At the end of June, word was coming out of Washington that there could be a second stimulus plan coming. President Trump and Treasury Secretary Mnuchin both voiced optimism that the second round of COVID-19 relief would be imminent. Sure enough, it is reported that next week the second plan, the HEROES Act, will be introduced to the Senate after passing the House approximately a month earlier. Part of this massive relief plan is the Emergency Pension Plan Relief Act of 2020. Simply put, it is a bailout for single and multiemployer pension plans.
The Emergency Pension Plan Relief Act of 2020 (EPPRA) would double the Pension Benefit Guaranty Corporation (PBGC) maximum benefit level. Currently, the maximum is 100% of the first $11 of the monthly benefit rate, plus 75% of the next $33 of the monthly benefit rate, times the years of credited service. This means a 30 year employee receives $12,870 annually, or $17,160 for a 40 year employee. Under this act, those limits would be raised to $24,300 and $32,400. The act also reinstates cuts that have been made by firms that were about to deal with insolvency. Furthermore, cuts made by the Multiemployer Pension Reform Act (MPRA) of 2014 wouldn’t be in effect either. The major problem with the entire act is that all of these benefit cuts are being rolled back without a reciprocal increase in contributions by those who have pension plans. Most of the funding would come from the federal government. Other things done in the EPPRA are the authorization of composite plans — a multiemployer plan that combines defined benefit plans and defined contribution plans, — accounting relief, special partition relief and an extension of funding improvement and rehabilitation periods
While it is essential that the American economy is guided back on the right course, this shouldn’t be an excuse for handouts as a stop-gap measure to remedy underlying problems. The burden taken on by the federal government will end up being paid off by the nation’s population. Pension fund relief and reform is not something that is taken lightly. Conscientious work and deliberations should be had so the problem can be addressed comprehensively and effectively.
The fate of the EPPRA is unclear at this moment, but however it must be noted that the pension fund issue has caught the eye of elected officials in both parties. This means that no matter the outcome of the EPPRA, it is expected that new pension legislation will come to the House and Senate floors soon.