Covid Relief Bill Gives $ 86 Billion Bailout to Failing Union Pension Plans
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Covid’s $ 1.9 trillion bailout package passed by the Senate on Saturday offers $ 86 billion for failed retirement plans.
The American bailout plan now running the house would allow certain pensions to apply for federal grants that would be used to pay retirement benefits to employees.
The provision applies to cross-employer pensions. These plans benefit union workers in industries such as construction, manufacturing, mining, retail transportation, and entertainment.
There are approximately 1,400 such plans in the US, covering 10 million people.
However, according to the Pension Benefit Guarantee Corporation, 124 multi-employer pensions are in a “critical and declining” status. It is projected that they will not have sufficient funds to pay the full retirement pension within the next 20 years.
According to the American Academy of Actuaries, there are approximately 1 million workers in such plans.
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So far, the PBGC, a government-sponsored facility, has been able to step in to at least partially pay benefits in the event of a pension failure.
However, the agency’s multi-employer program is in poor shape. The probability of bankruptcy is “very high” in 2026 and “almost certain” by the end of 2027, which can be attributed to additional pension losses, according to the latest forecasts by the PBGC.
At this point, it is not possible to guarantee workers retirement benefits if there are no legislative changes, the agency said.
American rescue plan
The grants offered by the American Rescue Plan would cover full retirement benefits for workers on sick plans for the next three decades. The relief measure would also restore any benefits that had been suspended for the beneficiaries.
Sponsors of plans with multiple employers can apply for the grant until 2025. The PBGC cannot make the benefit dependent on changes in pensions such as benefit cuts or new funding requirements.
The funds must be invested in investment grade bonds. Together with any investment income, they must be separated from other plan assets.
Senator Sherrod Brown, D-Ohio, said the Covid pandemic had worsened the financial health of the plans.
“It goes back to the fact that these workers didn’t do anything wrong,” Brown told the New York Times on Thursday. “You deserve these pensions.”
Senator Chuck Grassley, R-Iowa, criticized the move as an unconditional bailout.
“It’s just a blank check with no action to hold ill-managed plans accountable,” he said.
The Democrat-run house is expected to vote on the $ 1.9 trillion aid package Tuesday for President Joe Biden to sign earlier this week.