The co-chair of a special committee tasked with solving a crisis that threatens the pensions of 1.3 million Americans said Congress must shore up both the pensions and the insurance company that insures those pensions.
Sen. Sherrod Brown, D-Ohio, said during a hearing of the Joint Select Committee on the Solvency of Multiemployer Pension Plans Thursday that any plan must effectively do both in order to keep the problem form recurring.
That means shoring up the multiemployer pension plans such as the Central States Plan, which covers 60,000 Ohioans, as well as shoring up the Pension Benefit Guaranty Corporation, which insures such plans.
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The multiemployer plans allow employers to pool resources and provide their workers retirement security. For years, most plans ran at a surplus. But market crashes between 2000 and 2009, corporate bankruptcies that reduced the number of companies paying into the plans, and new laws have now rendered many plans virtually unsalvageable.
Brown said simply shoring up the PBGC would do nothing to help pensioners who are at risk of seeing their pensions default, nor would it help the businesses who owe their retirees promised pensions.
“Ask anyone who’s ever totaled a car or dealt with flooding or fire in their homes – you’re sure glad you have insurance,” he said. “But you’d much rather have avoided the disaster in the first place.”
Under questioning from Brown, PBGC director Tom Reeder said that if nothing is done, workers and retirees will continue to lose the benefits that were promised to them as part of their employment agreements, companies will continue to make contributions for active workers for benefits they’ll never get and the PBGC would have to cut the minimum benefits that its obligated to pay to retirees if a plan fails.
Reeder estimated it would cost $16 billion over 10 years to shore up the PBGC alone for two decades. But the PBGC’ failure, he said, would be “catastrophic.”
Sen. Rob Portman, a Republican on the panel, said if the PBGC fails, Central States retirees who will already see their pensions cut if they are not shored up would see reductions of about 90 percent if the PBGC becomes insolvent.
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“As bad as it is for these retirees and for these individual plans it also has a broader impact on our economy, and not just the local communities that will obviously be affected but also the larger economy,” Portman said.
The committee has scheduled two more hearings in June, and another two in July. Brown said the committee, which has until November to come up with a solution that Congress will vote on in an up-or-down vote, will begin negotiating a solution to the crisis in July.