President Joe Biden joined union workers and retirees in Cleveland today to announce the final rule implementing the American Rescue Plan’s Special Financial Assistance program, designed to protect millions of workers in multiemployer pension plans who faced significant cuts to their benefits.
Multiemployer plans are created through agreements between employers and a union, with plans typically involving multiple employers in a single industry or related industries. A typical worker whose multiemployer plan became insolvent would see their expected pension benefits slashed substantially. Before the American Rescue Plan, workers and retirees participating in more than 200 multiemployer pension plans faced the prospect of not receiving the full benefits they earned and need to support them and their families in retirement.
These plans are insured by a federal agency, the Pension Benefit Guaranty Corporation (PBGC), which provides partial protection of the benefits of approximately 10.9 million workers and retirees in approximately 1,400 private-sector multiemployer, union-connected plans.
Prior to the America Rescue Plan, the PBGC’s multiemployer pension insurance program was projected to become insolvent in 2026.
“With today’s actions millions of Americans will have the dignified retirement they earned and they deserve.”
President Joe Biden
Under the Butch Lewis Act named for the Ohio union leader and pension advocate, the American Rescue Plan’s Special Financial Assistance package will allow financially struggling multiemployer pension plans to apply to the PBGC for assistance.
“We’ve seen the risk that millions of workers face as they watch their hard-earned pensions turn into broken promises,” Biden said. “Losing a big part of your income late in life—that’s a scar that doesn’t heal. Well not this time. With today’s actions millions of Americans will have the dignified retirement they earned and they deserve.
“Now, multiemployer plans will remain solvent for decades. Those retirees that lost their benefits will have them restored retroactively,” Biden said. “We turned a promise broken into a promise kept.”
During his remarks, President Biden hailed the deceased Butch Lewis’ efforts to safeguard worker pensions and also thanked Senate HELP Committee Chair Patty Murray (D-WA) for her work on the legislation.
“As families deal with rising costs and the fallout of this pandemic, the last thing anyone needs is to have their finances turned upside down and the pension they worked so hard to earn ripped away—through no fault of their own,” Murray said in a statement today. “That’s why I fought to pass pension relief that has already saved the benefits of over a hundred thousand workers and retirees. Today’s announcement from the Biden Administration will ensure we continue to build on that progress so this program can serve even more struggling pensions, help all plans by getting the entire multiemployer pension system on stronger footing, and protect even more workers from having their hard-earned benefits cut at the worst possible time.”
Treasury Secretary Janet Yellen also released a statement: “Today’s action by President Biden ensures that millions of hardworking Americans will receive the pension benefits they worked all their lives for and feared were lost. This action will have a significant impact on the lives of workers and their families, and represents one of the most meaningful improvements in our nation’s retirement security in years. In addition, this initiative extends the solvency of the program that insures multiemployer pensions by nearly three decades.”
PBGC issued an Interim Final Rule implementing the program in July 2021. Unions, employers, and other key stakeholders provided important comments that PBGC and the three Cabinet agencies that constitute its Board of Directors (the Labor, Treasury, and Commerce Departments) considered in developing the Final Rule. Important policy changes from the Interim Final Rule to the Final Rule include:
• Addressing the amount of Special Financial Assistance needed to better achieve the goal of allowing plans to remain solvent until 2051. The interim final rule applied a single rate of return included in the statute that is higher than could be expected for Special Financial Assistance funds given that they were required to be invested exclusively in safe, but low-return, investment-grade fixed income products. The final rule uses two different rates of return for SFA and non-SFA assets so that the interest rate for SFA assets is more realistic given the investment limitations on these funds. This policy fix will help ensure that all multiemployer plans that receive assistance will receive sufficient funds to remain solvent until 2051.
• Responsible permissible return-seeking investments: The final rule allows 33% of Special Financial Assistance to be invested in return-seeking assets that are projected to allow plans to receive a higher rate of return on their investments than under the interim final rule, but subject to strict protections. This portion of plans’ SFA funds generally must be invested in publicly traded assets on liquid markets to ensure responsible stewardship of federal funds. These return-seeking investments include equities, equity funds, and bonds. The other 67% of SFA funds must be invested in investment-grade fixed-income products.
• Ensure MPRA plans could confidently restore both past and future benefits and enter 2051 with rising assets. PBGC designed the final rule to ensure that no MPRA plan–the 18 multiemployer plans that remained solvent by cutting benefits pursuant to the Multiemployer Pension Reform Act of 2014 (MPRA)–was forced to choose between restoring their benefit payments to previous levels and remaining indefinitely solvent, as required by the Act. The final rule ensures that all 18 MPRA plans avoid this dilemma, with enough assistance so that these plans can both restore benefits and be projected to remain indefinitely solvent going into 2051.
Taken together, these changes ensure that all plans that receive Special Financial Assistance are projected to be solvent and pay full benefits through at least 2051.
For more details, see the Biden Administration’s Fact Sheet HERE.
SEE ALSO:
• Troubled Multiemployer Pension Plans Get PBGC Bailout
• Dem-Proposed ‘Heroes Act’ Includes Further RMD, Pension Relief