Key Takeaways
- • President Biden signed the American Rescue Plan Act of 2021 (H.R. 1319) into law on March 11, 2021, including a Congressional Budget Office-estimated $86 billion taxpayer-funded bailout of struggling multiemployer pension plans (MEPPs).
- • The bailout is projected to cover about one million workers in targeted MEPPs facing insolvency, while the Pension Benefit Guaranty Corp. (PBGC) holds only $3 billion and is projected to run out of cash as early as 2025.
- • Critics including the Washington Post, The Wall Street Journal and The New York Times argue the provision lacks structural reform, does not require repayment, and leaves the underlying MEPP funding flaws unaddressed.
- • The PBGC has 120 days to issue implementing regulations, which will determine eligible plans, the ultimate taxpayer cost, and whether withdrawal liability changes apply.
- • Associated Builders and Contractors (ABC) argues government-mandated project labor agreements (PLAs) raise construction costs by 12% to 20% and disadvantage nonunion contractors, which employ more than 87% of U.S. construction workers.
Summary
On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (H.R. 1319) into law. The COVID-19 relief bill includes a provision that the Congressional Budget Office estimates will cost $86 billion in taxpayer funds to support struggling multiemployer pension plans. The funding is welcomed by about one million workers in targeted MEPPs that faced insolvency, but it has drawn criticism from small businesses and firms not affiliated with unions. Peter Comstock, senior director of legislative affairs at Associated Builders and Contractors, described the concession as a costly bailout.
The Pension Benefit Guaranty Corp., funded by investment returns and premiums paid by MEPP participants, protects insolvent participants with reduced defined benefits. According to the article, the PBGC has only $3 billion on hand and is projected to run out of cash as early as 2025, largely due to its exposure to failing MEPPs. Watchdogs argue many of these plans had problems for decades, before the pandemic-driven recession worsened them.
Editorial commentary has been largely critical. A Washington Post editorial of Feb. 17 said the bill provides federal cash with little structural reform. The Wall Street Journal's Feb. 21 editorial said the $86 billion would rescue 185 or so PBGC-insured plans without real reform. A New York Times article of March 7 noted that the provision does not require plans to repay the funds, freeze accruals, or change the practices that caused their distress, and that multiemployer plans, unlike single-employer plans, set their own funding rules through collective bargaining.
Implementation details remain unclear. The PBGC has 120 days to issue regulations, and open questions include which plans are eligible, the ultimate taxpayer cost, whether Congress will enact structural reforms, and how withdrawal liability may change for participating employers. ABC also cites PBGC data showing construction MEPPs account for about $326.52 billion, or 48.5%, of PBGC-insured MEPP underfunding of $672.98 billion as of 2017 data. ABC further argues that government-mandated PLAs increase construction costs, restrict bidding, and push nonunion workers toward union affiliation and MEPP participation.
The Pension Benefit Guaranty Corp., funded by investment returns and premiums paid by MEPP participants, protects insolvent participants with reduced defined benefits. According to the article, the PBGC has only $3 billion on hand and is projected to run out of cash as early as 2025, largely due to its exposure to failing MEPPs. Watchdogs argue many of these plans had problems for decades, before the pandemic-driven recession worsened them.
Editorial commentary has been largely critical. A Washington Post editorial of Feb. 17 said the bill provides federal cash with little structural reform. The Wall Street Journal's Feb. 21 editorial said the $86 billion would rescue 185 or so PBGC-insured plans without real reform. A New York Times article of March 7 noted that the provision does not require plans to repay the funds, freeze accruals, or change the practices that caused their distress, and that multiemployer plans, unlike single-employer plans, set their own funding rules through collective bargaining.
Implementation details remain unclear. The PBGC has 120 days to issue regulations, and open questions include which plans are eligible, the ultimate taxpayer cost, whether Congress will enact structural reforms, and how withdrawal liability may change for participating employers. ABC also cites PBGC data showing construction MEPPs account for about $326.52 billion, or 48.5%, of PBGC-insured MEPP underfunding of $672.98 billion as of 2017 data. ABC further argues that government-mandated PLAs increase construction costs, restrict bidding, and push nonunion workers toward union affiliation and MEPP participation.
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