Two things: 1) I’m not excited (as a taxpayer) about footing the bill for this fiasco and 2) It doesn’t appear any measures have been put in place to prevent this from happening again.
The American Rescue Plan, which includes unprecedented taxpayer bailouts of private multiemployer* pension plans, has raised concerns. So far, 37 multiemployer plans have requested assistance ranging from $4 million to $35 billion each. Of these, 25 plans have been approved to receive $6.5 billion in taxpayer money [from the Pension Benefit Guaranty Corp. (PBGC)], and it is estimated that a total of $97 billion will [ultimately] be provided. However, it’s important to note that these bailouts are not related to the COVID-19 pandemic, but rather a long-standing issue.
Before the pandemic, multiemployer plans had already accumulated $757 billion in unfunded pension promises. These plans were projected to pay out only 42 cents on the dollar in promised benefits. Unfortunately, the situation is expected to worsen, as taxpayers are now guaranteeing that certain union pension plans will deliver 100% of their promised benefits until at least 2051. Multiemployer pension plans are established by unions and employer representatives, bringing together workers from specific industries such as construction or mining.
While the number of individuals belonging to multiemployer plans is declining, there are still around 10.8 million workers and retirees who are part of approximately 1,400 of these plans across the United States. The root cause of the problem lies in the overpromising and underfunding of these plans, which have relied on unrealistic assumptions about investment returns and life expectancies. A fair solution to address the issue would have involved holding those responsible for mismanaging the plans accountable and implementing reforms to prevent similar situations in the future. Unfortunately, without such measures, the door is left open for unions and employers to deceive workers, a practice that should be illegal and discouraged.
*A multiemployer plan is a pension plan created through an agreement between two or more employers and a union. The employers are usually in the same or related industries, like construction or transportation.
Source: Nothing Equitable in Union Pension Bailout
Image: Public Domain; provided by Wikimedia Commons
Leave a Reply