TAUC Legislative & Regulatory Update, December 2017
The pace of activity in Washington has picked up significantly over the past month as Congress works on tax legislation and figures out a path forward on completing action on the fiscal year 2018 appropriations bills. After a relatively slow legislative session — due to the focus and effort on repealing the Affordable Care Act — Congressional republican leaders hope to have the tax bill and an omnibus appropriation to the President for signature by Christmas.
There has also been significant action on a number of policy issues important to TAUC members. Here is an exclusive update from TAUC on policy and regulatory issues of vital interest to contractors and the union construction and maintenance industry.
PBGC FY 2017 Annual Report
The Pension Benefit Guaranty Corporation (PBGC) released its Fiscal Year 2017 Annual Report. The report found that the deficit for the Multiemployer Program rose to $65.1 billion at the end of FY 2017, up from $58.8 billion last year. The Multiemployer Program has assets of $2.2 billion and liabilities of $67.3 billion as of September 30, 2017. PBGC estimates that the Multiemployer Program is likely to run out of money by the end of 2025.
Legislation Establishing a Loan Program for Failing Multiemployer Pension Plans Senator Sherrod Brown (D-Ohio) and Rep. Richard Neal (D-Mass.) introduced the “Butch Lewis Act.” This legislation, based on a proposal developed by the Teamsters, would establish a new federal loan program to address failing multiemployer plans. The legislation would create the Pension Rehabilitation Administration, a new federal office within the Treasury Department that would sell bonds to raise money to fund loans to financially troubled plans. The loans to the funds would be for 30 years and carry low interest rates of about 3 percent. Plans would use the loans to pay benefits and to make long-term low-risk investments. Plans would be required to make only interest payments for the first 29 years. In the final year, they would repay the entire principal and the remaining interest owed. Finally, the legislation would require Congress to provide funds to the PBGC to be used for financial assistance to plans than can’t borrow enough to meet their retiree obligations.
There are currently other loan-type proposals being developed by UPS and others to address the needs of failing multiemployer plans. TAUC and other members of the Construction Employers of America continue to push legislation to authorize new plan design. We are hopeful that legislation based on the composite plan concept contained in the “Solutions Not Bailouts” proposal will be introduced soon. Since the enactment of MPRA, we have been meeting with congressional offices and pushing the need to develop new plan design options as a tool for trustees to utilize.
House Hearing on Financial Challenges Facing the Pension System
The House Education and Workforce Subcommittee on Health, Employment, Labor, and Pensions held a hearing on financial challenges facing the PBGC and the pension system. PBGC Director Tom Reeder was the only witness at the hearing. Reeder’s testimony focused on the finding of in the PBGC Annual Report and Projections report release earlier in the month. He highlighted the financial challenges facing PBGC’s Multiemployer Program, and the stakes involved with finding a solution to maintain the solvency of pension plans to preserve the pension benefits of plan participants. Reeder and subcommittee members acknowledged that are no easy answers to addressing these challenges.
In response to questions, Reeder focused on the need to increase PBGC premiums to ensure that the PBGC can maintain its minimum benefit guarantee. He said that multiemployer program premiums have been “too low for too long.” He highlighted a proposal included in the Trump Administration’s budget that would restructure the multiemployer plan premiums to a variable premium rate that increases with the level of underfunding.
Earlier this month, U.S. Department of Labor Secretary Acosta convened the first meeting of a Presidentially mandated task force on apprenticeship. In June, President Trump signed an executive order calling for a scaling back of the government’s role in creating and monitoring apprenticeship programs and a shift to more oversight by trade groups, labor unions, and businesses.
At the meeting, Secretary Acosta told the task force that the federal government’s current registered apprenticeship model is failing, and the task force will need to come up with a new approach. He stressed his support for apprenticeship, but expressed concern with DOL’s current program, which relies on DOL certification. He stated that the Administration’s goal was to reform apprenticeship programs to allow businesses, unions and other groups to directly develop and monitor them. He also stressed the dire need to put apprenticeships in parents’ and educators’ lexicon when they talk about career opportunities with students.
Secretary Acosta also testified at the House Education and Workforce Committee this month. During the hearing, he discussed the Administration’s position on apprenticeship, and held up the building trades programs as examples of programs that should be replicated (where possible).