Lawmakers Demand Help for Union Pensions

Former House Speaker John Boehner and former Congressman Joe Crowley recently announced the launch of the Retirement Security Coalition.

According to Boehner and Crowley, who hails from New York and served as a Chairman of the House Democratic Caucus during his time in Congress, the Coalition is made up of a diverse group of employers, labor unions and policy experts “dedicated to finding a common-ground solution to the multiemployer pension crisis in America.”

The two announced their new advocacy effort shortly after the Ways and Means Committee of the U.S. House of Representatives marked up and voted along party lines to advance a bill formally called the Rehabilitation for Multiemployer Pensions Act, setting the stage for full floor consideration and the amendment process. The bill has also been colloquially referred to as the Butch Lewis Act, recognizing the late former president of Teamsters Local 100.

As passed by the committee, the Act would provide funds for 30-year loans and new financial assistance, in the form of grants, to financially troubled multiemployer pension plans. According to the text of the legislation, the program is designed to “operate primarily over the next 30 years.”

During the committee debate, Democrats, led by current Chairman Richard Neal of Massachusetts, generally voiced strong support for the Act. They suggest that the dire financial situation faced by some multiemployer pension systems is chiefly due to the Great Recession and long-lasting market challenges that have particularly harmed manufacturing and other blue-collar industries. They say economic conditions in the last two decades have forced many employers that offer these pensions to go insolvent themselves, which in turn left the multiemployer pension plans with fewer and more financially stressed contributing employers.

Republicans, on the other hand, led by Ranking Member Kevin Brady of Texas, were quick to cite their worries about ongoing mismanagement and even maleficence on the part of union leaders and pension trustees. They argue a loan program will do nothing to solve the underlying problems that weakened many of the plans to begin with, and they commonly use the term “bailout” to describe the program.

Boehner and Crowley Weigh In

Asked for their assessment on the current state of affairs, Boehner and Crowley tell PLANSPONSOR the multiemployer pension crisis must be solved quickly. Every day it grows more severe, they warn, leading to real-world consequences for union workers and retirees who have fully held up their end of the pension bargain.

“We are here to sound the alarm and say that we need to all come together to solve this problem and to protect the hard-earned retirement futures of millions of Americans,” Boehner says. “From New York to Ohio and across the country, hundreds of thousands of retirees and workers are already facing deep cuts to their pensions, and if we don’t change course, families will be devastated.”

“If the pension system in this country isn’t stabilized and it continues on its current trajectory, then millions of workers and families will suffer,” Crowley adds. “The impact will have a ripple effect on our national economy and communities across America.”

Asked for their take on the Butch Lewis Act in particular, Crowley shares the following: “There are a lot of solutions being offered. What John Boehner and I are doing is bringing attention to this crisis. What it’s going to take will be the public sector and the private sector working together to find a solution, and it may take some political courage to address some of these issues. I think that’s really what’s been holding this up. I think now, though, with the new Congress, with divided government in the House and Senate, there may be an opportunity here to see something really worked and engaged on.”

Boehner generally agrees with that assessment, noting there are dozens of feasible ideas being discussed and that it very well could require a combinations of ideas to provide stability to these plans.

“What I and Congressman Crowley and others involved in this Coalition are doing is trying to make people aware of how serious this crisis is and to encourage the public and private sectors to come together sooner rather than later to find a bipartisan, bicameral solution that achieves a good outcome,” Boehner says. “Congress has attempted several times to find a solution. I think what’s different now is the urgency there is to find a solution and find one now.”

Asked what they see as the potential outcome if no solution is reached in the near term, the former House members say the consequences will be dire, both for the union pensioners as well as the broader economy and the U.S. retirement system.

“This problem is getting worse,” Boehner says. “It’s urgent that action be taken, and the sooner the better, because the longer this problem goes on, the bigger the crisis is going to get. If action isn’t taken, millions of Americans are going to lose a significant portion of their retirement benefits, it’s going to affect state and local revenue, it’s going to affect the Pension Benefit Guaranty Corporation—and we’re going to have a real crisis on our hands.”

Crowley echoes the concern about the Pension Benefit Guaranty Corporation.

“The funding backstop for plans that have run out of money is projected to collapse by 2025,” Crowley observes. “The pension crisis does not only affect millions of people in multiemployer pension plans, it has broad implications that impact our economic interests and affect retirees, taxpayers, and Americans just entering the workforce. There’s a boomerang effect here if something isn’t done.”

Union Pensions Have Economic Power

Offering some context to this discussion, a recent report from the National Institute on Retirement Security (NIRS) shows spending from retirees that receive income from multiemployer pension plans significantly helps the overall U.S. economy. However, this support could be diminished or even turned into an economic drag if the multiemployer pension crisis is not resolved.

According to the report, the average benefit paid to retirees out of such plans was $11,935 a year as of 2016. In total, these benefits resulted in $89 billion in economic output and $50 billion in value added to the gross domestic product (GDP), according to the NIRS.

The analysis suggests pension income creates a “ripple effect, as one person’s expenditures become another person’s income.”

For example, NIRS says, “A retired carpenter uses his pension money to buy a new lawnmower. As a result of that purchase, the owner of the hardware store, the lawnmower salesman and each of the companies involved in the production of the lawnmower all see an increase in income and spend the additional income. These companies hire additional employees as a result of this increased business, and those new employees spend their paychecks in the local economy.”

In fact, NIRS says, for every dollar in multiemployer pension benefits paid out in 2016, $2.13 in total economic output was supported.