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There is an impending pension crisis that has nothing to do with social security deficits or market crashes – it is in the multiemployer pension plan system. Bloomberg uses the maker of America’s favorite snack cake, the Twinkie, to explain the situation:
When Hostess Brands Inc. went bankrupt in 2012, it triggered anxiety among employees at Ottenberg’s Bakery, a family-owned enterprise in Maryland. The companies shared a pension plan, and if Hostess couldn’t pay its retirees, Ottenberg’s would have to pick up the tab.
Gary League, 53, who has delivered Ottenberg’s bread for almost three decades, worried he might lose his nest egg, maybe even his job.
“If you have all these guys out on retirement and you only have Ottenberg’s paying into it, the math doesn’t add up,” League said. “I was thinking I would have to work forever.”
If Congress does not act, the retirement benefits of millions of workers like League's will be at risk.
Multiemployer plans are collectively-bargained pension plans that are maintained by two or more employers. Multiemployer pension plans are responsible for paying benefits to over 10 million workers. These plans have been particularly hard hit by the current financial crisis because it exacerbates long-term funding problems resulting from shifting demographic trends and financial problems within certain industries. Moreover, in a multiemployer plan, there is joint and several financial liability between all employers in the plan. Therefore, when one employer goes bankrupt—like Hostess--the remaining employers in the plan—like Ottenberg’s Bakery--are responsible for paying the accrued benefits of the workers of the bankrupt employer. Because of this liability, there is the fear of an employer being "the last man standing" or the last remaining employer in the multiemployer plan. These issues were explored and discussed in a recent panel entitled, Steering Clear of a Pension Calamity in America.
Recently, the National Coordinating Committee for Multiemployer Plans (NCCMP), a group of management and labor groups issued a report entitled Solutions Not Bailouts. The proposals in the report go a long way in addressing certain serious issues in the multiemployer plan system. As such, the Chamber fully supports the recommendations and believes that the recommendations can provide a critical foundation for reform of the multiemployer pension system. In addition to the recommendations from the NCCMP, the Chamber believes that additional reforms are needed to address employer concerns. For example, we recommend that limitations be placed on the amount of withdrawal liability that an employer can assume. There are many of our members who have gotten estimates of withdrawal liability that exceed the net worth of the company. Clearly, this is an outcome that was never contemplated when withdrawal liability was implemented and should be rectified.
Without multiemployer reform, many employers – including many small, family-owned businesses – are in danger of bankruptcy. Without real reform to the multiemployer system and resolutions to the underlying problems, more employers will be forced into bankruptcy and more workers will be left without a secure retirement.