Brown pension plan
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Senator Sherrod Brown Plan
Multiemployer Pension Legislative Proposal - Sponsored by Senator Brown & Congressman Richard Neal
Defining the Problem
• 130 multiemployer plans projected to be insolvent in the next 20 years
• An additional 200 plans in PPA critical status (red zone)
• The retirement benefits of 3.5 million plan participants are at risk
• PBGC multiemployer exposure has grown to $59 billion
• GAO names PBGC to its 2017 High Risk Report
• PBGC’s multiemployer insurance program projected to become insolvent by 2025
• Multiemployer Pension Reform Act of 2014 (MPRA) suspension of benefits solution for troubled plans has failed
Legislating a Private/Public Solution
• Current Federal pension insurance guarantees benefits after plan failure
• Legislate the creation of the Pension Rehabilitation Administration (PRA) within the Treasury Department, to structure loans to pension plans for the purpose of funding pension legacy deficits
• PRA would prevent plan failures through loan programs using private capital and Federal guarantees on loans for multiemployer plans
• US Treasury provides a guarantee of principal and interest
• Envision strong demand for these high-quality liquid bonds
• PRA makes direct loans to Critical & Declining status plans
• Treasury receives a fee of approximately 20 basis points
• These PRA loans would have a 30-year maturity, structured as interest only for 29 years, and then interest and principal due in 20th year
Structure of PRA Loans to Plans – 1/4
• Plans borrow the amount necessary to guarantee their specific retiree accrued liability
• Employer contributions cannot be reduced during the term of the loan
• Plans are prohibited from increasing benefits during the term of the loan
• Employers cannot withdraw from the plan for the loan term
Structure of PRA Loans to Plans – 2/4
• Pension plans receiving PRA loans are required to invest the loan proceeds in an insurance company annuity contract, a duration-matching portfolio, or cash-matching portfolio. These requirements accomplish the following:
1. Secures all retiree payouts for existing retirees
2. Neutralizes negative cash flow and allows plan to achieve funding progress
3. Reduces future investment risk
Structure of PRA Loans to Plans – 3/4
• Pension plans receiving PRA loans are required to negotiate with Treasury over the following conditions:
1. Revisions in future service plan design that reduces probability of future unfunded liabilities
2. Changes in investment strategy that reduce the probability of future unfunding
Structure of PRA Loans to Plans – 4/4
Pension Benefit Guaranty Corporation (PBGC) Financial Assistance
• Plans that cannot demonstrate that a PRA loan will keep the plan solvent and pay its retiree benefits, may receive financial assistance from the PBGC
• The PBGC assistance will equal the percentage of inactive liabilities necessary to maintain the plan’s solvency for a minimum of 30 years
• The assistance shall not exceed the value of the PBGC guarantee
• PBGC assistance is only available to critical and declining plans
PRA Governance
• Established as an agency within the U.S. Treasury
• Not affiliated with PBGC
• Director appointed by President of United States
• Director can hire actuaries and financial experts
• PRA is funded from within Treasury’s appropriated budget
• PRA will have oversight powers over pension plans that receive loans
PRA Goals and Outcomes
• Fosters retirement security for current and prospective at-risk pension plans
• Prevents plan failures and their adverse consequences on specific industries, employers, and workers
• Alleviates the PBGC’s long-term deficit and financial exposure
• Avoids the need for a direct federal bailout
• Provides a path to rebuilding sustainable DB plans
Current Status of the PRA Proposal
• PRA is a three-year work in progress
• Financial experts have advised on proposal architecture
• Vetted and encouraged by Democratic and Republican staff
• Congressional leadership recognizing pension crisis in the aftermath of MPRA benefit suspension application (e.g. Central States)
• Legislative language has been drafted b ex-PBGC Chief Counsel
• Senator Sherrod Brown is sponsoring Legislation
Compiled from Copyright @ 2017 Pension Fight and INTERNATIONAL BROTHERHOOD OF TEAMSTERS talking points presented by John Murphy, VP at IBT at
Sent from my iPhone
Multiemployer Pension Legislative Proposal - Sponsored by Senator Brown & Congressman Richard Neal
Defining the Problem
• 130 multiemployer plans projected to be insolvent in the next 20 years
• An additional 200 plans in PPA critical status (red zone)
• The retirement benefits of 3.5 million plan participants are at risk
• PBGC multiemployer exposure has grown to $59 billion
• GAO names PBGC to its 2017 High Risk Report
• PBGC’s multiemployer insurance program projected to become insolvent by 2025
• Multiemployer Pension Reform Act of 2014 (MPRA) suspension of benefits solution for troubled plans has failed
Legislating a Private/Public Solution
• Current Federal pension insurance guarantees benefits after plan failure
• Legislate the creation of the Pension Rehabilitation Administration (PRA) within the Treasury Department, to structure loans to pension plans for the purpose of funding pension legacy deficits
• PRA would prevent plan failures through loan programs using private capital and Federal guarantees on loans for multiemployer plans
• US Treasury provides a guarantee of principal and interest
• Envision strong demand for these high-quality liquid bonds
• PRA makes direct loans to Critical & Declining status plans
• Treasury receives a fee of approximately 20 basis points
• These PRA loans would have a 30-year maturity, structured as interest only for 29 years, and then interest and principal due in 20th year
Structure of PRA Loans to Plans – 1/4
• Plans borrow the amount necessary to guarantee their specific retiree accrued liability
• Employer contributions cannot be reduced during the term of the loan
• Plans are prohibited from increasing benefits during the term of the loan
• Employers cannot withdraw from the plan for the loan term
Structure of PRA Loans to Plans – 2/4
• Pension plans receiving PRA loans are required to invest the loan proceeds in an insurance company annuity contract, a duration-matching portfolio, or cash-matching portfolio. These requirements accomplish the following:
1. Secures all retiree payouts for existing retirees
2. Neutralizes negative cash flow and allows plan to achieve funding progress
3. Reduces future investment risk
Structure of PRA Loans to Plans – 3/4
• Pension plans receiving PRA loans are required to negotiate with Treasury over the following conditions:
1. Revisions in future service plan design that reduces probability of future unfunded liabilities
2. Changes in investment strategy that reduce the probability of future unfunding
Structure of PRA Loans to Plans – 4/4
Pension Benefit Guaranty Corporation (PBGC) Financial Assistance
• Plans that cannot demonstrate that a PRA loan will keep the plan solvent and pay its retiree benefits, may receive financial assistance from the PBGC
• The PBGC assistance will equal the percentage of inactive liabilities necessary to maintain the plan’s solvency for a minimum of 30 years
• The assistance shall not exceed the value of the PBGC guarantee
• PBGC assistance is only available to critical and declining plans
PRA Governance
• Established as an agency within the U.S. Treasury
• Not affiliated with PBGC
• Director appointed by President of United States
• Director can hire actuaries and financial experts
• PRA is funded from within Treasury’s appropriated budget
• PRA will have oversight powers over pension plans that receive loans
PRA Goals and Outcomes
• Fosters retirement security for current and prospective at-risk pension plans
• Prevents plan failures and their adverse consequences on specific industries, employers, and workers
• Alleviates the PBGC’s long-term deficit and financial exposure
• Avoids the need for a direct federal bailout
• Provides a path to rebuilding sustainable DB plans
Current Status of the PRA Proposal
• PRA is a three-year work in progress
• Financial experts have advised on proposal architecture
• Vetted and encouraged by Democratic and Republican staff
• Congressional leadership recognizing pension crisis in the aftermath of MPRA benefit suspension application (e.g. Central States)
• Legislative language has been drafted b ex-PBGC Chief Counsel
• Senator Sherrod Brown is sponsoring Legislation
Compiled from Copyright @ 2017 Pension Fight and INTERNATIONAL BROTHERHOOD OF TEAMSTERS talking points presented by John Murphy, VP at IBT at
Sent from my iPhone