Democrats’ Relief Bill Shores Up A Million People’s Pensions. That’s A Huge Deal.
Democrats in the Senate narrowly passed a mammoth coronavirus aid package Saturday morning that is likely to become a landmark for progressive legislation. The $1.9 trillion deal includes another round of stimulus checks, an extension to federal unemployment benefits, billions in aid for cities and states, and an increased child tax credit.
In fact, the legislation includes so many notable, big-ticket provisions that it’s gaining almost no attention for another notable feature: rescuing the pensions of more than a million workers and retirees.
The Senate bill, like the version that recently came out of the House, addresses what has become a crisis among multiemployer pension plans. These plans are negotiated between unions and employers in fields where workers tend to change jobs a lot, like construction, trucking and mining. Some of them have fallen into rough shape as industries have changed and union jobs have disappeared.
As the most troubled funds start to run out of money, so will the multiemployer pension program at the Pension Benefit Guaranty Corporation (PBGC), the government-run entity that insures the plans. Due to the bad fiscal shape of more than a hundred multiemployer plans, the PBGC projects that its insurance program would become insolvent by 2026. If that happened, the PBGC would fail to cover the benefits retirees are owed, leaving many with pennies on the dollar.
After years of trying and failing to pass a fix in Congress, Democrats decided to attach one to the COVID-19 relief plan, arguing it was essential to the retirement security of more than a million people. The provision approved by both the House and Senate provides $86 billion in direct aid for the pension funds that need it, paid from the Treasury through the PBGC.
If Congress did not help, retirees could end up with pennies on the dollar for their hard-earned pensions.
That money would be partially offset by increased insurance premiums on certain pension funds, leading to a total estimated cost of $65 billion.
The bill passed by the Senate this weekend includes several changes and now goes back to the House for approval before it can reach President Joe Biden’s desk. But the pension piece has not been tinkered with and is expected to be part of the final product, ending years of negotiations in Congress that until now went nowhere.
The International Brotherhood of Teamsters, the union with the membership most affected by the troubled pension funds, said in a statement it was “elated” with the bill’s passage. More than 50 of the union’s pension funds would be eligible for aid, including its Central States plan, which has 400,000 participants and beneficiaries.
The benefits in multiemployer plans tend to be modest and are crucial for many retirees. The typical payment in the Central States plan comes out to around $15,000 a year for a beneficiary. A lot of workers forwent raises under the expectation those pensions would pay out after they retired.
Sen. Sherrod Brown (D-Ohio), who has spent years working on this issue, noted that a lot of the workers whose pensions were threatened work in essential fields, like trucking and food processing. “Even before the pandemic, workers, businesses, and retirees faced a crisis and were in dire need of our help,” Brown’s office said in a statement.
We can protect retirees’ hard-earned pensions and spare folks a lot of harm, or we can kick the can further down the road.
Rep. Bobby Scott (D-Va.)
Rep. Bobby Scott (D-Va.), who has pushed the measure on the House side, recently told HuffPost that if Congress allowed the pension funds to collapse it would be costly in other ways, with retirees needing government aid, like food stamps, to get by.
“We can protect retirees’ hard-earned pensions and spare folks a lot of harm, or we can kick the can further down the road and end up costing the taxpayers far more in the long run,” Scott said.
Republicans have objected to the provision’s inclusion in the COVID-19 relief bill, calling it a bailout for unions. But Democrats did not need their cooperation to pass it. They used a process known as budget reconciliation, which allows them to pass legislation with a simple majority, rather than the 60 votes necessary to surpass a filibuster.
The Senate approved the bill Saturday along a party-line vote of 50-49. The House is expected to take it up on Tuesday.
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