Pricey pension rescue headed to House floor next week

Bill would provide financial lifelines to union pension plans

House Ways and Means Chairman Richard Neal, D-Mass., confirmed the pensions bill is ready for a floor vote. (Bill Clark/CQ Roll Call file photo)
House Ways and Means Chairman Richard Neal, D-Mass., confirmed the pensions bill is ready for a floor vote. (Bill Clark/CQ Roll Call file photo)
Posted July 17, 2019 at 10:00am

House Democrats will bring a $64.4 billion measure that would provide financial lifelines to union pension plans to the floor next week.

House Majority Leader Steny H. Hoyer and House Ways and Means Chairman Richard E. Neal, the bill’s author, on Tuesday confirmed the schedule for the legislation, which has gone through the Ways and Means as well as Education and Labor panels.

The Congressional Budget Office estimate released last week outlined expected costs over the next decade for the measure, which would provide low-interest, 30-year loans to cash-strapped multiemployer pension plans. That was, however, before the number of plans eligible for assistance was increased through changes in a substitute amendment.

About 130 pension plans covering more than 1 million workers are projected to become insolvent over the next 20 years. Even before then, by 2025, the Pension Benefit Guaranty Corporation is expected to run out of funds to fulfill its role of assisting failing and failed union plans to make benefit payments.

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The bill was advanced by the Ways and Means panel on a 25-17 party-line vote last week, though it included no revenue or spending offsets to pay for the legislation.

“This is really an emergency in many respects,” Hoyer said. “But ultimately, on these pay-fors, if the Senate takes it up, if the Senate passes it, we’re going to be looking more closely at pay-fors.”

On the same day as last week’s markup, the Committee for a Responsible Federal Budget argued the legislation “could ultimately cost substantially more” than $64 billion because of a “relatively gimmicky loan approach” where pension funds get interest-only loans for 29 years and then pay a balloon payment including the full principal in year 30.

The Congressional Budget Office has projected that once the PBGC’s multiemployer program becomes insolvent, plans that were only 65 percent funded as of 2016 would be able to cover only 20 percent of the benefits they owe by 2036.

Pension funds had to be at the 65 percent funding level to receive assistance in the initial version of the bill, but that was lowered to 40 percent in the substitute amendment the committee adopted. The $64 billion estimate was for an earlier version of the bill. Joint Committee on Taxation Chief of Staff Thomas Barthold told the committee that changes made in the substitute expanded the number of plans that could be assisted.

Neal, however, has argued the bill’s mechanism allowing Treasury to sell bonds to private investors and loan the proceeds at a low interest rate to struggling plans “in the end” would make the bill “very close to revenue neutral” as loans are repaid.

“This is not a bailout, this is simply a backstop to get these plans back on their feet,” Neal said prior to last week’s markup.

Advocates of the legislation say the costs would be far less than the potential costs of inaction. If the PBGC, which insures the funds and has taken premiums to do so, were on the hook for the entire costs, or the PBGC failed and more than a million workers had to turn to the social safety net for sustenance, the costs could be higher, they say.

While House Ways and Means Democrats turned down a dozen GOP amendments to the bill on party-line votes, at least 13 Republican amendments were withdrawn with an eye toward negotiating them into a final bill. Amending the bill is still on the table.

“Well, we’ve offered them the opportunity,” Neal said.