-pension-liabilities/

Excerpt:

The pandemic could also slash pension plan sponsors’ liabilities, by making ordinary health care an expensive luxury — and driving up the U.S. death rate for decades to come.

Analysts at Club Vita US LLC have presented those scenarios in a look at the possible effects of the COVID-19 pandemic on three types of U.S. pension plans: defined benefit plans sponsored by single employers; defined benefit plans sponsored by multiple private-sector employers; and defined benefit plans sponsored by government employers.

The analysts’ work reflects the same kinds of effects that might affect blocks of life insurance policies, blocks of annuities, and life settlement portfolios.

Author(s): Allison Bell

Publication Date: 9 March 2021

Publication Site: Think Advisor

Multiemployer Pension Relief Expected by March 14

Mary Pat Campbell

Link: https://www.morganlewis.com/blogs/mlbenebits/2021/03/multiemployer-pension-relief-expected-by-march-14

Excerpt:

EPPRA takes a far more direct approach to the problem than prior proposals. Under EPPRA, eligible plans can receive financial assistance from a new Treasury-backed PBGC fund. The available financial assistance will be sufficient for eligible plans to pay all benefits for 30 years. This includes any benefits previously suspended under the Multiemployer Pension Reform Act of 2014 (MPRA), which must be restored by plans that apply for assistance under EPPRA. EPPRA’s special financial assistance will not, however, cover adjustable benefits that have been cut under a rehabilitation plan.

The assistance is payable in a single lump sum without any repayment obligation. To qualify for assistance, a multiemployer pension plan must meet one of four conditions:

1. Be in critical and declining status

2. Have previously imposed a benefit suspension under MPRA

3. Be in critical status, have a modified funded percentage of less than 40% on a current liability basis, and have a ratio of active to inactive participants of less than 2 to 3

4. Be insolvent

The PBGC may prioritize plans that are insolvent, that require more than $1 billion of assistance, or that have suspended benefits under MPRA.

Author(s): Timothy P. Lynch, Daniel R. Salemi, Benjamin T. Kelly

Publication Date: 9 March 2021

Publication Site: Morgan Lewis

Bailed Out Multiemployer Plans

Mary Pat Campbell
Bailed Out Multiemployer Plans

Excerpt:

According to PBGC, 61 plans filed notices for 2020 that they were in Critical and Declining status.

There have been 32 plans that filed for benefit cuts under MPRA and it may pay off for every other multiemployer plan to rustle up a submission package prior to enactment.

Then we come to other plans who might be (or could make themselves) eligible. Of 1,220 plans who filed Schedule MBs for 2018 there were:

118 in Critical and Declining status

638 with more retired than active participants

1202 with unfunded liabilities

$685 billion in net unfunded liabilities

Author(s): John Bury

Publication Date: 9 March 2021

Publication Site: Burypensions

The Politics of Pensions

Mary Pat Campbell

Link: https://www.nationalreview.com/the-tuesday/the-politics-of-pensions/

Excerpt:

One of the difficulties faced by some of these pensions is that most of the large employers that were expected to pay into them no longer do so, many of them having ceased to exist. As Elliot Blair Smith put it in a 2016 MarketWatch write-up of the sorry history of the Central States pension fund: “Only three of the plan’s 50 largest employers from 1980 still pay into the plan. And for each active employee, it has 5.2 retired or inactive participants.”

If corporations did nothing but grow and stack up profits, then this would be a pretty good system. But that isn’t how things actually work.

In spite of the sci-fi trope of immortal, galaxy-spanning corporations, the modern business firm is in fact a relatively vulnerable and short-lived thing. In the middle of the 20th century, a big corporation might be expected to stay in business for the better part of a century; today, the average big corporation will not live long enough to legally order a beer. McKinsey has estimated that three-fourths of the companies listed in the S&P 500 in 2017 will disappear within ten years. This is an inconvenient thing for people who expect to be taken care of for all of their adult lifetimes by a single employer, but it is the result of improved business practices rather than defective ones. As businesses become more focused on their core competencies and learn to adapt more quickly to changes in the market, they become ever more temporary partnerships among different kinds of capital: physical, financial, and human.

Author(s): Kevin Williamson

Publication Date: 9 March 2021

Publication Site: National Review

MoneyPalooza Monstrosity: It Passed! More on the Multiemployer Pension Bailout

Mary Pat Campbell

Link: https://marypatcampbell.substack.com/p/moneypalooza-monstrosity-it-passed

Graphic:

Excerpt:

Here are the whole-number ratios if you can’t eyeball the relationships above.

The total MEP unfunded liability is 8 times that of the bailout bill amount

The total public pension unfunded liability is 22 times that of the bailout bill amount (this happens to be the same as the total American Rescue Plan Act of 2021)

The total Social Security shortfall is almost 200 times that of the MEP bailout bill

Author(s): Mary Pat Campbell

Publication Date: 8 March 2021

Publication Site: STUMP on Substack

Rescue Package Includes $86 Billion Bailout for Failing Pensions

Mary Pat Campbell

Link: https://www.nytimes.com/2021/03/07/business/dealbook/bailout-pensions-stimulus.html

Excerpt:

Both the House and Senate stimulus measures would give the weakest plans enough money to pay hundreds of thousands of retirees — a number that will grow in the future — their full pensions for the next 30 years. The provision does not require the plans to pay back the bailout, freeze accruals or to end the practices that led to their current distress, which means their troubles could recur. Nor does it explain what will happen when the taxpayer money runs out 30 years from now.

Senator Sherrod Brown, a Democrat from Ohio who has been leading the charge to rescue the ailing pension plans, said that including the provision in the relief bill is a “really big deal” for both the retirees who depend on the money and the employers now being crushed by promises they cannot afford to keep.

Author(s): Mary Williams Walsh and Alan Rappeport

Publication Date: 7 March 2021

Publication Site: New York Times

Durbin, Duckworth Announce Illinois Wins In COVID-19 Relief Bill

Mary Pat Campbell

Link: https://www.durbin.senate.gov/newsroom/press-releases/durbin-duckworth-announce-illinois-wins-in-covid-19-relief-bill#new_tab

Excerpt:

U.S. Senate Majority Whip Dick Durbin (D-IL) and U.S. Senator Tammy Duckworth (D-IL) today released the following statements after the Senate passed President Biden’s American Rescue Plan, which will provide emergency relief to Illinois:

…..

To avoid dramatic budget cuts at every level of government:

Estimated $13.2 billion in state and local funding for Illinois including $1.8 billion for Chicago.

The bill provides an estimated $7.5 billion for the state and $5.5 billion for Illinois locals ($2.3 billion for counties; $2.4 billion for larger cities; $681 million for smaller municipalities).

…..

Multiemployer Pension Relief: 

By prolonging the solvency of the Pension Benefit Guaranty Corporation (PBGC), more than 100,000 Illinoisans will have their hard-earned pension benefits preserved 

Author(s): Dick Durbin, Tammy Duckworth

Publication Date: 6 March 2021

Publication Site: Dick Durbin’s Senate Office

The hopeful news for Social Security buried in the $1.9 trillion bailout

Mary Pat Campbell

Link: https://www.msn.com/en-us/money/retirement/the-hopeful-news-for-social-security-buried-in-the-1-9-trillion-bailout/ar-BB1eht7e?ocid=BingNews

Excerpt:

Lawmakers have moved to include in the bill an unrelated $86 billion bailout for bankrupt union pension plans.

And once they’ve done that, it’s going to be even harder for them to argue that they shouldn’t bail out the stricken Social Security trust fund that is actually their responsibility. Social Security’s deficit: $16.8 trillion, or about $50,000 for every person in America.

On the other hand, if Congress tries to weasel out of fully funding Social Security in a few years’ time, this rescue of private sector union pensions is going to look like an outrage.

Author(s): Brett Arends

Publication Date: 6 March 2021

Publication Site: MSN Money

MoneyPalooza Monstrosity — The Return: Multiemployer Bailout

Mary Pat Campbell

Link: https://marypatcampbell.substack.com/p/moneypalooza-monstrosity-the-return

Graphic:

Excerpt:

Now, you can say that they are just about to add $2 trillion to the federal debt, so what’s $2 trillion more? (and yes, people will be saying that – we shall see how much that money printer can go BRRRRRR)

In my own opinion, the standard measures for DB pension shortfalls greatly underestimate the cash flows needed, given this time of extremely low interest rates. But still, let’s pretend.

The public pension bailout would be at least 20 times the amount of a MEP bailout. Just because you bailout a set of pensions that would have pulled down a federal guarantee fund (the PBGC) does not mean you’re going to bailout other pensions that are much bigger and that you never guaranteed in the first place.

Author(s): Mary Pat Campbell

Publication Date: 3 March 2021

Publication Site: STUMP on Substack