The Pension Rights Center sent a letter to the editor of Pensions & Investments, in response to its negative editorial on the Keep Our Pension Promises Act of 2015. The text of the letter as published is below.
Your June 29 editorial, “Defying economic reality,” does your readers a disservice by failing to accurately inform them about the Keep Our Pension Promises Act of 2015.
This legislation, introduced by Sen. Bernie Sanders, Rep. Marcy Kaptur and 11 other congressional co-sponsors, offers an economically workable solution to the cash-flow problems faced by severely troubled multiemployer plans, including the Teamsters Central States, Southeast and Southwest Areas Pension Fund. At the same time, it protects the hard-earned pensions of 1.5 million employees and retirees whose benefits could otherwise be cut by the hastily enacted and ill-considered provisions of the Multiemployer Pension Reform Act of 2014.
The Sanders-Kaptur legislation recognizes that a major problem for many multiemployer plans is that large numbers of employers have left the plans without paying sufficient withdrawal liability to fund the pensions of their retirees. The executive director of the Central States fund has testified that 50 cents of every benefit dollar paid by the fund goes to these “orphaned” participants.
The Keep Our Pension Promises Act authorizes the Pension Benefit Guaranty Corp. to partition qualifying plans and provide them with annual payments equal to the amount the agency would have had to pay in guaranteed benefits to the plan’s orphaned retirees and beneficiaries if the plan had been insolvent that year.
The plan that is partitioned will be required to provide the additional funds needed to ensure that the plan’s retirees and beneficiaries will continue to receive their full benefits up to a specified limit. The legislation sets the limit at 80% of the maximum benefit payable to participants in the PBGC’s single-employer program, unreduced for early retirement. This year, that cap would be $48,000.
When added to a plan’s current investment income and employer contributions (including withdrawal liability contributions), the payments made by the PBGC each year will make it possible for a plan that has been partitioned to satisfy its benefit obligations for that year to the orphaned participants in the partitioned plan and other participants in the original plan.
The financial assistance provided by the PBGC, primarily from a new legacy fund, will be scored as a revenue loss to the Department of the Treasury. However, this amount will be offset by the modification of two sections of the Internal Revenue Code, the “like-kind exchange” and estate-and-gift valuation provisions. The modifications recognize that there is no tax policy justification for all taxpayers to subsidize deferral of income taxes when wealthy investors exchange works of art or large real estate parcels, and no reason to apply questionable valuation discounts to certain closely held businesses in calculating the value of the gross estate for estate tax purposes.
The Keep Our Pension Promises Act provides a reasonable and fair solution to a challenging problem. It will ensure that hardworking Americans and their families can rely on the promises made to them in exchange for a lifetime of work. Although the Keep Our Pension Promises Act will certainly confront political obstacles, we are confident that once the act’s provisions are understood, Congress will act in a bipartisan manner to secure its enactment.
We invite your readers to read summaries of the legislation and the proposed tax code modifications, as well as an analysis applying the Keep Our Pension Promises Act to the Central States fund. These are posted on the Pension Rights Center’s website at Keep Our Pension Promises Act of 2015.
KAREN W. FERGUSON
Director, Pension Rights Center