Nearly 1.5 million Americans’ pension plans are failing and House Democrats want taxpayers to bail them out.
To make matters worse, the Pension Benefit Guaranty Corporation’s (PBGC), the government insurance program designed to insure pensions, has “long-term challenges related to its funding and governance structure”, according to the GAO.
“PBGC’s liabilities exceeded its assets by about $51 billion as of the end of fiscal year 2018,” the GAO reported [in PDF] in January.
However, on Tuesday, with a 26-18 vote, the Democrat-controlled House Education and Labor Committee approved legislation that would provide a lifeline to failing multi-employer plans by creating a federal loan program for them.
The bill (H.R. 397) is called the Butch Lewis Act and, if passed and signed into law, would create (and fund) a new agency within the Treasury Department called the Pension Rehabilitation Administration (PRA).
The bill would set up trust fund within the Treasury Department to make taxpayer-backed loans to multi-employer plans in “critical and declining” status that are approved by Treasury to reduce benefits, or make loans to plans that are already insolvent but not terminated.”
The bill was introduced by House Ways and Means Committee Chairman Richard E. Neal (D-MA) in January and has 168 co-sponsors, including eight Republicans. according to Pension & Investments.
The problem is, according to a white paper [in PDF] published by the Pension Analytics Group last November, “loans would not prevent plan insolvencies, but merely delay them.”
Or, as Alex Pollack, the former President and CEO of the Federal Home Loan Bank of Chicago, explained the problem in April:
“Let’s make billions of dollars in loans to borrowers which ‘are insolvent’ or in ‘critical or declining status.’ These loans would be unsecured and no payments of principal would be due for 30 years. At that point, in case of default, the loans would be forgiven. Would you make such a loan? Obviously not, and neither would anybody else—except maybe the government.”
If union leaders (whose pensions are fully funded) and Democrats (who are beholden to unions for campaign support) have their way, taxpayers will be underwriting risky loans from the Treasury Department that union pensions have no feasible plan to repay.
Additionally, according to the Heritage Foundation, “taxpayer liabilities could exceed the entire multiemployer pension system’s $638 billion-and-growing shortfall.”
Rather than addressing the issue decades ago—by rolling participants into defined contribution plans—when more union companies were exiting the plans or going out of business, union pension trustees kicked the proverbial can down the road.
Just as many felt it wrong for the federal government to use taxpayer money to bail out bankers in 2008, many also feel it would be wrong for taxpayers’ moneys to be used to bail out union pension plans that are destined to fail.
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- Treasury Dept. Okays Teamster Pension Cuts In Western PA
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