WASHINGTON, D.C. | December 19, 2012
Today’s hearing is our second opportunity in recent months to examine the multiemployer pension system. In June, we discussed broadly the policies governing the system and its structural challenges. Since that hearing, news reports have reminded us of the problems plaguing many pension plans and the need for reforms that will help promote a stronger system.
Hostess Brands, an iconic American company for more than 80 years, decided in November to close its doors and lay off 18,500 workers. Hostess participates in 42 multiemployer pension plans and its total withdrawal liability – the penalty a company pays when exiting a plan – could exceed $2 billion. Yet it is uncertain whether that money will be collected in bankruptcy. Those employers who remain in the plans will have to provide Hostess employees the retirement benefits they earned.
Regrettably, the Hostess story is one that is becoming all too common in the multiemployer pension system. An employer withdraws from a pension plan, leaving behind unfunded promises that then fall to the remaining employers. At times, this can drive even more employers out of the system, creating a domino effect that undermines the strength of the individual plan and the pension system as a whole.
These events have a profound effect on workers, and they also impact the Pension Benefit Guaranty Corporation. The federal agency provides financial assistance to multiemployer pension plans in distress, a responsibility that has grown significantly in recent years.
According to its annual report, PBGC has obligations of $7 billion in future financial assistance – a 57 percent increase since 2011. The agency believes there is a 30 percent chance its multiemployer insurance program will be insolvent in less than 20 years. Meanwhile, its total deficit continues to grow and now stands at $34.4 billion.
Maintaining the status quo is no longer possible. Provisions in the law governing multiemployer pensions will expire in two years, which means Congress has an important opportunity to study the system, assess its strengths and weaknesses, and pursue solutions that support workers without discouraging participation in the voluntary pension system.
To do this successfully, we need the facts as quickly as possible. Unfortunately, the administration has a history of delaying the facts and slowing the work of this committee. For example, it took nearly nine months to get answers to questions submitted by members of the committee – both Republican and Democrat – after our hearing with Director Gotbaum in February. Only now are we able to complete the hearing record.
I am also troubled by two missing reports that were due last year. These reports should provide important details on multiemployer pensions, including the sufficiency of current premium levels and the impact of funding rules on small employers. The law requires PBGC to finish these reports by the end of last year and yet we are still waiting. We are now told to expect the reports by the end of this year.
Congress is ultimately responsible for legislative changes that will improve the long-term health and stability of the multiemployer pension system. We cannot do our work if the administration fails to do its job in a timely manner. Blaming changes to the law enacted six months after the reports were due is not an acceptable excuse.
The success of the multiemployer pension system depends upon many factors, such as a strong economy, practical promises, and a diverse group of participating employers. It also requires policymakers working together on reforms that serve the interests of workers, employers, and retirees.
Director Gotbaum, you play a vital role in that effort. I hope you will help us get the answers we need without unnecessary delay. Thank you for your service and we look forward to working with you.
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