Today, House Ways and Means Committee Ranking Member Richard Neal (D-MA) and Joint Pension Committee Co-Chair Senator Sherrod Brown (D-OH) announced that the Congressional Budget Office (CBO) has finalized its estimate of their legislation to solve the multiemployer pensions crisis, known as the Butch Lewis Act, and found the plan would cost just $34 billon over the 2019-2028 period.
- The $34 billion score is much less than earlier reports that the Butch Lewis Act may cost as much as $100 billion.
- The $34 billion score is less than half the estimated cost of propping up the Pension Benefit Guarantee Corporation (PBGC). The PBGC is the government agency that insures multiemployer pension plans. Like most insurance, PBGC benefits would kick in only after the damage has been done - after the plans have failed and businesses have gone under. And PBGC benefits would only cover a fraction of pensions workers earned.
Therefore, passing the Butch Lewis Act would save the multiemployer pension system and prevent businesses from going bankrupt all without cutting a single dime of the benefits workers earned. And it would do so for less than half the cost of allowing the plans to fail, allowing businesses to go under and allowing workers’ benefits to be slashed.
|Passing The Butch Lewis Act
||Propping Up The PBGC
|Cost: $34 Billion
||Cost: $78 Billion +
|Cuts To Retirees’ Pensions: NO
||Cuts To Retirees Pensions: YES
|Businesses Fail: NO
||Businesses Fail: YES
|Economic Activity Lost: NO
||Economic Activity Lost: YES
|Tax Revenue Lost: NO
||Tax Revenue Lost: YES
|Increased Demand for Public Assistance: NO
||Increased Demand for Public Assistance: YES
|(sources: CBO, PBGC Testimony, Quatria Strategies)
How do we know that propping up the PBGC would cost double?
- PBGC Director Thomas Reeder testified before the House Committee on Education and the Workforce, Subcommittee on Health, Employment, Labor, and Pensions in November 2017. On page 7 of his testimony, Reeder notes that the PBGC’s multiemployer program is already projected to fail with a deficit of over $67 billion. And when the PBGC multiemployer program fails, it will cost $78 billion just to make the PBGC whole.
- Previously, the CBO has estimated the cost of backstopping the PBGC should it fail could be as much as $101 billion dollars over 20 years.
What happens to workers, businesses and the economy if Congress simply lets the plans fail and props up the PBGC?
- The PBGC is the government agency that insures multiemployer pension plans. Like most insurance, PBGC benefits would kick in only after the damage has been done - after the plans have failed and businesses have gone under. And PBGC benefits would only cover a fraction of pensions workers earned.
- PBGC Director Thomas Reeder testified before the Joint Committee on Pensions in May that when a plan fails and PBGC coverage kicks in, the payments retirees get are much smaller than the actual pension they earned. In one recent example, the PBGC guarantee resulted in over 40% of the retirees losing more than half of their benefits (HERE).
- Independent analysis performed by Quatria Strategies has found that simply propping up the PBGC would cost close to $200 billion in decreased economic activity (see page 2 HERE).
- The U.S. Chamber of Commerce explains why allowing plans and employers to fail and then propping up the PBGC is a threat to businesses and jobs: HERE.
- In fact one study by a respected conservative economist employed by the American Enterprise Institute projects that just Central States Teamster Pension alone fund would cost 55 thousand jobs if it were allowed to fail (HERE). And the Central States plan is just one of dozens of plans projected to fail if Congress doesn’t act.
By contrast, that same Quatria Strategies economic analysis shows the will not cut pensions, not decrease economic activity, not decrease tax revenue and will not increase demand for social programs and public services (HERE).