Thousands of people, many of them union retirees, rallied Thursday in Columbus, Ohio, in the name of Butch Lewis, a truck driver and Teamster union leader who died in 2015 after fighting for decades to save retirees’ pensions.
The retirees say one possible solution — the Butch Lewis Act of 2017 — is the best chance currently on the table to save their pension benefits.
Others say it’s just a bailout.
The crowd, which numbered 10,000, according to the Columbus Dispatch, gathered outside the Ohio statehouse. It was made up of members of the Teamsters, Miners and Bakers unions from across the country.
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Among them were about 40 members of the local Missouri Kansas City Committee to Protect Pensions, who rode to Columbus in a bus. The rally was organized around a planned Friday hearing, also in Columbus, for a congressional committee tasked with solving the multiemployer pension fund crisis.
Central States Pension Fund, the largest, faces insolvency by 2025 and would leave more than 30,000 Missourians without the monthly pension checks they were promised. There are 114 multiemployer plans considered “critical and declining,” and more than a million people total in the U.S. could be affected in coming years.
If enough lawmakers agree on a fix, a bill would be hustled through Congress. The committee plans to issue its final recommendation in November after the midterm election.
The Butch Lewis Act is supported by 22 Democrats in the Senate and zero Republicans, and a mostly Democratic group of 167 in the House.
Supporters say it’s the only comprehensive, realistic proposal on the table currently that could fix the pension problem. Opponents say it’s simply an ineffective bailout — kicking the can down the road without solving the real problem.
The act would create a new Pension Rehabilitation Agency in the Department of Treasury. The agency would raise money by issuing low-interest, 30-year government bonds to private buyers.
Then the agency would accept applications from failing pension funds, like Central States, that presented a plan to invest the loans to build wealth and avoid insolvency for 30 more years. The plans receiving loans would be required to pay 100 percent of retirees’ benefits.
The pension plans would make low annual interest payments for 30 years, after which they’d pay the principal back to the agency and the agency would pay back the private investors. If the pension plans don’t have the money, they’d negotiate with the agency for more time, or the loans could be forgiven.
If the pension plans invest successfully enough, it would barely cost the taxpayers a dime, proponents say.
An analysis of the 114 multiemployer pension plans that are critical and declining, and thus eligible for loans under the Butch Lewis Act, projected that all would be able to pay back their loans. The analysis was conducted by Russell Kamp and Ronald Ryan, experts in assets and liability management, who wrote about it in a commentary for Pensions&Investments.
Their analysis showed that because the loans buy so much time for the pension funds, 30 years, the funds should be able to invest carefully and still be able to pay back the government.
“Our team’s analysis of the 114 plans does not forecast any plan failures! In fact, the annual projected return on asset assumption, or ROA, to ensure solvency is only 6.5% for each of these plans. Substantially lower than their current ROA objective (7.5% to 8%),” Kamp and Ryan wrote. “We need a prudent recovery/preservation strategy and not a bailout, which the Butch Lewis Act is not!”
So is the plan a bailout or not?
“The arguments that it’s not a bailout are just trying to disguise it,” said Rachel Greszler, a research fellow at the Heritage Foundation, a conservative think tank.
“By definition, if you’re giving someone money they wouldn’t be able to get from the private sector, that’s a bailout,” she said.
Referring to a requirement that only failing pension plans would be eligible, Greszler said, “that’s kind of an odd way to qualify for a loan, by basically saying you’re going bankrupt and won’t be able to repay the loan.”
If the plan goes through, she said, it will send a message to other pension plans that they don’t need to be responsible in their financial stewardship.
Plus, she said, taxpayers could be on the hook for a direct bailout down the line through a separate part of the bill if things go south again for the pension funds. And because the bill says that plans failing to pay back their loans could be eligible for forgiveness, it opens up the entire plan to just being one big bailout.
“It’s a big loss,” Greszler said. “It’s tragic and it’s unfair for those individuals, but going forward it’ll hurt more people if you let the government go in and bail everyone out.”
Central States tried to cut benefits in 2016 to stave off insolvency but ultimately failed to do so after intense pushback from retirees and a ruling from Kenneth Feinberg, a special master for the Treasury. The fund has slowly declined over decades, but then was hit with a one-two punch: It lost billions of dollars in investments from the 2008 financial crisis, and UPS pulled its employees, taking more than 40,000 dues-paying workers away from the plan.
Central States now has more than 400,000 members and gives out $4 for every $1 it gets in. Its unfunded liabilities total more than $17 billion.
“The taxpayers weren’t the ones who made those promises,” Greszler said. She compared the situation to one where someone invested all their retirement savings in a single stock that then lost all its value. In that situation, it’s not a neighbor’s job to give them money.
“Just because it’s a big group of people, it shouldn’t be any different than considering an individual who had their own retirement plan,” she said.
For some, the situation is less abstract.
John Anderson, 65, is a retired dockworker who lives in the Northland. He worked for 30 years until he was forced to retire after 12 orthopedic surgeries. Now he walks with a cane 90 percent of the time. He lives paycheck to paycheck on his $3,000 monthly pension check.
His wife had her second spinal fusion surgery in April, and he’s currently taking care of her, and when she’s healthy enough he’ll schedule a shoulder replacement surgery he needs, and it’ll be her turn to take care of him.
“If they were to cut me, I would lose everything,” he said.
Anderson said he’s also a good example of the kind of widespread economic devastation that could occur if plans like Central States are simply allowed to go belly-up. The loss of his pension wouldn’t just affect him, he said, it would spread outward like a wave, damaging his whole family and community. That would be the case for many others who rely on their pensions.
“The Republicans are afraid this will turn into a bailout and cost the taxpayers greatly,” Anderson said. It’ll cost even more when people who are living check to check lose out on their pensions and need to go on state or federal assistance, he said.
There’s also a sense among union members and retirees that the federal government should be responsible for taking care of them because unions and pension funds have been federally regulated for decades, and the threat of insolvency has been obvious for some time.
“Congress has to do something. That’s their project. They’ve kicked that football around for decades,” Anderson said.
But Wes Epperson, co-director of the Missouri Kansas City Committee to Protect Pensions, isn’t enthusiastic about the prospects of the congressional committee finding a solution.
“My personal feeling is that I don’t know the committee is going to be able to resolve this,” Epperson said. “It may come down to the election in November.”