WASHINGTON, D.C. | May 1, 2014 -
Good morning. I appreciate that kind introduction and would like to begin by extending my thanks to Bloomberg Government for hosting us this morning, as well as to the Quality Construction Alliance for its support of today’s event. You are shining light on an important issue that frankly hasn’t received the attention it deserves.
President Reagan once said that “status quo… is Latin for ‘the mess we’re in.’” I would like to discuss for a few moments the mess we face in the multiemployer pension system and the urgent need to enact bold reforms.
Why is multiemployer pension reform so important? Because the path we’re on is not sustainable; the path we’re on will force businesses to close their doors and lay off workers; the path we’re on will expose taxpayers to greater risk of a multi-billion dollar bailout; the path we’re on will destroy the retirement security of families across the country.
More than 10 million Americans participate in a multiemployer pension plan, including roughly three and a half million retirees. These men and women helped build our roads and bridges; they transported goods from factory floors to store shelves; they delivered energy to power our homes and businesses; they made it possible to reach into space and helped keep our homeland safe.
For decades these men and women worked hard providing for their families and helping to make this nation the greatest on Earth. The same is true for those in the workforce today, the teamsters, builders, miners, machinists, and store clerks – to name a few – who labor every day to meet the needs of their loved ones and country.
Throughout their careers, these men and women were promised that a multiemployer pension would ensure financial security during retirement. Each year in the workforce was another year closer to a retirement filled with hope, a retirement built on the expectation this promise would be kept and their future was financially secure. Yet for many Americans, this promise is now in jeopardy.
The multiemployer pension system is a ticking time bomb that will inflict a lot of pain on homes and workplaces. According to the best information available, multiemployer plans have $818 billion in benefit liabilities yet only $397 billion in assets, which means collectively plans face a $421 billion funding shortfall. The Pension Benefit Guaranty Corporation – the federal backstop to defined benefit plans – warns its multiemployer pension program will be insolvent in fewer than 10 years, thanks to more obligations and fewer resources. I’ll let the technical experts discuss later today the underlying causes of these challenges.
However, there is one leading culprit worth mentioning: A persistently weak economy. The same failed policies that foster high unemployment and stagnant wages also exacerbate the problems plaguing the multiemployer pension system. Returning to policies that promote robust growth would go a long way toward restoring the prosperity every working family needs.
Unfortunately, an economy firing on all cylinders can’t save the most severely troubled pension plans from insolvency. One of the largest plans pays $5 in benefits for every $1 it receives in contributions. Another plan has roughly six retirees for each active employee. These are systemic problems that afflict other plans as well. It is only a matter of time before a sizable number of large plans go bankrupt.
What happens then? For starters, the men and women in these plans will fall onto PBGC and many – if not most – will have their benefits cut. The PBGC will then be overwhelmed and unable to continue offering the support it has provided for nearly four decades, leaving some retirees with nothing. Finally, we will see a domino effect across the system, placing plans that are in good shape now on the brink of ruin in the future, spreading risk and uncertainty to more employers, workers, and retirees.
This is not a pretty picture by any means, but we have to be brutally honest about the magnitude of the challenges that exist. It’s easy to think we are dealing with just dollars and cents. Fundamentally we are dealing with the livelihood of real people, our friends, neighbors, and relatives. Lives were built around a promise and we have to help find a way to keep that promise.
The good news is there is an effort underway to address the problem. A group of business and labor representatives has put forward a package of reforms entitled, “Solutions, Not Bailouts.” Crafted by the National Coordinating Committee for Multiemployer Plans, or NCCMP, the proposal reflects key principles that should be a part of any serious legislative reform.
First, the proposal provides a framework for a modern multiemployer pension system. Twentieth-century policies can’t keep up with a 21st century workforce. It’s time to start being more creative about the options workers should have to plan for their retirement.
Second, the proposal encourages greater employer participation. We need to stop the exodus of employers from the multiemployer system. Just as important, we need to remove barriers that discourage new employers from joining. Expanding the pool of participating employers will reduce risk and strengthen the system.
Third, the proposal provides trustees with new tools to restore deeply troubled plans back to financial health. When they are out of options and fighting for survival, multiemployer plans need more flexibility to avoid insolvency. One idea in particular has attracted a great deal of attention, one that would allow for a reduction in earned benefits. A few years ago such an idea would have been unthinkable, but we are forced to confront a hard truth.
If we do nothing, benefits will be cut. Let me repeat that: If we do nothing, benefits will be cut. It’s only a question of when and by whom. We could sit back, let these plans fail, and watch the federal government inflict maximum pain on the maximum number of people. Or we can allow those responsible for these plans to adjust benefits as a last resort and in a way that accounts for the needs of its participants. The choice NCCMP offers is between an axe in the hand of a first year med student or a scalpel in the hand of a trusted surgeon.
Fourth and finally, the proposal protects taxpayers. By offering new alternatives to the old model, inviting more employers into the system, and saving troubled plans, NCCMP has laid out a path that will put multiemployer pensions on more sound financial footing and help end the threat of a taxpayer bailout.
The president of the AFL-CIO Building and Construction Trades Department described the package of reforms as “reasonable and workable.” The head of the Associated General Contractors of America said it’s a “pragmatic, reasonable…self-sufficient approach” to preserve these pensions. It’s not every day you see labor and management working side-by-side on such an important issue. NCCMP has shown what’s possible when we work together in good faith. That is precisely what we intend to do in Congress.
Under the leadership of our subcommittee chairman, Congressman Phil Roe, we have held half a dozen hearings to examine the problems and possible solutions. We are actively engaging key stakeholders, including employers, union leaders, and retiree advocates. We are also working with members on both sides of the aisle and on both sides of the Capitol, as well as the administration, to find common ground and unite behind a responsible legislative solution.
I know some of what’s being discussed is controversial and not everyone agrees with the ideas that are on the table. We welcome the debate and opposing views. If you have suggested reforms that embody the principles I’ve just discussed, we want to hear from you. But we need to hear from you soon.
With each passing day there are fewer choices and tougher decisions to make. We have to get this done. We have to get this done for employers struggling to run successful businesses. We have to get this done for taxpayers already drowning in red ink. More importantly, we have to get this done for those men and women clinging to the promise they can enjoy a retirement that is financially secure. I look forward to working together on this important effort. Thank you.
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