Facebook Twitter

Will a pension bailout be enough to save America’s unions?

In a speech in Cleveland, President Joe Biden announces final rule on the $90 billion federal assistance for union pensions

SHARE Will a pension bailout be enough to save America’s unions?
President Joe Biden speaks at Max S. Hayes High School, Wednesday, July 6, 2022, in Cleveland.

President Joe Biden speaks at Max S. Hayes High School, Wednesday, July 6, 2022, in Cleveland. The speech showcased a final rule tied to his $1.9 trillion coronavirus relief package from last year. The rule allows troubled multicompany pensions to be made financially whole, ensuring full benefits for 2 million to 3 million workers and retirees.

Evan Vucci, Associated Press

In a speech to a room full of former and current union workers on Wednesday at Max S. Hayes High School in Cleveland, Ohio, President Joe Biden announced the finalization of a pension relief package.

The final rule will replace an interim rule, and go into effect on Aug. 8. Funds estimated to total between $74 billion and $91 billion were approved under the American Rescue Plan Act in 2021, and will be put toward failing pension plans.

The declining state of pension plans

As union membership declines, some managers of pension plans that pool funds from multiple employers are predicting they will run out of money soon, without external assistance. According to a report by the Pension Benefit Guaranty Corporation, “out of roughly 1,400 insured multiemployer plans, 124 plans have reported that they will run out of money within 20 years.”

As these plans become insolvent, they apply to the Pension Benefit Guaranty Corporation, a government organization, for financial support. Multiemployer plans that become unsustainable receive financial help, “technically in the form of loans,” however all loans except one are yet to be recovered and the plans lack “meaningful collateral to support the loans.”

The dire situation is not a new one. In 2014, the Multiemployer Pension Reform Act allowed critically endangered plans to suspend participant benefits “in order to avoid future insolvency.” Those in the unions took larger pension cuts, and membership fees were raised significantly to prevent these plans from going under.

One of the largest plans, Central States Pension Plan run by the Teamsters union, “is committed to paying $40 billion more in benefits to 364,000 members than its dwindling assets can support,” according to a CQ Roll Call report.

The Central States plan is also one of the most critical, and before the pension bailout, it was poised to tank the remaining funds in the government organization.

In 2018, a joint select committee was formed by members of Congress to develop a plan for legislation and recommendations to improve the issue. At the end of the allotted life of the committee, no deliverables had been created, according to the National Coordinating Committee for Multiemployer Plans.

In 2019, the pension corporation stated, “the program is very likely to become insolvent by the end of FY 2026, absent changes in the law, rising to a near certainty by FY 2027.”

Pension bailout — a Band-aid solution?

Bill DeVito, retired Iron Workers Local 17 Union member, opened the gathering with a statement at the Cleveland school, packed with his fellow union members. He said, “As president, Joe Biden has done more for unions than any president I can recall.”

The provisions in the Historic American Rescue Plan will help restore or save the pension benefits of millions of union workers and retirees, according to the White House press release.

Rep. Bobby Scott, D-Va., in a Department of Labor hearing, said “had we not acted, pensions would have failed; workers and retirees — from truckers to bricklayers — would have lost nearly everything they worked to save; and many participating employers would have been forced to close or cut jobs.”

Some critics of the funding favor “benefits cuts, higher premiums and governance changes” over bailout money, according to Brookings. Others are wary that the bill “doesn’t correct the actuarial and oversight processes that allowed the plans to become massively underfunded.”

With the final rule, the bill attempts to create a framework for multiemployer plans to be self-sufficient in the long term, though some believe it is not enough,