The hearing is timed at a critical point in the committee’s work. By the end of the month, the committee will conclude the fact-finding part of its investigation and will move on to the hard part, finding a solution.
Their solution, due in November, must be virtually bullet-proof. It has to be approved by five out of eight members of each party on the committee and then it has to be able to pass both the House and the Senate by an up-or-down vote, with no amendments allowed.
“Nobody’s wild about doing this,” said Brown, an Ohio Democrat who fought for the creation of the committee. “There is no easy solution. If there were an easy solution, Congress would’ve done it a long time ago.”
But doing nothing, he said, “is not an option.” Failure would mean businesses on the hook to pay pensions could be at risk, retirees could lose money, and the Pension Benefit Guaranty Corporation, the federal entity that insures pensions, could go under.
At issue are about 150 to 200 of the 1,400 multiemployer pension funds in the nation, which were created by companies that pooled their resources to provide their employees with retirement funds. For years, most of the plans ran at a surplus, but the recessions, combined with corporate bankruptcies and a rash of baby boom retirements have taken a toll on the solvency of the pensions.
Those who watch the issue worry that if those 150 to 200 plans go under, the others could fall like dominoes, creating the potential for a catastrophe that could impact a vast swath of the economy.
“The only thing we know is that nobody knows for sure” what will happen if the plans fail, said Aliya Wong, executive director of retirement policy at the U.S. Chamber of Commerce.
She said if the plans fail, the PBGC would initially pick up the cost of the pensions, but that retirees would receive their pensions at a lower rate. The PBGC also would face the possibility of going bankrupt, leaving questions about what the employers’ responsibility would be.
Employers already paying high contributions would be obligated to pay more. And if one large company involved in the multiemployer plan goes bankrupt, there’s a possibility that other plans would have to pick up the slack. In short, the domino effect could be devastating.
“This isn’t just a retiree problem,” Wong said. “It’s a business problem and it’s a jobs problem.”
She and others see few solutions that don’t involve some sort of loan program that would help offset the potential for catastrophe. But Republicans have been resistant, and part of the reason that the committee was set up was a bill Brown introduced — the Butch Lewis Act, named after a Cincinnati-area retiree who died fighting for his pension — stalled in the Senate. That bill would have created a low-interest, 30-year federal loan to troubled pension plans, with no cuts to retiree benefits.
Brown said the hearings so far have been designed to “systematically build a case” to show “that failure is just not an option.”
“I think the members of the committee have seen that we’ve got to come up with something,” he said.
Portman admits there’s a “fault line” between Republicans and Democrats on the issue, with Republicans opposing a loan program and Democrats saying the solution should be a loan program.
“My role has been from the start that we have to take the two points of view and reconcile them,” he said.
He said any solution that does not involve what he calls “shared responsibility” will likely “not stand the test of time.” But he said he won’t introduce a bill. Instead, he’ll push the committee to work together.
“I worry that people getting locked into their positions is going make it impossible to find a solution,” he said.
But a solution won’t come easy, he said. The structure of the committee, with the requirements for majorities from both parties, he said, “is very challenging.” And the timing – the solution is timed to be presented around Election Day – does not help.
“But that’s what we have to work with,” he said.
He is not the only one worried. Mike Walden, president of the National United Committee to Protect Pensions, said he sees the current process “as being deadlocked.”
Walden, one of six scheduled to testify at Friday’s hearing, said the only solution likely to pass would be one with “shared responsibility” – a solution that would involve pensioners giving up some of their pensions and employers as well as taxpayers also kicking in.
“Nobody is going to be 100 percent happy on this,” he said.