Although the bipartisan Joint Select Committee on the Solvency of Multiemployer Pension Plans failed to vote or come up with a firm package of potential solutions by its Nov. 30 deadline, Republican and Democratic lawmakers have made progress in the quest to strengthen the finances of these underfunded pension plans.

In fact, it’s possible that the work the committee achieved in 2018 will result in a solution sometime in 2019, according to Hon. Earl Pomeroy, senior counsel of Alston & Bird, a former congressman who will be the keynote speaker at the Made in America 2019: The 16th Annual Taft-Hartley Benefits Summit, which will take place January 20-22 in Las Vegas.

Pomeroy will examine the legislative efforts related to the financial security of multiemployer pension plans in his keynote address, and he will continue the discussion immediately after it during a fireside chat with Joseph A. LoCicero, chairman of The Segal Group and an expert on multiemployer pensions.

Both Pomeroy and LoCicero have been closely following the progress the Joint Select Committee on the Solvency of Multiemployer Pension Plans has made since it was established last February. The 16-member panel, which was made up of four Democrats and four Republicans from each chamber of Congress, was tasked with finding solutions to improve the solvency of multiemployer pension plans. The committee, which will disband at the end of 2018, failed to finalize a bipartisan agreement before a Nov. 30 deadline. However, members of the temporary committee still believe a bipartisan solution is possible, according to Sen. Orrin Hatch (R-Utah) and Sen. Sherrod Brown (D-Ohio), who co-chaired the committee.

A brief history lesson

Multiemployer plans, sometimes called Taft-Hartley plans, are maintained under collective-bargaining agreements between two or more employers, usually within the same or related industries, and a labor union. Also involved: The Pension Benefit Guaranty Corporation, the government’s pension insurer, which insures the pension benefits of approximately 40 million American workers and retirees.

A large minority of these multiemployer pension plans, which cover approximately one million of the 10 million participants, are in a financial crisis and are projected to run out of money within the next 15 years. The reason for the financial crisis? A combination of factors, according to an analysis by Cheiron Inc., an actuarial consulting firm. Those issues included the stock market crash during the Great Recession; declining industries, which left fewer active plan participants and employers who exited the plans due to corporate bankruptcies, leaving the remaining employers responsible for the underfunded liabilities.

In addition, the Pension Benefit Guaranty Corporation, which provides financial assistance to plans that are unable to pay basic guaranteed benefits in full when due, expects its multiemployer insurance program to run out of money within 10 years. This means some of the retirees whose plans paid premiums to the Pension Benefit Guaranty Corporation will be left with little or no benefits.

The establishment of the Joint Select Committee on the Solvency of Multiemployer Pension Plans in early 2018 was an “unprecedented effort for Congress to identify the breadth and depth of the problem and advance a response in the face of a deteriorating situation,” says Pomeroy. Generally, these pensions are not a matter for political consideration in Congress, he says.

“It is a very technical undertaking and I think the members and staff were serious in trying to learn about the problem,” he says. “Everyone was disappointed that in the year-end, no consensus was reached, and no final architecture was developed to respond to it. But we learned a lot in the past year. The participating members, most of whom will be part of the new Congress, learned a lot and there are more leaders to direct policy in the debate going forward than they had before they went into this extensive learning committee.”

What the future may hold

Pomeroy says the multiemployer plan community and the joint committee learned over the course of the past year what was politically doable versus what is impossible. For example, he says that steep benefit reductions are not acceptable to Democratic legislators and any solution that involves those deep cuts will not pass. Republicans also will not approve of a solution that includes substantial loan programs to pension plans.

It’s possible that the Butch Lewis Act may serve as a starting point for discussions in 2019, but Pomeroy isn’t convinced that Republicans will support this approach. The Butch Lewis Act would use proceeds from Treasury bonds to fund an emergency loan program to preserve the pension benefits.

LoCicero says that what came out of the committee meetings and hearings is a recognition that the government must solve the problem for plans that are going to run out of money and that the Pension Benefit Guaranty Corporation, which is supposed to guarantee the benefits, will soon become overwhelmed. “They have to do something,” he says. “The big question is where is the money going to come from to solve the problem? There has to be the right balance among taxpayers, other multi-employer plans, employers and unions. The whole balancing act is highly controversial. Right now, most in the community felt what was being proposed was out of balance.”

The multiemployer community feels it is too much to be asked to bail out the 10 percent of plans that are in trouble and believes that perhaps tax payers should take on more of the costs, according to LoCicero. Another option is for retirees and plan members to pick up more of the costs by way of lower benefits. “It’s really challenging, almost to the point of a moral question, how do you fix the problem for these folks?” LoCicero wondered.

Furthermore, the joint committee wanted to make sure the problem doesn’t occur again, so it was also looking to tighten the funding rules for healthy plans. And that caused a potential problem because some of the proposals took healthy plans and moved them into a troubled-plan status. And no one liked that approach.

“But the concept to try not to repeat the problem does make sense. And so, the devil is in the details in both aspects of the program…But I think it’s clear that there is a recognition in Congress and the multiemployer community that something has to be done. So, I suspect it will be done in the next year because 2020 is an election year again,” LoCicero says.

Pomeroy is hopeful that the new Congress comes up with a solution in the first or second quarter of 2019. “The longer it goes, the less likely, in my opinion, something will happen,” he says.

Editor’s note: Pomeroy and LoCicero will discuss the latest developments related to the solvency of multiemployer pension plans on January 21, the first full day of the Made in America 2019: The 16th Annual Taft-Hartley Benefits Summit.