Barry’s Pickings Online: Welcome to Trump-World

Art by J. CiardielloIt’s a commonplace that President Donald Trump is rewriting political conventions, advocating a number of policies, e.g., on trade, that are not “traditionally Republican.” How might his new priorities affect retirement policy? Consider two areas—the multiemployer plan crisis and paying for infrastructure spending.

The multiemployer plan crisis 

Most Republican policymakers have been notorious for their dislike of unions. So it was no surprise that in 2016 the majority of Republicans on the Senate Finance Committee opposed a bill—the Miners Protection Act—that would have bailed out the United Mineworkers Pension Plan, by transferring mine cleanup funds to it. Democrats on the committee, however, conditioned their support of a broader retirement policy bill sponsored by Chairman Hatch, R-Utah, on favorable committee action on the UMW bailout. And so, last September, six committee Republicans, along with all 12 Democrats, voted to favorably report out the UMW bailout bill.

Nevertheless, before the November election, few believed that the Miners Protection Act would get enough Republican support in the full Senate, and the House, to pass. And it was pulled from the 2016 Congress’s December continuing resolution.

It has now been reintroduced, in the 2017 Senate. And there are some significant Republican supporters, including Burr, R-North Carolina, Capito, R-West Virginia, Portman, R-Ohio, and Sullivan, R-Alaska.

What is President Trump’s view of this legislation? He seems to view labor as a potential ally, e.g., with respect to his infrastructure and pipeline proposals. Coal states—West Virginia, Pennsylvania and Ohio—were critical to his victory. And—in contrast to former Secretary of State Hillary Clinton—he took a vigorous pro-coal stand during the campaign.

More broadly, the UMW plan is one of two major multiemployer plans that threaten the solvency of the Pension Benefit Guaranty Corporation (PBGC) multiemployer insurance fund. The other is the Teamsters Central States plan. And there are many other, less giant multiemployer plans that are in critical condition. In the 2016 PBGC Annual Report, then-Secretary of Labor Perez said “PBGC estimates that plans covering about 10% to 15% of the 10 million multiemployer participants are at risk of running out of money over the next 20 years and that PBGC’s multiemployer insurance program is likely to run out of money by the end of 2025.”

In the past, Republican support for some sort of bailout for multiemployer plans was inconceivable. It seems to me, however, like a natural for President Trump. Moreover, other Trump proposals, particularly ending the “war on coal” and infrastructure spending, will improve conditions in the industries in which multiemployer plans are concentrated: construction, transportation and energy.

Infrastructure spending was actually one of the few things Republicans and Democrats could agree on over the last four years. For instance, in 2015, Congress passed the Fixing America’s Surface Transportation (FAST) Act, providing for $305 billion in infrastructure spending over five years. And, sadly for those who care about retirement policy, Congress often paid for this infrastructure spending by, among other things, raising PBGC premiums.

President Trump’s most notorious infrastructure project—“the wall”—has an estimated cost of $15 billion to $25 billion. One of last week’s main anti-wall talking points was “How are you going to pay for it?” For President Trump, the answer has been simple (“Mexico will pay”). But for House Republicans, who under President Obama insisted on “pay-fors” for every spending proposal, the question is more awkward.

Maybe Mexico will (through tariffs, a border tax or a tax on money sent back to Mexico) “pay” for the wall. But President Trump’s broader, massive infrastructure spending proposal—with an estimated price tag of $1 trillion—is going to present a challenge for budget-conscious Republicans.

In that regard, consider that some have suggested paying for the wall out of the “border adjustment tax” that is a feature of the House Republicans’ “Better Way” corporate tax proposal. That solution ignores the problem that those revenues are already being counted to keep the proposed Republican corporate tax cuts revenue neutral. But that discussion does raise the possibility that Congress may look to tax reform as a way to raise revenues for infrastructure spending. And, in such a combined infrastructure spending/tax reform process, tax benefits for retirement savings may become a target. Indeed, they already have been a target in the Obama administration’s most recent budgets.

I think those of us who care about retirement policy should be concerned that Congress will look to our area for revenues to fund an infrastructure spending project. We should be prepared to vigorously defend current policies that matter. Most obviously, there’s widespread agreement that raising PBGC premiums yet again would be a mistake, the most likely result of which will simply be to force defined benefit (DB) plan sponsors to accelerate plans to terminate. And we should make clear that cutting back tax incentives for retirement savings is likely to result in a reduction in the number of employers willing to sponsor retirement plans, even as Congress searches for ways to encourage plan formation.

In a less dystopic vein, during the campaign President Trump floated the idea of paying for infrastructure spending via private investment: “Citizens would put money into [an infrastructure fund], and we will rebuild our infrastructure with that fund, and it will be a great investment, and it’s going to put a lot of people to work.”

Investment in such an infrastructure fund seems like a natural for public (state and municipal) and multiemployer plans—the sponsors of which have a significant interest in increased infrastructure spending. And it is certainly conceivable that President Trump and his allies may “encourage” private, single-employer pension plans to invest in such a fund.

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It is, obviously, still the very early days. But these issues may be upon us willy nilly. President Trump has indicated that he is prepared to aggressively pursue the policies on which he ran. We could see an infrastructure/tax package this spring. Democrats might insist that it include something for ailing multiemployer plans. And budget hawks and infrastructure advocates may start horse-trading over policies that we care about intensely.

Get ready.

Michael Barry is president of the Plan Advisory Services Group, a consulting group that helps financial services­ corporations with the regulatory issues facing their plan sponsor clients. He has 40 years’ experience in the benefits field, in law and consulting firms, and blogs regularly http://moneyvstime.com/ about retirement plan and policy issues. 

This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of Asset International or its affiliates.