On March 11, 2021, President Biden signed the American Rescue Plan into law. With a whopping price tag of $1.9 trillion, this legislation is the first part of the president’s Build Back Better Plan. Most of us are aware of the direct stimulus payments of $1400 for each American. However, it also provides $86 billion to 185 distressed multiemployer funds – a lifeline for 10.7 million hard-working Americans.
Let’s be clear – the American Rescue Plan is not pension reform, it is pension relief. Over the last few months on the podcast, you’ve heard me and a lot of my guests talk about pension reform. We explored the low-interest loans proposed by Democrats and the expansion of the PBGC’s ability to partition liabilities of troubled plans favored by Republicans.
However, the bill did not have enough bi-partisan support to override a filibuster-proof super majority in the Senate needed to pass it. Instead, the American Rescue Plan was passed under budget reconciliation, which required only a simple majority in both Houses of Congress. Unfortunately, the legislation had to be devoid of any pension reform or policy changes. Under reconciliation, spending and revenue could not add to the federal deficit beyond a 10-year window – meaning that distressed funds would receive a lump sum upfront so they didn’t go over the 10-year rule.
Bailing out multiemployer pension funds save 185 pension funds and the PBGC from insolvency and protects the pensions of 10.7 million workers. Do I wish the American Rescue Plan contained pension reform? Yes! Is the American Rescue Plan the right thing to do right now? Absolutely!
Michael Scott, the director of the non-partisan National Coordinating Committee for Multiemployer Plans, came on the podcast and explained why passing the American Rescue Plan was crucial:
The High Cost of Doing Nothing
The $86 billion price tag may seem like an excessive amount of money for taxpayers to bail out these distressed multiemployer plans, but the cost of doing nothing is far worse. In fact, the numbers are mind-boggling.
When the non-partisan National Coordinating Committee for Multiemployer Plans looked at the US Department of Labor’s Form 5500 data from 2015 – 2018, they found that the multiemployer system generated more than $698 billion in taxes for the federal government and $374 billion in state and local taxes. It paid more than $927 billion in wages to 3.8 million active workers and provided $169 billion in pensions to retirees. Altogether, the pension and wage income supported 17.2 million jobs each year and generated $4.6 trillion in US GDP.
If the American Rescue Plan was not passed, then 1.3 million American workers would lose 98% of their pension income and have to turn to federal safety net programs for poverty. Thousands of businesses would be forced into bankruptcy or liquidation, resulting in tens of thousands of workers in the unemployment line. The next ten years would have resulted in the federal government losing between $46 billion and $138 billion in tax revenue, and mandatory safety net spending would increase by approximately $138 billion. All of these costs factored together far exceed the 10-year cost of the bailout.
For anyone who would like to read the Multiemployer Pension Crisis and the Cost of Congress Doing Nothing, the NCCMP’s August 2018 analysis that Michael Scott and I discussed on the podcast, I will provide a hyperlink to the PDF on the NCCMP’s website in my source materials below. (BTW – the August 2018 analysis has been updated as of March 2019.)
Regardless of our political affiliations, all of us should want pension reform. And, if we want meaningful pension reform, then we need to petition our representatives in Congress and the Senate to get behind it and support it. Otherwise, without real pension reform, we could be wasting tax dollars.
To listen to the full podcast of The American Rescue Plan with NCCMP Director, Michael Scott, click HERE
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If you would like to read a PDF version of the full text of the American Rescue Plan, please visit the Congress.gov website.
To view/read the PDF version of the full text of the NCCMP analysis, the Multiemployer Pension Crisis and the Cost of Congress Doing Nothing, please visit the NCCMP.org website.
Investopedia: American Rescue Plan (Biden’s $1.9 Trillion Stimulus Package)