TAUC Legislative & Regulatory Update, January 2020
The end of the first session of the 116th Congress has been a flurry of activity. While much of the focus has been on the impeachment of President Donald Trump, lawmakers have chalked up numerous unexpected legislative accomplishments as they left Washington for the holidays. Here is an exclusive update from TAUC on policy and regulatory issues of vital interest to contractors and the union construction and maintenance industry.
Cadillac Tax Repealed, "New NAFTA" Passes
Both the House and the Senate passed the $738 billion National Defense Authorization Act for Fiscal Year 2020 and a $1.4 trillion Fiscal Year 2020 spending package — which included repeal of the Affordable Care Act's excise tax on high-cost employer-sponsored health care plans (the "Cadillac Tax") and addressed mineworker health care and pension benefits.
The full repeal of the 40% "Cadillac Tax" on joint labor-management health plans has been a TAUC priority since the tax was enacted in 2010. The tax would have penalized employers who provided health care benefits for factors out of their control, such as employers with a large number of workers with chronic or serious diseases or injuries or employers in areas where health care costs are high. Earlier in the year, the House passed free-standing legislation repealing this tax by a bipartisan vote of 419-6, and companion legislation in the Senate had 63 bipartisan co-sponsors, demonstrating the significant support for eliminating this tax on employers.
The House also passed the renegotiated U.S., Mexico and Canada trade agreement, with Senate consideration expected to occur early this year.
Pension Reform Update
Despite all the major legislation and significant spending, federal policymakers once again did not address the looming multiemployer pension crisis. Instead, they acted to shore up just the United Mine Workers pension plan, leaving nearly 125 other failing multiemployer pension plans to find another legislative vehicle down the road.
The October bankruptcy of Murray Energy, the last major contributing employer to the mineworkers' pension plan, significantly increased pressure on Congress to act to prevent the insolvency of the plan. While we believe this failure to act on broad reform threatens to undermine the entire multiemployer pension system and continues the significant uncertainty for participants in these plans and the signatory employers who contribute to them, this action demonstrates that Congress recognizes the importance of federal action to address the looming crisis.
There was hope that Congress would include broad multiemployer pension reform in the end-of-year spending package when Sens. Chuck Grassley (R-Iowa) and Lamar Alexander (R-Tenn.) issued the Multiemployer Pension Recapitalization and Reform Plan. This discussion paper was deemed an effort to kick off negotiations and advance efforts to address failing plans and provide reforms to modernize the multiemployer pension system. Unfortunately, the paper raised serious concerns with stakeholders, and it became obvious that broader reform was once again going to have to wait.
The core of the Grassley-Alexander proposal was to allow failing plans to partition liabilities to remain solvent. While there seems to be consensus that this approach could work to restore the solvency of distressed plans, the primary concern remains over how to pay for it. Grassley-Alexander would have the "system" pay the estimated $4.7 billion in annual cost for this program through premium increases, a series of fees and copays. Most objective stakeholders have said that the magnitude of the cost under the proposal on signatory employers would be unsustainable and would drive many employers from the multiemployer system.
On the bright side, though, the proposal would authorize the use of hybrid composite plans. TAUC and our construction industry and building trades union partners have long supported legislation to authorize the voluntary use of innovative plan designs that would allow multiemployer plan trustees to ensure that plan participants continue to have lifetime retirement security in the future at no cost to the federal government or to multiemployer pension plan participants.
While there are serious concerns over aspects of the Grassley-Alexander discussion draft, we are hopeful this will be a starting point for bipartisan negotiations on comprehensive multiemployer pension reform. We are also encouraged that the provision addressing the Mine Workers' pension fund recognizes the importance of Congress to act to address the looming multiemployer pension crisis. It also lowers the estimated annual cost to fix distressed multiemployer plans by $600 million by removing the UMWA plans. This limits the amount of federal revenues and taxes on the multiemployer system to fix the distressed plans universe.
We look forward to continuing to work with Congress to find a path forward on efforts to not just rescue failing plans but also take steps to strengthen the entire system while not harming plans that are financially healthy.