WASHINGTON, D.C. – U.S. Senator Sherrod Brown (D-OH) joined Senator Orrin Hatch (R-Utah) Thursday to chair the third hearing of the bipartisan, joint House-Senate committee tasked with solving the pending pension crisis threatening small businesses and 1.3 million workers and retirees nationwide. More than 60,000 Ohio workers and retirees are at risk.
During the hearing, Brown questioned Thomas Reeder, executive director of the Pension Benefit Guarantee Corporation (PBGC), on exactly what is at stake as he continues to urge his colleagues to pass a solution this year. Reeder confirmed that congressional action is needed to prevent devastation for workers, retirees and businesses and prevent a taxpayer bailout of the PBGC.
PBGC serves as the insurance company for multiemployer pension plans. Brown explained in his opening statement that, like any insurance plan, PBGC won’t kick in until after the damage is done – after plans fail, businesses are forced to close and jobs are lost. And even then, retirees would only be covered for a tiny fraction of the retirement they earned over a lifetime of work. What’s more, Brown explained, the PBGC itself is severely underfunded, so allowing just one of the major plans to fail could put enough strain on the insurance system to bring down the entire PBGC multiemployer system. And if that happens, taxpayers could be on the hook for tens of billions of dollars.
Brown is urging the committee to find a solution to prevent that from happening and ensure workers and retirees get the full pension they earned.
“Ask anyone who’s ever totaled a car or dealt with flooding or fire in their homes – you’re sure glad you have insurance. But you’d much rather have avoided the disaster in the first place. We have the opportunity to do just that – to keep those businesses open, to save those jobs, and to ensure workers get the entire retirement they earned,” Brown said. “Simply propping up the PBGC is not enough. We can’t take our hands off the wheel, close our eyes and allow this car to crash, simply because we bought an insurance policy. We can’t do that to the retirees and businesses whose plans are in crisis, and we can’t do that to the multiemployer system.”
Reeder confirmed to Brown during questioning that if plans are allowed to fail and PBGC insurance kicks in, the insurance could only pay about one-eight of the minimum benefit retirees are supposed to be guaranteed. Brown pointed out that minimum benefit is already much lower than the retirement these workers earned, that they bargained for and gave up pay raises for – that they budgeted for when taking out mortgages, and that they count on to pay their bills. Cutting it down to one-eighth is unsustainable and could force retirees into poverty.
Senator Rob Portman (R-OH) also expressed concern about how the projected insolvency of PBGC in 2025 under current law would negatively impact workers and our economy. Portman is hopeful his colleagues on both sides of the aisle can come together to achieve a comprehensive and permanent solution that protects earned pensions, protects taxpayer dollars, prevents the insolvency of the PBGC, and alleviates pressure on employers.
“Your testimony today was very sobering because it lays out clearly the huge challenge that we face,” Portman told Reeder. “You were just talking back and forth about when PBGC might go insolvent and it sounds like 2025 is the year that you’ve kind of focused on. I understand that there might be some changes that will push that a little forward or a little back, but that’s only seven years from now. And that’s PBGC insolvency, which is sort of the most dramatic of the potential problems that we face, and to me the drastic cuts in the earned pensions. Again, you’ve talked a lot about that today and what that is, but if you go insolvent it’s about a 90 percent cut to the Central States pension fund, the teamsters.
“I think the broad impact, that’s the bigger issue we have to talk about, too. As bad as it is for these retirees and for these individual plans it also has a broader impact on our economy, and not just the local communities that will obviously be affected but also the larger economy,” Portman told Reeder.
Numerous Ohio pension plans, including the massive Central States Teamsters Pension Plan, United Mine Workers Pension Plan, Ohio Southwest Carpenters Pension Plan, and Bakers and Confectioners Pension Plan are currently on the brink of failure. The Ironworkers Local 17 plan has already had to cut benefits. If nothing is done to the plans, they will fail and retirees will face massive cuts to the benefits they earned over decades of work.
Brown has been fighting to solve the pension crisis for years, and has introduced his own solution, the Butch Lewis Act. Earlier this year, he secured the creation of the committee as part of the overall budget compromise. At Brown’s urging, the committee will have instructions to report a bill by the last week of November, and will be required to hold at least five public meetings, including the option of field hearings outside of D.C., so members of Congress can hear directly from retirees, workers and businesses affected by the pension crisis. The solution the committee produces will be guaranteed an expedited vote in the Senate without amendments.
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