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TAUC Legislative & Regulatory Update, December 2019

December 3 2019

TAUC Legislative & Regulatory Update, December 2019

While impeachment is capturing much of the media's attention, there is still other work being done on Capitol Hill. Congress has passed a Continuing Resolution to keep the Federal Government operating through December 21st while the House and Senate work on reaching agreement on Fiscal Year 2020 spending bills. It remains to be seen what other agenda items will be considered while the House begins impeachment proceedings. We remain hopeful that recent efforts to kickstart discussion on multiemployer pension reform legislation will be successful. There are hopes that the renegotiated NAFTA (the Unite States-Mexico-Canada Agreement) could be approved, but this remains unclear at this point. We are also monitoring for the possible release by the Department of Labor (DOL) of final regulations regarding the establishment of Industry Recognized Apprenticeships.

Here is an exclusive update from TAUC on policy and regulatory issues of vital interest to contractors and the union construction and maintenance industry.

Multiemployer Pension Reform

In an effort to kick off negotiations on legislation to address the looming crisis facing the multiemployer pension system, Senators Chuck Grassley (R-IA) and Lamar Alexander last month issued the Multiemployer Pension Recapitalization and Reform Plan. The comprehensive discussion paper is designed to initiate negotiations and advance efforts to address failing plans and provide reforms to modernize the multiemployer pension system. TAUC joined with other members of the CEA to put out a statement expressing appreciation for the Senators' efforts. We are in the process of evaluating the proposal and will with to ensure any final plan addresses the concerns of construction industry plan stakeholders. While we have serious concerns with the proposal, we remain hopeful that there is serious interest in finding a reasonable bipartisan agreement.

Major aspects of the proposal include:

Partition: The core of the proposal is a plan to allow failing plans to partition liabilities in order to remain solvent. The proposal provides this authority to certain named plans, critical and declining plans and MPRA plans. The PBGC would reimburse the successor plans up to the new guarantees.

Premiums and Fees:

  • PBGC premiums. The proposal increases the flat rate premium from $29 to $80 per participant and imposes a variable rate premium (VRP) based on unfunded current liability, capped at $250 per participant. Partitioned participants are included in the flat rate, but partitioned liabilities are not included in the VRP.
  • Union and Employer Co-payments. The proposal requires unions and participating employers to pay a monthly fee of $2.50 per active employee covered under the collective bargaining plan.
  • Retiree Copayments. All retirees, except those in plans that are 80% or more funded, must pay a percentage of their retirement to the PBGC ranging from 3% to 10% (depending on the zone status or if the plan is in the partition program). The plan collects and pays the copayment to the PBGC.

Discount Rate: The discussion paper calls for plans to use a discount rate that is capped equal to the lesser of (1) a 24-month average of the third segment of the yield curve plus 2 percent, or (2) 6 percent. The cap applies to the assumptions for all plan liabilities. This would be phased in over a 5-year period beginning in 2020.

Withdrawal Liability: Withdrawal liability would be 100% of the employer's highest contribution base units in the last 20 years, multiplied by its highest contribution rate in the last 10 years, but not less than the highest amount the employer contributed in the past 20 years. Withdrawal liability is measured the same as minimum funding. The payment schedule would be based on funding status ranging from no liability up to a maximum of 20 years (25 years for declining and terminated plans). Partitioned amounts are not included in determining withdrawal liability after 15 years.

Composite Plans: The proposal would authorize the use of composite plans for plans that are not currently in critical or declining status.

As Congress looks for a path forward on comprehensive reform, TAUC will continue to advocate for solutions that restore the solvency of distressed plans, while not harming plans that are financially healthy or undermining plans undertaking rehabilitation efforts. We continue to support authorizing the voluntary use of composite plans. We are also fighting proposals to increased withdrawal liability and require unsustainable PBGC premium increases and contribution rate increases.

PBGC Annual Report

Adding to the need for Congress to take action to reform the multiemployer pension system, the Pension Benefit Guaranty Corp. (PBGC) released its FY 2019 Annual Report last month. The report found that the multiemployer program will have a $65.2 billion deficit in FY 2019 – up from $53.9 billion in FY 2018. The program is projected to be insolvent by 2025. The report also showed that implementation of a risk-based premium structure on participants in single-employer plans significantly improved the condition of the single employer program – which now has a positive net position of $8.7 billion. This has added to calls from many Republican members of Congress to institute PBGC premium increases and a variable rate premium structure for the multiemployer program.

Cadillac Tax

TAUC continues to work to repeal the Affordable Care Act's excise tax on high-cost, employer-sponsored health care plans. This is a 40 percent tax on the value of employer-sponsored health coverage that exceeds certain benefit thresholds – estimated to be $11,100 for self-only coverage and $29,750 for family coverage in 2022. This tax would penalize employers providing the benefits for factors out of their control, such as employers with a higher number of workers with chronic or serious diseases or injuries, or employers in high-cost areas.

The House passed legislation earlier this year to repeal this tax by an overwhelming bipartisan vote of 406-6. Companion legislation in the Senate currently has 62 bipartisan cosponsors – more than enough support to overcome a potential filibuster. While it is unclear if the Senate schedule will allow the bill to be considered on the floor free-standing, we are hopeful it could be included in the final FY 2020 spending package. TAUC joined with over 600 other organizations in a letter urging the Senate to act.

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