Business, Labor Agree: Time to Act on Retirement Security
February 27, 2013
It’s one of the biggest challenges facing the economy today: providing retirement security for America’s work force.
But the 2008 Great Recession, which wreaked havoc on pensions and other retirement funds, has led labor and business leaders to propose new reforms to the multiemployer pension system to keep the funds – which allow workers to accrue benefits even as they move from job to job – solvent and attractive to employers and employees alike.
Says International President Edwin D. Hill:
The regulatory provisions covering multiemployer plans, last updated in 2006 as part of the Pension Protection Act, are scheduled to expire in 2014.
To kick off debate in Congress and among plan stakeholders about revamping the pension regulatory system to meet current economic challenges, the National Coordinating Committee for Multiemployer Plans, a coalition of unions, businesses, and retirement experts (including the IBEW), released its reform recommendations in a new report – Solutions not Bailouts – this month.
Among the suggested reforms are:
Multiemployer pensions are particularly common in industries like construction which are dependent on a mobile workforce. Approximately one-fourth of workers are covered by traditional pensions are in multiemployer plans.
Years of outsourcing, plant shutdowns and corporate mergers have devastated single-employer private pension plans, leaving millions of Americans reliant on 401(k)-type defined contribution plans which fall short when it comes to providing sufficient retirement income.
As Michael Fletcher of the Washington Post wrote:
Despite their decline, researchers say that defined benefits plans still give retirees a bigger bang for their buck. The National Institute of Retirement Security finds that the cost to deliver the same level of retirement income to a group of employees is 46 percent lower in a defined benefit plan than it is in a defined contribution plan.
Multiemployer plans held up better than their single employee counterparts, but the Great Recession still caused major damage, with the percentage of plans considered to be financially healthy dropping from 76 in 2008 to just 20 a year later.
That figure has since improved to 62 percent, but more needs to be done on the federal level to protect and expand retirement security for plan participants, says Marco Giamberardino, National Electrical Contractors Association executive director for Government Affairs.
The Pension Benefit Guaranty Corp. the federal agency responsible for guaranteeing private pensions estimates that without regulatory changes, there is a strong probability that multiemployer plans could exhaust their assets in the next 20 years.
Says International Secretary Treasurer Sam Chilia: