Covid relief law gives $ 86 billion ransom to failed union pension plans

The $ 1.9 trillion Covid relief package approved by the Senate on Saturday offers $ 86 billion in funding for failed pension plans.

The American Rescue Plan, which is now going to the House, would allow some pensions to apply for federal subsidies, which would be used to pay retirement benefits to workers.

The provision applies to multi-employer pensions. These plans pay benefits to union workers in industries such as construction, manufacturing, mining, retail and entertainment.

There are approximately 1,400 such plans in the United States, covering 10 million people.

However, 124 multi-employer pensions are in a “critical and declining” state, according to the Pension Benefit Guarantees Corporation. They are not expected to have enough funds to pay full retirement benefits in the next 20 years.

According to the American Academy of Actuaries, about one million workers participate in these plans.

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To date, the PBGC, a government-sponsored entity, has been able to intervene to pay at least partial benefits in the event of a pension failure.

But the agency’s multi-business program is in disrepair. Its likelihood of insolvency is “very high” in 2026 and “almost certain” by the end of 2027 due to additional bankruptcies in pensions, according to the latest PBGC projections.

At this time, he will not be able to guarantee retirement benefits to workers if there have been no legislative changes, the agency said.

The grants offered by the American Rescue Plan would cover full pension benefits for workers in sickness plans for the next three decades. The relief measure would also restore the benefits that had been suspended for the beneficiaries.

Multi-business plan sponsors can apply for the grant until 2025. The PBGC cannot condition the grant on changes in pensions, such as benefit reductions or new funding requirements.

Funds should be invested in investment quality bonds. They, along with investment income, must be separated from the other assets in the plan.

Senator Sherrod Brown, D-Ohio, said the Covid pandemic had worsened the financial situation of the plans.

“It goes back to the fact that these workers did nothing wrong,” Brown told The New York Times on Thursday. “They’ve earned those pensions.”

Senator Chuck Grassley, R-Iowa, criticized the measure as a no-rope bailout.

“It’s just a blank check, with no measures to hold accounts to mismanaged plans,” he said.

The Democratic-led House is expected to vote on the $ 1.9 trillion aid package on Tuesday for President Joe Biden to sign it earlier this week.