For example, the last session of Congress did act in a spirit of bipartisanship "at the last minute" last December when it passed the omnibus budget and spending bill. One of its provisions, the Multiemployer Pension Reform Act of 2014, introduced "reforms" into private sector multiemployer pension plans. In particular, managers of those "deeply troubled" plans can suspend benefit payments to retirees as well as accrued benefits for participants.
Yes, payments and benefits can be CUT to those whose $$$s are invested in deeply troubled plans.
According to MarketWatch, private sector multiemployer defined benefit plans--bargaining agreements between labor unions and two or more employers--currently cover about 10M unionized participants. During the stock market boom of the 1990s, these plans expanded benefits. But as usually happens, what goes up, must come down. During the two financial recent crises, those plans lost substantial assets. Then, too, many of those plans have contracted with industries --like construction--which continue to be negatively impacted by the prolonged recession. Other plans--like trucking--have contracted with industries that are confronting a shrinking pool of workers.
In short, capital isn't flowing into the plans and, it has been estimated, if capital outflows aren't slowed, those plans will be bankrupt within 20 years. Even the Pension Benefit Guaranty Corporation (PBGC) doesn't have the $$$s to save the plans. Hence, "deeply troubled."
Without getting into the thickets of how this act of bipartisanship will "save" those plans, the basic steps include:
- "Deeply troubled" plans apply to the Treasury to suspend benefits for retirees and to reduce accrued benefits for active workers.
- The sponsor must demonstrate that it has taken all reasonable measures to forestall insolvency and that the proposed benefit suspension will ensure solvency.
- A participant’s benefit cannot be reduced below 110% of the PBGC guarantee.
- Limitations to benefit reductions are provided for those 75 and older. Those 80 and older are exempt from the reductions.
- Suspensions must first be allocated to a participant’s service for an employer that withdrew from the plan without paying its full withdrawal liability.
In short, "spreading the pain around" to those 10M unionized workers who are under 80 years of age.
While this act of bipartisanship isn't a bailout, it is crony socialism! The government intrudes into the private sector by setting rules to control private entities that have been hired to manage private pension plans but have royally screwed up by failing to account for changing economic and demographic factors.
But, here's the rub: If the same thing happened to individuals working in the private sector, there'd be no such governmental intervention to spread the pain around. "Too bad, you invested with the wrong firm," they'd be told. "Get out of here and figure out what you're going to do." And that's as it should be because that's how a free market works, not just for individuals but for multiemployers as well.
What's next? A bipartisan plan to funnel taxpayers' $$$s into saving those plans? After all, what's another trillion added to the national deficit to pay off the union bosses for the "hardworking middle class"?
Let the discussion begin...
To read the MarketWatch article, click on the following link: