WASHINGTON, D.C. | April 29, 2015
Today’s hearing represents the next step in a long process to strengthen the retirement security of America’s workers by reforming the multiemployer pension system. This effort began more than three years ago for a simple reason: A pension crisis threatened the well-being of countless workers, employers, and retirees, as well as American taxpayers.
Without congressional action, this crisis would have forced businesses to close their doors and lay off workers, retirees would have had their benefits cut, if not wiped out entirely, and taxpayers would have been on the hook for a multi-billion dollar bailout of a bankrupt pension system. As a nation, and more specifically, as elected policymakers, we had a responsibility to act.
That is why this subcommittee convened numerous hearings and called more than a dozen witnesses – including employers, union leaders, administration officials, and retiree advocates – in order to thoroughly examine the challenges facing the system and discuss possible solutions.
As part of this effort, in the spring of 2014, Chairman Kline discussed four key principles necessary for any serious, responsible reform of the system. Those principles included protecting taxpayers, encouraging greater employer participation, and providing trustees new tools to restore troubled plans back to financial health.
At the time of the chairman’s remarks, only one proposal embodied all four principles, and that was the proposal crafted by the National Coordinating Committee for Multiemployer Plans or NCCMP. A coalition of management and labor representatives organized by NCCMP spent months crafting a consensus proposal that would give trustees the best shot they had to save dying pension plans without a taxpayer bailout. No one else came forward with a credible plan to responsibly reform the system.
The NCCMP proposal became the framework for a bipartisan legislative solution the president signed into law last December. This new law extended funding rules put in place almost a decade ago, raised premiums to improve the financial outlook of the federal backstop for multiemployer pension plans, and allowed trustees to adjust benefits as a last resort to rescue a plan from insolvency.
This was not an easy thing to do, but doing nothing would have been far worse. Regardless of whether we did or didn’t act, retirees in badly failing plans were going to have their benefits cut. That’s the harsh reality we were forced to confront, and the choice we faced was to either watch the federal government inflict maximum pain on the maximum number of individuals, or provide more flexibility to save these plans and ensure retirees are better off.
George Miller, former congressman from California and senior Democrat of our committee, described these bipartisan reforms this way: “The approach we have put forward, which is backed by business and labor leaders, will secure the multiemployer pension systems for millions of current and future retirees.”
Congressman Miller urged his colleagues to “trust these workers enough to give them this opportunity and this responsibility to make these decisions about their retirement.” That is precisely what we did, and as difficult as it was, it was the right thing to do.
Now, it is time to complete this important effort. One principle I neglected to mention earlier in is the subject of today’s hearing: Modernizing the multiemployer pension system. Through our continued oversight, it has become abundantly clear that workers need new options to help plan for their retirement.
As part of its work, NCCMP devised a new “composite” pension plan design, combining aspects of both defined benefit and defined contribution plans. The goal of the proposal was to deliver annuitized, lifetime income without the drawbacks associated with traditional multiemployer defined benefit plans.
For example, many plans face unfunded liabilities that threaten the retirement security of their participants. Current rules discourages employers from agreeing to participate in the system and poses a financial burden for those who do. Finally, despite improvements resulting from the new law, the federal backstop for these plans continues to face fiscal challenges in meeting its modest benefit guarantees.
Our witnesses today will describe these and other shortcomings. They will also explain how the composite plan design could address these concerns while providing robust, well-funded retirement benefits for America’s working families.
I look forward to our discussion, and more importantly, to finishing this important effort. It is easy to find areas of disagreement on this subcommittee, especially as we address policies so central to the well-being of the American people. But I have always appreciated the bipartisan approach the committee has taken on this important issue, and I pledge to do my part to continue that tradition in the work that lies ahead.
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