Earlier this month, President Biden signed the American Rescue Plan Act (ARPA), a $1.9 trillion COVID-19 stimulus measure. Of that amount, $86 billion will provide substantial financial assistance for about 185 to 300 underfunded pension plans.
The bill provides relief for single-employer pensions, but more significantly targets multiemployer pensions. Multiemployer pensions are union-managed pensions that bring groups of companies within an industry together, so that a single plan covers many employers. Multiemployer plans exist for construction, trucking, entertainment, mining, and more. Benefits follow workers from job to job within the same industry. Across the country, there are about 1,400 multiemployer defined benefit pension plans, covering about 10 million participants.
In the last two decades, many of those plans have been struggling, although through no fault of their own. To try to remedy things, multiemployer plans have cut benefits and increased contributions, but factors out of their control have continued to cause financial stress. Quite simply, the decline in the number of union workers, and thus contributions, has meant significant investment losses for the plans. Additionally, decline in industry means that many companies are no longer active and are thus not around to pay anymore, but their employees are still in the plan. The remaining companies struggle to cover everyone under the pension.
Without the government relief, many of these pension funds would have become insolvent within five years. At least in the short term, the relief will provide direct benefits to 1.5 million people.
Interestingly, this particular bill marks the first time that major pension legislation has not been bipartisan. While Democrats and union officials view the relief provision as necessary to ensure that workers receive the benefits they were promised, GOP lawmakers have criticized it as a “bailout” that doesn’t address the processes that allowed the plans to become massively underfunded in the first place.
On either side, though, no one disagrees that there’s certainly an immense and immediate crisis facing multiemployer pension plans.