CBO Says Rescue Plan for Multiemployer Pensions Won’t Help

In an analysis of the Rehabilitation for Multiemployer Pensions Act of 2019, H.R. 397, the Congressional Budget Office (CBO) estimates that the government would disburse $39.7 billion in loans to certain multiemployer pension plans. H.R. 397 would provide federal loans and grants to certain plans that are insolvent or facing insolvency.

Under CBO’s official approach (which excludes grant assistance), the present value of loan repayments would total $7.9 billion, CBO estimates, leading to a net subsidy cost of $31.8 billion. Under the alternative approach (which includes grant assistance), the estimated net subsidy cost would be $5.8 billion because some loans would be repaid using grant assistance.

However, the CBO projects that about one-quarter of the affected pension plans would become insolvent in the 30-year loan period and would not fully repay their loans. (It based its analysis only on the availability of plan assets and did not distinguish between loan forgiveness, renegotiated loan terms, and other reasons for nonpayment.) In addition, most of the other plans would still become insolvent in the decade following their repayment of their loans.

Lawmakers have a sense of urgency for fixing the crisis faced by many multiemployer plans. Given the dire situation of the Pension Benefit Guaranty Corporation’s (PBGC)’s multiemployer plan program, participants in plans that become insolvent could have no benefits.

Last year, a Joint Select Committee on the Solvency of Multiemployer Pension Plans was created and tasked with coming up with a solution by November 30. However, the committee failed to meet that deadline.

In July, the Ways and Means Committee of the U.S. House of Representatives marked up and voted along party lines to advance the Rehabilitation for Multiemployer Pensions Act. And, last month, lawmakers announced the launch of the Retirement Security Coalition to help find a bipartisan solution for the multiemployer plan crisis.