Multiemployer pension backstop plan advances on Capitol Hill

Sources: Associated Builders & Contractors, Washington, D.C.; CP staff

Just ahead of its August recess, the U.S. House of Representatives passed the Rehabilitation for Multiemployer Pensions Act (H.R. 397), with 29 Republicans joining the majority in a 264-169 vote. Advocates argue the measure is needed to protect the pensions of 1.3 million workers in certain multiemployer pension plans (MEPP)—up to half of which cover construction trades participants—and prevent a Pension Benefit Guaranty Corporation (PBGC) collapse.

Critics maintain the legislation is a taxpayer-funded bailout of MEPP and does little to address their fundamental structural flaws. “[It] fails to include any reforms that would ensure responsible funding of future benefit promises or prevent a similar situation from recurring,” said Rep Virginia Foxx (R-N.C.) during the debate over H.R. 397. “The bill also fails to address the chronic underfunding that plagues the entire union multiemployer system and passively accepts that plan trustees and actuaries may continue to underestimate pension promises—to the detriment of workers and retirees.”

Also known as the Butch Lewis Act, H.R. 397 was introduced by Rep. Richard Neal (D-Mass.); Sen. Sherrod Brown (D-Ohio) introduced a companion bill in the upper chamber. Unionized construction trade contractors generally participate in a defined benefit MEPP, notes the Associated Builders & Contractors, while nonunion contractors typically provide defined contribution plans such as portable 401(k) retirement accounts.

Lawmakers have pushed construction industry contractors and workers into MEPP via so-called responsible contractor laws and government-mandated project labor agreements (PLA) on taxpayer-funded construction projects, ABC observes. Nonunion contractors, on the other hand, are typically wary of competing for contracts subject to such terms because MEPP can expose them to potentially catastrophic liability and harm retirement prospects for their workforce if plans fail.

If MEPP become insolvent, they are taken over by the PBGC, an independent agency of the federal government that a) monitors and privately insures pension benefits in private sector defined-benefit plans; and, b) provides qualified individual beneficiaries up to $12,870 per year in defined benefits in certain circumstances. The agency is projected to become insolvent around 2025, partly due to exposure to struggling MEPP. An ABC analysis of PBGC data indicates the construction industry is responsible for almost half of the current PBGC-backed MEPP underfunding and is a primary contributor to projected future PBGC MEPP insurance program funding shortfalls.

Senate Majority Leader Mitch McConnell (R-Ky.) has not indicated whether the full Senate would take up H.R. 397 companion. ABC has not taken a position on the bill but will continue to monitor all legislative proposals concerning the PBGC and MEPP, and oppose government-mandated PLA and other laws mandating contractor and employee participation in MEPP.