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Biden to Unveil Bailout Plan for Multiemployer Pension Funds (1)

July 6, 2022, 4:45 PMUpdated: July 6, 2022, 9:12 PM

The federal government’s private-sector pension insurer is expected to soon unveil a permanent rule detailing its long-term strategy for bailing out severely underfunded multiemployer pension plans.

Congress approved $94 billion for union-brokered pension plans as part of President Joe Biden‘s 2021 Covid-19 recovery plan, but the law gave the Pension Benefit Guaranty Corporation discretion to set the parameters by which plans would receive federal stimulus dollars and for how long that money would last. The assistance is known as the Special Financial Assistance (SFA) Program.

PBGC published an interim final rule last July that set strict limits on the ways plans could invest the money they receive. That set off a wave of complaints from employers and unions that feared those limits could sabotage the economic recovery Congress had promised.

The final rule is expected to take into account those concerns, using two—instead of one—discount rates in their calculations to ensure that the approved assistance money, which is restricted, “is more realistic given the investment limitations on these funds,” according to a White House fact sheet. A separate rate will apply to the unrestricted pension funds.

The president spoke on the final rule at an event in Cleveland Wednesday, saying that for many workers, the “goal posts keep moving.”

“Unfortunately, this happens to people who need it most—working people in this country,” he said. “I’m here to say we’ve done something about it.”

Program Changes

According to a copy of the final rule released by the PBGC, the agency is making changes that revise part 4262 of the Employee Retirement Income Security Act of 1974, including “changes to the SFA measurement date, the methodology to calculate SFA, permissible investments of SFA funds, the application of conditions on a plan that merges with a plan that receives SFA, and the withdrawal liability conditions that apply to a plan that receives SFA.”

The agency estimated that under current conditions, the program will assist about 200 financially troubled plans, according to the rule. The PBGC also estimated that based on its modeling, total projected amount distributed to plans will be between $74.3 billion and $90.8 billion.

The final rule is scheduled for publication in the Federal Register July 8, and will take effect Aug. 8.

Rule Reactions

Congressional Democrats applauded the final regulation, saying it provides relief to workers who have struggled with inflation and the Covid-19 pandemic.

“Today’s announcement from the Biden Administration will ensure we continue to build on that progress so this program can serve even more struggling pensions, help all plans by getting the entire multiemployer pension system on stronger footing, and protect even more workers from having their hard earned benefits cut at the worst possible time,” said Senate Health, Education, Labor and Pensions Committee Chair Patty Murray (D-Wash.) in a written statement.

The private-sector pension insurer protects some benefits of about 10.9 million workers and retirees, according to the White House fact sheet. The PBGC’s pension program was previously projected to become insolvent by 2026.

Nearly 30 group plans have already received special financial assistance under the interim rule PBGC issued last year. A senior agency official said these plans can submit a supplemental application for additional assistance, and may be eligible to receive more funds.

Sen. Sherrod Brown (D-Ohio), said he’s been working for years to ensure the plans remain solvent. Brown, along with six other Senate Democrats, sent critiques of the interim final rule to PBGC leadership last year.

“The anxiety that thousands of Ohio families are feeling will be lifted thanks to the hard working retirees and workers who never gave up on this issue,” Brown told Bloomberg Law in an email. “I am grateful that the Biden administration adopted many of the suggestions I made during the notice and comment period, and produced a strong program that will protect these plans for decades to come.”

US Treasury Secretary Janet Yellen said in a written statement that the initiative will shore up the solvency of the program for decades to come.

“Today’s action by President Biden ensures that millions of hardworking Americans will receive the pension benefits they worked all their lives for and feared were lost,” Yellen said. “This action will have a significant impact on the lives of workers and their families, and represents one of the most meaningful improvements in our nation’s retirement security in years.”

(Updated with additional reporting throughout.)

To contact the reporters on this story: Austin R. Ramsey in Washington at aramsey@bloombergindustry.com; Paige Smith in Washington at psmith@bloomberglaw.com

To contact the editors responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com; Genevieve Douglas at gdouglas@bloomberglaw.com