The fix for multiemployer pension plans

Galen Munroe, spokesman for the Teamsters union, said in an email: "We are going to decline comment for your story."

PBGC won't rescue these plans

The amount the PBGC is already stretching to cover is just a fraction of what union retirees have been promised. Multiemployer pensions can provide very generous benefits, with some journeymen employees anticipating more than $60,000 a year. But the PBGC has never promised to match pensions that high. Unlike its insurance of single-employer plans, the PBGC doesn't take over multiemployer plans and assume responsibility for paying all the benefits up to a certain cap. Instead, the agency pays administrative costs and a minimum amount to retirees.

The PBGC doesn't offer an acceptable solution for hardworking union workers, nor does it provide sufficient relief for union employers faced with uncertain obligations, says Marco Giamberardino, executive director for government affairs for the National Electrical Contractors Association.

Josh Gotbaum, director of the PBGC, says the program was designed decades ago with "low guarantees and low premiums, and it worked fine for 30 years. But the world has changed and the program hasn't."

He adds that the PBGC ought to revisit how these pension plans are insured at PBGC. "The issue is, what do you do for the minority of plans that are in trouble that doesn't mess up the majority plans that are not in trouble? The thing we don't want to do is taint a good system of retirement by tarring everyone with the same brush. Any change needs to be made carefully, thoughtfully and gradually."

Giamberardino says his union's national plan, as well as its 112 local plans, are mostly in good shape, but it does have a few in what is referred to as the yellow zone -- troubled -- as well as in the red zone -- deeply troubled. If those plans can't be turned around, workers can expect to receive no more than $13,000 annually from the PBGC -- assuming the PBGC remains solvent enough to pay that.

"No one wants to get to that point," Giamberardino says. "The heads of many of our member companies were apprentices and journeymen once, and they continue to be card-carrying union members. They understand what it means to be an employee and how important those pensions are."

Legislative, regulatory solutions

It is critical for unions and employers to craft a solution this year because many of the provisions of the Pension Protection Act of 2006, which offer tools for unions and employers to bail out troubled plans, expire at the end of 2014, says Joseph P. Paranac Jr., labor attorney at LeClairRyan in Newark, N.J.

Paranac works with union employers to help them manage their pension obligations. He says the available remedies in the Pension Protection Act for fixing troubled plans seemed severe when the law was passed in 2006, but since the economic meltdown in 2008, they don't look so harsh. Paranac thinks Congress ought to take pressure off multiemployer plans by extending the Pension Protection Act right away. "Nobody wants the act to expire and go into oblivion," he says.

Some union employers are angry and think any proposal that will cost them money is the wrong one. The National Coordinating Committee for Multiemployer Plans, which released the "Solutions Not Bailouts" report, calls for educating members of regulatory agencies and Congress to adopt their recommendations.

But some image problems are hard to overcome. As one Teamster member, who asked to remain anonymous, says, "The rumors have been running rampant for years that because of bad management, there will be no money in the pension fund for the retirees."

Giamberardino shrugs at union members with that kind of attitude: "Do you keep letting the roof leak, or do you fix it?" he asks.


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