On July 24, the U.S. House of Representatives passed the Rehabilitation for Multiemployer Pensions Act (H.R. 397) by a vote of 264-169 with 29 Republicans supporting the majority.
Advocates argue the measure is needed to protect the pensions of 1.3 million workers in certain multiemployer pension plans and prevent the collapse of the Pension Benefit Guaranty Corporation, while critics maintain the legislation is a taxpayer-funded bailout of MEPPs and does little to address the fundamental structural flaws of MEPPs.
“This legislation fails to include any reforms that would ensure responsible funding of future benefit promises or prevent a similar situation from recurring,” said Rep Virginia Foxx (R-N.C.) during the debate over H.R. 397 on the House floor. "The bill also fails to address the chronic underfunding that plagues the entire union multiemployer system and passively accepts that plan trustees and actuaries may continue to underestimate pension promises—to the detriment of workers and retirees.”
The House bill, also known as the Butch Lewis Act, was introduced by Rep. Richard Neal (D-Mass.), and a companion bill was introduced in the upper chamber by Sen. Sherrod Brown (D-Ohio).
In general, unionized construction trade contractors typically participate in a defined benefit MEPP, while nonunion contractors typically provide defined contribution plans such as a portable 401(k) retirement plan.
Lawmakers have pushed construction industry contractors and workers into MEPPs via so-called responsible contractor laws and government-mandated project labor agreements on taxpayer-funded construction projects. Nonunion contractors are typically wary of competing for contracts subject to such terms because MEPPs can expose contractors to potentially catastrophic liability and harm retirement prospects for its workforce if MEPPs fail.
If MEPPs become insolvent, they are taken over by the PBGC—an independent agency of the federal government that monitors and privately insures pension benefits in private sector defined-benefit plans such as multiemployer pension plans—and qualified individual beneficiaries may receive up to $12,870 per year in defined benefits in certain circumstances. However, because of a number of factors, including exposure to struggling MEPPs, the PBGC is projected to become insolvent around 2025, after which it will not be able to pay guaranteed benefits for insolvent MEPPs.
ABC analysis of data from the PBGC demonstrates the construction industry is responsible for almost half of the current PBGC-backed MEPP underfunding and is a primary contributor to projected future PBGC MEPP insurance program funding shortfalls.
Senate Majority Leader Mitch McConnell (R-Ky.) has not indicated whether the full Senate would take up the legislation.
ABC has not taken a position on the bill but will continue to monitor all legislative proposals concerning the PBGC and MEPPs and will continue to oppose government-mandated PLAs and other laws mandating contractor and employee participation in MEPPs.
Construction industry stakeholders interested in reviewing construction industry MEPPs in critical and declining, critical and endangered status from 2008 to Jan. 22, 2018, can search this spreadsheet or visit the DOL website on MEPPs.