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.
More than 500,000 IBEW members, retirees, participants, and their beneficiaries are covered by multiemployer pension plans. For decades these plans – jointly managed by labor and management – have provided a decent retirement for electrical workers, as well as millions of other workers in industries ranging from transportation and services to coal mining and manufacturing.
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:
Multiemployer retirement plans are one of collective bargaining’s true success stories, showing how labor and management can work together to guarantee retirement security for working families. With the goal of a decent retirement looking increasingly remote for many Americans, this is the time for us to come together to strengthen multiemployer plans as a bedrock of economic security for the middle class.
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:
- Give plan trustees more flexibility in managing financially troubled plans to avoid having to rely on tenuous government bailouts.
- Give plan managers more leeway to partner with other plans to minimize administrative costs
- Change federal regulation to encourage new approaches to plan design that maintain a secure retirement stream for participants while minimizing risks for contributing employees
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:
Numerous studies have found that workers with defined-contribution accounts often put aside too little money, make too many withdrawals or employ the wrong investment strategies to save enough for old age.
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.
To protect multiemployer retirement security, we need solutions that address the long term challenges facing both employers and employees.
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:
We urge lawmakers to come together, like we have, to take action on these recommendation to ensure that multiemployer plans continue to provide reliable retirement security for millions of workers while helping to prevent bailouts down the road.
Photo used under a Creative Commons License from Flickr user StockMonkeys.com