Important Developments in Washington DC

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As you may know, several proposals have been made in Washington DC to address the crisis in the multi-employer pension sector. These proposals would impact not only the AFM-EPF plan but also the Teamsters pension plan and dozens of others that are chronically underfunded. 

Below, we will review the four most talked about proposals. Of the four, only the third (Rob Portman’s proposal) has been introduced as legislation. But policymakers are actively reviewing all four and we would not be surprised to see legislation introduced in the near future that incorporate some of the ideas outlined below.

The UPS Proposal

United Parcel Service, which is a large employer of Teamsters, could be liable for up to $4 billion of pension plan liability if the Teamsters pension plan becomes insolvent. It has made a proposal to address the pension crisis. Under the UPS proposal, the federal government would provide 30 -year loans at 1% to troubled pension plans to cover their cash flow shortages. 

The problem with the UPS proposal is those benefit payments would be reduced up to 20% for all participants immediately, and UPS is also calling for increased PBGC premiums, employer surcharges, employee membership fees and union surcharges. 

The Teamsters Proposal

The Teamsters proposal calls for low-interest long-term government loans to underfunded plans. The government would sell bonds to investors to fund the loans. The troubled pension plans would be required to invest in the loan proceeds conservatively, such as purchasing a group annuity. 

The Teamsters proposal involves no cuts to accrued benefits. However, it does contemplate a new benefit design for future service accruals that would minimize future underfunding. This could take the form of a variable annuity plan or an adjustable pension plan. 

Senator Portman's Pension Accountability Act

Senator Rob Portman (R-OH) has proposed that any cuts in accrued benefits be put to a fair vote of the plan membership. No cuts could be made unless a majority of plan participants who cast a vote approve the benefit cuts. Currently, the way the law is written, a majority of all plan participants, whether they vote or not, must reject the benefit cuts in order to prevent cuts from being made. The recent experience of the NY Teamsters illustrates why Portman’s proposal is necessary. There, the proposed cuts were voted down by a margin of 2-1, but the cuts were made anyway. This is because a majority of the membership didn’t vote.

The Portman Bill would also eliminate the authority of the Department of the Treasury in the case of systemically important plans to override votes of plan participants to reject benefit cuts. (A plan is “systemically important” if projected financial assistance to the plan will exceed $1 billion if benefit cuts are not implemented.)

NCCMP Proposal

The NCCMP is a trade group of multi-employer plans in Washington DC. AFM-EPF is a dues-paying member, and two of our trustees sit on various boards and committees of the NCCMP. 

NCCMP is the group that wrote MPRA and got it passed by Congress in 2014. MPRA contains numerous provisions that are deeply prejudicial to our interests, including a provision that deprives pension beneficiaries of any real say in whether they are to receive cuts or not, and a provision that deprives the right of pensioners to have judicial review of the cuts. 

MPRA is a law that takes vested property rights away from us, and NCCMP is trying to pass more legislation that would take even more rights away from us. Currently, the NCCMP is lobbying for its proposal regarding Composite Plans. Under the NCCMP proposal, the Composite Plan would be required to be funded to a ridiculously high 120% funded ratio over the next 15 years. Any funding shortfall would prompt benefit cuts. The trustees would not have to go to the United States government for any approval to get benefit cuts, and benefits would not be insured by the PBGC. Luckily, right now, the Composite Plan proposal would not apply to AFM-EPF. But it easily could.