Butch Lewis Watch – Installment #3
By Jonathan Kantor
The Select Committee on Multiemployer Pensions conducted its third hearing yesterday and heard from two key witnesses who voiced support for the concept of government-sponsored loans as a means of shoring up failing multiemployer pension plans. However, the panelists also stated that they believed workers’ pensions should also be cut as part of the deal. The two key panelists were Chris Langan, a finance executive with United Parcel Service, and Aliya Wang, Executive Director of Retirement Policy for the United States Chamber of Commerce, a lobbying organization which represents the business sector.
UPS made its government loan proposal in 2017, under which worker pensions would be cut up to 20%. The U.S. Chamber of Commerce came out in favor of government-sponsored loans several months ago, joining together with the NCCMP, which also supports the loan program. (As you may recall, NCCMP is the trade association in Washington for multiemployer plans. It was instrumental in the formulation of MPRA, the 2014 law that allows trustees to cut our accrued pension benefits.) However, the NCCMP
has also proposed that government loans not be made available to plans like AFM-EPF.
Mr. Langan of UPS indicated that plans in critical and declining status need the cash flow that only government loans can provide and that such plans cannot earn their way out of trouble through investment earnings. He also stated that in many of these failing plans employers have dramatically increased their contributions. He pointed out that “most if not all” plans in critical and declining status have seen employer contribution doubled in the past ten years. (Note that at AFM-EPF, employer contributions have increased far less, well under 50%, in the past 10 years.)
Mr. Langan also described the problems posed by the spate of employer bankruptcies and withdrawals in critical and declining plans. When that happens, he said, the pension obligations of the employees left behind – so-called “orphans” -- must be picked up by the remaining employers. This puts even more financial pressure and uncertainty on the remaining employers in the plan. (Note that AFM-EPF is not experiencing these problems. As MPS actuary Tom Lowman has stated: “Employer withdrawals at the Plan are quite low and seem to pose no significant threat. Similarly, the proportion of orphans (i.e., employees in the Plan whose employers have gone bankrupt) is also quite low.”)
The only outright negative comments made about the loan program proposal came from Congressman Rowe of Tennessee and Senator Hatch of Utah. Two other Republicans -- Congressman Buchanan and Congressmen Schweikert -- appear to be leaning against the loan program but indicated they may support it under certain conditions. Schweikert indicated that he might be supportive of government loans if the bankruptcy code was reformed to make the government loans the highest priority in the repayment queue. Senator Portman (R-OH) remained noncommittal, saying that all options should be on the table. Democrats on the panel voiced general strong support for the loan proposal.