Transcripts For CSPAN3 Pension Benefit Guaranty Corporation 20171204

Calling being present, the subcommittee on health labor and pensions will come to order. Good morning and welcome to todays subcommittee hearing on the financial challenges facing the Pension Benefit Guaranty Corporation and more importantly the impact to workers and retirees, George Miller was a proud liberal lion of this committee. While we very often disagreed, the years that i served with him on this committee, i admired his commitment to ensuring americans have the ability to retire with dignity. In 2014, he worked with john kline, then our chairman, to try to solve a real problem. A retirement system on the brink of collapse. They put politics aside, worked with employers and labor unions and negotiated a set of reforms to the multiemployer Pension System in order to provide benefits for millions of workers. President obama signed this bipartisan approach into law in 2014. The law was based on the premise that the Plan Trustees who have a legal and moral obligation to pensioners and workers would have the ability to take early action in order to avoid disaster. While the 2014 statute was an important step, regulations written by president obamas Treasury Department implementing the law made it difficult if not impossible for trustees to use the tools the law contains, and so the problem continues. We know they persist because the Pension Benefit Guaranty Corporation, the backstop for private defined benefit plans, released its annual report two weeks ago. According to the report, more than 100 plans are expected to fail. This will impact millions of workers, retirees and their families who spent their careers planning their retirement with these promised pension benefits in mind. And who promised these bin fene, unions and employers who established and administered these plans. The federal government and nonunion workers had no role in negotiating the contracts that made the promises that will be broken. Mr. Miller, when he chaired the committee, recognized this. It thats why this committee, under his leadership in 2009, refused to advance a legislative proposal to put taxpayers on the hook for these promises. Implementation of the 2014 law has been ineffective and the workers and retirees in these plans are worse off because of it. When their plans fail, their benefits will be cut, in many casings, significantly. And when these Retirement Systems fail, the pbgc will collapse as well. The agencys Multiemployer Insurance Program currently has about 2 billion in assets, receives less than 300 million in premium revenue annually and has a longterm deficit of 65. 1 billion. Again, thats 65 billion. When the money runs out, likely sometime in 2025, pensioners will receive pennies on the dollar of what they were promised. Employers will close their doors, and previously healthy plans may go bankrupt. Congress took bipartisan action just three years ago to prevent this looming disaster. We believe the Trump Administration will work hard to ensure the laws tools are utilized more appropriately, but if congress is to consider further reforms, its critical that the committee fully understand the scope of the financial challenges facing pbgc no matter how dire they are. Todays witness tom reiter is a pbgcs director, he administers no it just the Multiemployer Program, but also the agencys very Large Program for single defined Employee Benefit plan. While those plans are trending upward, its still under funded by more than 11 billion. The plan insures more than 27 million americans in more than 22,000 Pension Plans. We look forward to examining that program in todays hearing as well. There are no easy answers. To these problems. But we owe it to workers, retirees, employers and taxpayers to put politics aside as we have done in the past and work toward finding a fiscally responsible bipartisan solution. Millions of americans are counting on us. Before i yield to the Ranking Member for his opening remarks, i want to yield to chairwoman fox with for a brief comment. Thank you, mr. Chairman. I want to take a moment to recognize a member of our staff, Andy Banducci whos leaving the committee to pursue a new opportunity across the capitol as labor policy director for the Senate Committee on health, labor and senate pensions, andy has been a valued member of our team since 2011, most recently as the workforce policy counsel. Hes been at the forefront of our efforts to help workers save for retirement, modernize the federal employment Pension System, and expand access to Affordable Health care for all. Over the years, andy worked dill gently in support of our workforce policy agenda and has helped us advance important legislative initiatives, including, most notably as chairman wahlburg just talked about is the bipartisan pension reform act of 2014, i know all our current and former Committee Colleagues will agree, andy has always provided us with wise counsel and important technical expe expe expert expertese. An on behalf of myself and the committee, thank you for the time you have put in doing the peoples work. Of course we hope we will have an opportunity to stay in touch as you embark on this new colla challenge in your congressional career. Will you yield, ms. Chair . Yes, i will. I want to join in our good wishes for even in issues where theres disagreement and thats so important in getting a good legislation passed, andy has been a constructive staffer and will be missed and i want to join in the congratulations of the chairwoman and wish you well. Yield back. [ applause ] and andy, i too want to echo the same tesentiments, i know youre taking a lateral transfer, but we know you will give great benefit to that other body. With truth and clarity that maybe they have been lacking for quite some time. I also want to add an additional point that while you have done this with all good humor and support and optimism, positive and moving forward in giving us good counsel, youve also been very good at telling me no. And sometimes the best thing you can hear from good counsel is no. So you have a chance, then, to understand what is actual truth and what we can and cant do and how we need to move forward. So i too, andy, would say thank you for your service, its been invaluable. We assume that there are other staff that will follow you that will do excellent work, so were not worried about this committee and subcommittee, so were not worried about that. They will have to prove themselves, you did. God bless you as you move forward. Now i yield to my Ranking Member, my good friend and colleague, representatithe repr. Let me also start by recognizing and thanking mr. Andy bonducci which is depart g ing this legislative staff this week. Andy has played a leadership role on several important Retirement Security issues. On behalf of all your friends and the democratic Sub Committee members and their staff, friends all to you, i want to thank you and wish you well as you move to the senate. Dont forget to recognize house members when youre a senate staff. I want to express my thanks to chairman wahlburg. Since i became Ranking Member, we have gained solid ground on helping americans retire. Last month, we enacted ira rollovers and in may we conducted a subcommittee hearing, where there was a fair amount of consensus on practical Retirement Security solutions. At the conclusion of that hearing, i noted how the multiemployer Pension System and the looming insolvency of the pension benefit guaranty welcome director reiter, i en y enjoyed meeting with you yesterday, and i look forward to your testimony. I would also like to recognize some of the members of the teamsters union, who also some of you came to my office yesterday. Mr. Chairman, it is clear that the Multiemployer Pension Program remains in significant financial distress, as the pbgcs annual report states, the program has 2 billion in asset, to cover 67 billion in liabilities, thats a deficit of 65 billion, up from 58 billion last year, at an alltime high. The pbgc has estimated that unless congress acts, the program is going to run out of money at the end of 2025, thats the present estimate. We have to focus on the biggest cause of the crisis, the looming failure of a few very large multiemployer Pension Plans, if Congress Works together to help these failing plans, we can go a long ways toward improving pbgcs outlook. We want to propose legislation that will prevent multiemployer plans from failing while safeguarding retirees pensions. I would like to hear director rethes thoughts. We must act soon, as we proceed, i believe we should be guided by the simple principle that it is not the fault of the workers or the retirees that their pension plan is on the brink of insolvency, these americans worked a lifetime and earned their pension. American workers dont want a bailout, they just want the pension promise that was made to them to be upheld. We must also keep in mind that the cost of the consequences of inaction are enormous and the consequences will be devastating, impacted retirees could see catastrophic reduction to their pension benefit, as high as 90 . Governments will see reduced revenues from impacted pensioners. Theres likely to be significantly increasing employee safety nets others will have a worsened Financial Outlook due to having this pension liability. This will affect all of our constitutional districts. This should provide members the magnitude of the scope of the multiemployer pension crisis, and more importantly, mr. Chairman, todays hearing should underscore the urgency for congress to take responsible action to prevent the foreseeable collapse of the Multiemployer Pension Program. I hope that we can do that sooner rather than wait until the last minute. And i am hopeful we will do that. With that, mr. Chairman, i want to thank you again for convening todays hearing and i yield back my time. I thank the gentleman. Pursuant to Committee Rule 7c, all members will be permitted to submit written statements to be included in the permanent hearing record and without objection, the hearing record will remain open for 14 days to allow such statements and other extraneous material referenced during the hearing to be submitted for the official record. Its my pleasure to introduce our next witness, mr. Tom rethier. Prior to joining the pbgc he was employed at private practice firms. And he rose to the benefits of in 2009, he started serving on the Senate Finance committee of chairman baucus. I will now ask our witness to raise your right hand. Do you solemnly swear or affirm that the testimony youre about to give will be the truth, the whole truth and nothing but the truth . Yes. Thank you. Let the record reflect that mr. Rethier answered in the affirmative. Before i ask the director to provide his testimony, i think you know the lighting system, so i wont go through the script here, it is a system that we generally follow on the road, green, go, yellow, start to stop and red stop. We want to hear your full testimony, though we have your full testimony in written form and then after that have the opportunity for our committee here to ask questions. So we welcome you and thank you for your testimony. Thank you chairman wahlberg and Ranking Member sublan and members of the subcommittee. I appreciate the opportunity to appear before you today to discuss the key challenges that pbgc faces, as you referenced, my full testimony has been submitted so ill focus on the most pressing issue facing us today. Congress established the pbgc in 1974 as part of erisa to provide basic protection for participants benefits in define benefit Pension Plans. Under erisa, pbgc insures plans without regard to their financial situation. Right now pbgc insures pensions for about 10 Million People in the program. While each program protects pension benefits when plans fail, it guarantees the premiums and other features differ significantly. By law the assets of one program cant be used to pay benefits under the other. Both programs have been in deficit for about 15 years. And, however, the Financial Condition of the Single Employer Program has, as the chairman noted, has been steadily i remember pro remember improving, but the Multiemployer Program is in dire straits and getting worse. As of september 30th, the Single Employer Program had 117 billion in assets and liabilities of 117 billion and assets of 106 billion so theres still an 11 billion deficit. Our proswrjections show that it will improve, but its not a certainty. By contrast, as the chairman noted, we have 67 billion in liabilities in the multisystem and only 2 billion in assets. Thats a 65 billion deficit and its likely to become worse and we project that the program will be insolvent, more likely than not to be insolvent by the end of 2025. Thats due to many factors, financial, economic, and demographic and the recession of 20082009 amplified the effects of each of these factors. As a result the funded status of the Multiemployer Program fell below 50 after the 2008 crisis. Many plans have recovered, but about 10 of them didnt and probably will not recover. So today, the Multiemployer Program faces an unprecedented level of plan failures. Over 100 multiemployer plans with more than a million participants have already reported to their participants that they expect to fail within the next two decades. Pbgc, our financial statement, with some of these plans already on our balance street reflects the serious underfunding of these critical and defining multiemployer plans. Our projections report shows that this underfunding is likely to increase our deficit as the years come. And as i mentioned, were likely to be insolvent by the end of 2025. With pbgcs multiemployer funds exhausted, when and if they get exhausted, the only money available to pay plans, or benefits under plans, will be the annual premium revenue that we collect, which is now a little over 200 million a year, and is projected to grow to 400 million a year. So were paying billions of dollars in obligations with millions of dollars of income. Multiemployer guarantees are already very, very low compared to the Single Employer Program. And so a failure of the pbgcs Multiemployer Program will result in those low guarantees becoming even lower, much lower. Right now, if you have 30 years of service, your guarantee level is a little under 13,000, that compares to the Single Employer Program, where youre guaranteed, regardless of your service, is more like 64,000. So one of them is livable, and the other one is not quite livable. Cuts of this size are catastrophic to participants. We will continue to work with the administration, with congress, and the multiemployer plan community, that includes both participants and the plans themselves, to address this problem and i look forward to addressing your specific issues in the coming few moments. Mr. Reiter. I appreciate you saying in your testimony that the legislation needed to address the looming insolvency of the Multiemployer Pension Program and i agree. As you may be aware, congressman neil recently introduced legislation, h. R. 4444 that would increase the plans and other Financial Systems through the pbgc, most of the members of the Health Committee are sponsors of mr. Neils, which does not cut retirees pensions. One, has the pbgc had an opportunity to review mr. Neils bill, and if so, what is your thoughts on it and if not, when do you think you will finish your analysis and will you provide it to us when you do . We are looking closely at it. It is very difficult to evaluate exactly the effect and the cost of the program because each plan is plan specific and we dont have data from plans that we need to see how that would affect each plan. And other loan proposals have actually gone to plans and assault out their advice on whether or not that loan proposal will cure their problem. But we cant its difficult for me to predict when our analysis is going to be done, but we will share it whenever we have it. And i will go to my next question. Has the pbgc reviewed the other pr proposals put forward by u. P. S. And other multiemployer plans, and if so, what are your thoughts on those proposalpropod if not, when will you finalize your analysis of those proposals and will you share it with us when its complete . Again, we can share our analysis with you, but as i said about the other proposaproposal very hard to examine the plan on a plan by plan basis and we need to do that to see if it resolves the problem for the big plans that are facing imminent insolvency, and we have to go through the plans to get access to that and so far we have been unsuccessful. But we do think that the loan proposals all would clearly have an affect, but exactly what that affect is we dont know. And whether or not its going to resolve the problem, and again, were talking about a problem up here, with promised benefits, not just a problem for pbgc, whether or not it solves the problem, we cant say, were a little bit skeptical because we think maybe the assumptions that are being used by the people who are proposing the other po pose spose proposals may be little rosy. Let me get to my next question. No, i believe one of the most attractive features of mr. Neils bill is that it does not include cuts to the retirees benefits. So we should do our best to do what was promised to these retirees. I understand that the average pension paid by the mine workers plan is 530 a month. So could you please talk about the pension benefit range on multiemployer plans and we only have 48 seconds. Yes, we the benefits vary greatly, there are plans that have very modest benefits modes and the teamsters have a higher much higher level of benefit so a reduction to the level would effect the teamsters much more than the coal miners but they will have an effect on both groups. And im going to yield back my time but i may have other questions. Thank you. Thank you. I yield back. Thank you. Dr. Rowe youre recognized for five minutes. Thank you. I too want to thank andy. Thanks for your friendship and thanks for the hard work you did on behalf of the committee. First of all, mr. Director and i appreciate you coming by the office and speaking with me. I can see myself sitting out in that audience concerned. My father was a union member, lost his job at 50. It was offshored and here he was a post world ii, no job and no mention plan. So i can see myself sitting there and it looks to me that we have two very conflicting issues, one the pbgcs current funding cant meet its obligations and some of the multiemployer Pension Plans cant meet their obligation. If you dont have enough money to pay the obligations, there are things that we have to look at. One, are we paying premiums enough . Youve talked about that, the premiums right. Has an improving economy has improved tremendously over the last year helped make these plans more solvent and extended that time and three, can we reduce benefits, thats another option that you have. Reduce benefits. And can you fund and ive always thought this you should be able to fund the pension plan above what we allow during good times because you see in the 90s when the dotcom was going along, the economy was doing great. We should have upfunded those plans then instead of not funding them, i think, and lastly i want to ask, have there been any government decisions, any decisions that Government Policies that have rbted to the failure of the plan and Going Forward do we need a new type of pension plan . Im sorry. I didnt take notes at the beginning of your question so there was a lot im sure youll remind me if i miss something. Yes, i do think theres been errors as i mentioned in a prior question in the governments behavior in limiting the amount that can be contributed to a plan and i do believe that those rules have been loosened and people can contribute more in better times but your point is will they and if we i think with a variable rate premium we might encourage them to do so in better times. I do think that a different sort of plan is something that should be examined. I am heartened by the various proposals that have been given about having a different plan but i have to emphasize that we from my perspective, it is very important that we not effect the funding levels we dont adversely effect the funding levels of the existing promises that have been made and im very fearful of new plans having that effect, but i think if theres going to be anything that looks like a defined benefit plan in the future for our grandchildren, i think its going to have to look different than today. The administrations proposed changing and scott talked about this, how would the pbgc new premium wouldnt accelerate the already insolvency underfunded plans. The proposal, the administrations proposal has a provision that allows for the pbgc to waive up to 20 of the premium in total for plans that it would adversely effect. We certainly dont want to accelerate the problem and we would exercise that authority to avoid charging plans that are already close to insolvency or critical and declining, avoid charging them a higher premium. Thats just money that goes into our pocket and goes right back out. We defined the problem pretty well. We dont have enough money to pay the obligations. What solutions have the pbgc, its not your job, but what solutions do you think we can do to help solidify these plans . Theres an array of solutions and weve been looking at lots of different proposals that have been made that range from government funding to benefit cuts to earlier benefit cuts for a plan thats headed towards insolvency thats going to go to the pbgc almost certainly the earlier they make the cuts the less drastic the cuts have to be if youre going to cut. And premium increases but all of those are very politically uncomfortable resolutions. Thank you, mr. Director. I yield back. Thank you, gentlemen. I recognize gentleman from new jersey, mr. Norcross. Thank you, chairman. Certainly appreciate you along with our Ranking Member putting together this incredibly important meeting and as suggested we up here might not have a stake in the game or skin in the game, i am a multiemployer pensioner. I understand as ive been a part of it for better part of 37 years thats why i understand how important this is so director, thank you very much for bringing to us. This is not a red issue, or blue issue this is not an republican or democrat issue. This is an american issue. The men and women who deferred part of their compensation to have a secure retirement, its a solemn vow they made and they kept their promises so we need to make sure that we keep our promises in making sure they get their full benefit. I just remember we promised a lot in Social Security yet weve made changes for years. So when we hear some of the statistics that youre talking about, 72 plans have failed, what is going to happen . The cost of inaction, the changes, do you want to leave define benefit and defined contributions which shifts the liability. All these issues come into play but the cost of inaction, if we do nothing, let me walk through this. You say by 2025, it is estimate youll be bankrupt,up side down, no longer can pay premiums. Today, for pensioner that makes or gets, lets say a 70,000 50,000 pension which is above the normal, what is the maximum benefit that he or she can receive if that plan goes under . Today that amount is a little under 13,000 for if they have 30 years of service, little more if they have more service. Its the rather indicated formula. 12,870 if you have 100,000 pension or a 50,000 pension, the most you can get is 12,870. If we do nothing and plans crash, the maximum anybody can get is 12,870 is that correct . Today. Today. The cost of doing nothing. In 2025 they will get less than 2,000. So the cost of inaction here is the issue that were dealing with. Couple of issues. You said you were expecting the premiums to increase from 200 million to 400 million. How is that possible . Is that by your anticipating the increase thats indexed already . Yes. And thats keeping every plan healthy . If a plan goes bankrupt, that would pull away from thats including a consideration of some plans dropping out. So you factored that in . Yes. Did you factor in the increases on how that might accelerate healthy plans from going unhealthy, going into yellow or red zone . The premiums under their current rate i dont believe weve factored in an effect of the premiums. The more you charge premiums, the less healthy they either have to increase what theyre paying or lessen the accumulated benefit, correct . Thats correct, but i think the inflationary increase is not going to have the same effect as a legislative increase. I agree a legislative increase would have an effect. The risk based premium shifting a little bit, is that based on individual plans or companies or is that risk base for the entire multiemployer . The variable premium rate would be based on the underfunding of the entire plan. Across the board for healthy plans and unhealthy plans . So you would use the healthy plans to pay for the unhealthy plans . No. If a plan was fully funded it wouldnt pay the vashl rate premium. Only 100 , so if theyre 90 would they pay the premium . Yes. The details of the variable rate are not specified in the proposal and the details you could say is where the devil resides. I agree and again i want to thank everybody on both sides of the aisle here. The cost of doing nothing is unacceptable. Thank you. I yield back. I thank the gentleman. I recognize my colleague and friend from michigan, mr. Mitchell. Thank you, mr. Chair. You referenced earlier in a conversation to another colleague that you begun to look at the loan concept but in looking at that you need to look at individual plans and youve been unsuccessful in being able to do that. Can you share with me why youve been unable to look at those plans . We need more data on the accrued benefits per participant to determine what it takes to make the plan viable in the long run. And why are you not able to get that . Its not something that we collect. Its not we have a pretty complex 5,500 that form 5e800 that they file every year and adding to that would cause some consternation and we have added to that in the past but we dont have it right now. These are plans that are in pretty dire straits, so would they night be wise to supply it so you could have more detailed information since theyre looking for a way to avoid insolvency . With respect to the analysis of the loan program, i think it would be but they havent we havent gotten it. Weve asked for it. Did your client do effectively provide it . We didnt ask for it in a judicial or legal way. We didnt subpoena it or anything but we said we would like information on how the program would keep the plan solvent and we have not received it. For the record, id like to ask mr. Chair that we get a listing of those plans that what information if you would please. Let me just say weve asked the proponents, we havent asked the specific plan. I would ask that you ask the specific plans since it has a specific impact on our deliberations and yours how we address this issue responsibly. You made a reference also in your testimony about the fact that the individual plans are far more successful and we dont have effective teeth in the multiemployer plans. The big teeth in the single world is an excise tax and to charge an excise tax its a confis ca tri excise tax, its something that people want to avoid and in order to do that in the multiemployer world in the way the reason its been so difficult is its not clear who you charge that tax too. If its the plan, then you could make the matters worse. If its the employer, well, its difficult to get that legislated. If its the participants, its difficult to get that legislated. Its similar to raising premiums. By doing the ones that effectively go bankrupt earlier are better off because youre actually imposing the penalty on those that are left standing. Thats right. You talk about the promises made, the current guarantee which for multiemployer plans are very low, have you done any analysis of the reality is unfortunately plans here that there have been decisions made for a variety of reasons, some poor decisions, economic impact, have you done analysis of alternative levels that would guarantee that is fiscally manageable . Have you looked at that as far as ultimate guarantee . The statute requires us to provide a report to congress when with we determine that we are going to go insolvent and i think the time is coming up for that and we need to figure out exactly how were going to ramp down the guarantee level as we approach insolvency. We dont have a concrete plan in that regard yet. Is pbgc prepared to administer a loan program thats been discussed in order to help basically push off some of these catastrophes at this point . Not currently. Loan programs that exist in the government already are generally administered by the Treasury Department or other departments. I dont want to be too cheeky in saying that the the assistance that we give to insolvent plans already is technically a loan and we dont collect those very well. You can be cheeky here. Its okay. Let me make one comment, i think we need to be very careful when we talk about fully funding or using taxpayer funds for fully funding plans that decisions were made such as the one you described on increasing benefits but then you cant ramp them back because the taxpayers didnt participate in those decisions. So while we do not want anybody, my dad retired from General Motors to end up without a pension, we need to be careful to balance that because otherwise we create an incredible snefl to be irresponsible frankly. Your recommendations would be appreciated. We need to look at those loan programs and ask those questions and see those response. I yield back. I thank the gentleman. Before i recognize our next questioner, noticing my Ranking Members tie it reminded me of a Beautiful University of michigan mason blue but i was also in the stands at the big house this past saturday and enjoyed the first half very much but i would be remiss if i didnt congratulate my colleague from ohio. Thank you. The buckeyes for your for another win that continues on but there is always next year so i recognize i recognize my friend and colleague from ohio the buckeye state, the victor state this past saturday, ms. Fudge. Thank you, mr. Chairman. And since it is my alma mater, i wasnt going to say anything but since you did, maybe next year. I think you channelled me. Thank you so much mr. Chairman and i thank you director for being here today. Just a couple really quick questions for you. Should should the agency become insolvent is there any mechanism by which the government steps in absence congressional action . No. So you need us to act, number one. Number two, i dont like to talk in abstract, my colleague, mr. Norcross asked you about the maximum benefit that could be received should the worse happen. What is the floor . You said the maximum may be 2,000. What would be the floor . It would be the benefit promised under the plan and many plans dont promise a benefit thats even that high. At all. So tell me, what do you think would happen if some of the people sitting here were to only get 1,000 or 2,000 on our economy should they not be able to buy medication, should they not be able to maintain their homes or not be able to send their children to school . Tell me what the economic benefit if you know would be if we reduce benefits to a level that people cant even live on. I dont have hard numbers congresswoman, but i do know that many of these multiemployer plans have participants concentrated in Geographic Area where the effect of a cat trough if i can decline would have a similar effect on the entire community. Could this happen before 2025 . Yes, it could. So we really know that there is some urgency, it may not be 2025. I agree with our chairman that we havent done this in more than 30 years, it is time to do. And i think that its great to look back on mistakes that were made but the people who are going to be punished today had nothing to do with those mistakes either. And if we make people a promise we should keep our word. I understand that there were problems. We need to find a way to solve it so my next question to you, if there were any one thing suggested we do to try to make this a better situation, what would that thing be . I have to say increase the premiums to keep pbgc afloat long enough to make the promises that pbgc has made. Youve limited me to one. Because thats i think maintaining the governments promise is the most important promise of all and if you can achieve that then you ought to also think about trying to figure out a way to have the plans maintain their problems. And lastly, i would say to you how many people do you think would be effected by an insolvency immediately . How many people . Just sheer numbers. At least 1 million, probably closer to a million and and a half. And that is cat astrof if i can. I recognize now friend from georgia one whos had concerns about employees and their future and benefits, mr. Alan. Thank you, mr. Chairman and i wont talk about college football, although i am pretty about happy about the outcome of the alabama game. We are here for a serious conversation this morning and it sounds very serious. Im trying to find out exactly it seems like were kind of going around the issue here. Its obvious that people paid into a program, paid premiums and that the the labor organizations and the employers adjusted benefits at will disregarding the premium that were being paid in and how in the world were they able to do that . How could they just decide they were going to give greater benefits without any regard to the future solvency of the program . I dont believe that any one would say that trustees made a decision on benefits without regard to the funding level of the plan. I do believe they all sincerely believed when they made a promise that the assets would be available to pay that promise based on actuarial evaluations that they were doing at the time. However, some plans, probably a majority of the plans, made the promise in a way that it could be adjusted in the future and they made those adjustments when the Economic Conditions required it and they increased contributions from the employer when the Economic Conditions required increased contributions. So and were talking about as congresswoman mentioned earlier, were talking only a million, million five people. Theres 8 million, 8. 5 Million People out there that are not going to have any problems and the Multiemployer Program is doing very well for them and i think congressman norcross mentioned that there are plans that are doing just fine out there and its difficult to extract higher premiums from them. Right. Why are some programs doing well and weve got this one group that is upside down and its going to be an exponential cost to somebody . Potentially taxpayers where we already have a nation thats 20 trillion in debt. Its not taxpayers that are going to be funding any kind of assistance here, its going to be i dont know four, five, six generations from now. Were not funding anything basically right now because of the deficit. Its all being passed down several generations. So what is the difference in the premiums in the programs that are successful or the Single Employer Programs and the programs that are in financial trouble . Whats the difference in the premiums . Theyre pretty incredible difference. The singles the multis pay 28 a head, the singles pay 74 a head flat so already youre talking nearly three times as much plus 38 per 1,000 in underfunding and thats capped at 523 per participant. So a single employer plan can have a benefit premium of up to nearly 600 per participant if theyre poorly funded. It sounds like somebody was misled here, in other words, you pay in this amount and youre going to get this benefit. And theyre not going to get it. Is that a correct statement based on your concern presently . I do think that 9 until 2012 per participant was too little to provide the insurance that we are providing. Who is responsible for that . The Congress Sets the premium rate. The premium rate set by congress so i as i mentioned earlier that theres been a lot of proposals for to allow the pbgc to set the premium rate but Congress Sets the premium rate. Okay. You may be talking about the contribution rate and the contribution rate is collectively bargained. Thats the amount that employers pay out of the employees salary to pay the benefit. So congress has been unwilling to raise the premium because of what reason . I have a difficult time answering that question but premiums i think are are largely regarded by plans and in the single world by employers as a tax and we dont like to raise taxes and its technically not a tax but it feels like a tax, especially if youre well funded. And so its its not easy to raise premiums. Im asking these questions, ive only been here this is my second term and ive learned a lot here. The gentlemans time is expired. I yield back. Youll have plenty more opportunities to hear this and thats why were doing it today. I now recognize the gentle lady from delaware, ms. Rochester. I dont recognize her. I recognize the gentleman from new york. Thank you, chairman. I had the pleasure of going to one of the ups garages in the morning when they had a role call. I was very impressed with the number of young people, both men and women that work for that company, the kind of Safety Measures they take into consideration on a daily basis to ensure that everybodys safe, the professionalism that they had there including also as well their starting salary. These are young people that are making about 74,000 a year. It has pretty Good Health Plan and what should be a pretty good pension plan. So this is an example of a Union Company that i think is emblematic for our nation, what our nation sane what it should be in the future but yet they have this looming pension issue and of course you have said that you support not only a potential reduction in the benefits but also an increase in the premiums as potentially some confusion of cash loans to these Pension Plans. With regards to the money, the inclusion of dollars, what level do you think this should occur . Whats the game plan . Whats the length period, the calendar period for this to be paid back . This is critical. Lots of companies go under because theyre saddled with these pension issues and then of course they cant cover their employees and then Companies Like ups get saddled with this responsibility. What is in terms of the infusion of cash and in terms of the reduction of benefits, what can you live with . I want to make sure that i dont get misinterpreted. I did mention as a proposal that has been made and i think the ultimate solution may be difficult to get without some kind of a benefit cut and i do believe the ups proposal has a benefit cut in it, but i we dont have a specific recommendation as to infusion level. The administration is not supporting i wont say theyre not supporting, they have not proposed, they have not voiced an opinion on infusions of cash into the multiemployer system. The only thing on the table in our world is a premium increase. You said that if we do nothing, doomsday down the road . In fact, a good company like Union Company like ups may find itself in real deep trouble. Further exacerbating this general pension problem across the country, so what do you suggest . If you dont want to itemize the benefits that youd be willing or we would be willing to live with that cut, you dont have an idea on the level of infusion that should come forward and the timetable, what is the recommendation then . Like i said, i am i am focused im laysered focused on the guarantee that we provide and we think that premium increases that get us 16 billion over the next ten years that continue after that ten years will keep us afloat for at least two decades, but again, im focused on the level of our guarantee and i think most of your question focuses on the level let me remind you that youre talking about premium increases and youve yourself have said companies consider this to be a tax. This very same week as we are talking about socalled tax cuts so the environment coming from the white house and the majority is not one to lends itself to the survival of this great company, american company, ups. Mr. Chairman, i yield the remaining part of my time to congressman norcross. Thank you. Just a real quick question, you keep talking about the premium increase. You told me it would not save the pension plan. So lets remind lets just extend life support for very short period of time. Bankruptcy, number one issue in causing the deficit in this the position of bankruptcy, wouldnt you agree . Yes. But its very high. With all the calculations weve seen by far that and obviously the down turn. We just want to make sure this was caused by other Companies Going out of business and those Healthy Companies that remain take on this liability. Those making the incorrect decisions with investments have liability but its minuscule when we compare it to the unfunded liability by those who went bankrupt. I yield back. Thank you. I recognize the gentleman from pennsylvania, mr. Smucker. Thank you. Mr. Chairman. Thank you for being here. I want to follow up to some of the comments that mr. Alan had made earlier and im even newer than he is, my first term so really just beginning to grasp the magnitude of the problem and i certainly believe that those who worked hard all their lives and saved responsibly and counted on that pension that they were promised deserve to receive that pension. Its not the beneficiaries fault that the pension fund was poorly structured. On the other hand, as was just mentioned businesses who are left shouldering this may not have been party to making what turned out to be bad decisions as well and certainly concern with any impact that this would have on taxpayers who dont benefit from the plans at all. So it is a tough problem and im only beginning to understand exactly how that works. I specifically want to go back and you may have mentioned this before and i apologize if you did. Tell me more about the difference between the single employer plans and the multiemployer plans, the single fund is doing much better than the multiemployer. Is that primarily because of the premium level that you just described where single employer plans are you said i think are paying 74 and multiemployer pension are only paying 28, is that why one is more solvent than the other . I think thats a very high ranking if i rank the reasons, i think that would be very high, one or two or three but also the fact that in the multiemployer world the a single employer bargains for a compensation package that includes pension and health and everything with the union and once they come to an agreement on how much the employers going to have to pay towards the pension plan, the employer makes that contribution to the pension plan and then the trust yeels of the pension plan determine what the benefit is. So you have two different entities technically, different entities making how much you contribute decision and what the benefits are decision. In the single world its the employer decides to provide this benefit and they are on the hook for the entire benefit. So is it a lack of accountability on the multiemployer side . Accountabilitys a pretty strong word. I dont think i wouldnt use that word but it is i think theres a disconnect between the people who the process for deciding on how much to contribute to the plan and the process for sounds to me like a structural but the decisions made in regard to the benefit do not align with the decisions that are being made to pay for the i think the bargainers are very much aware of the benefit levels and the deficit levels of the plan so they bargain accordingly. I wouldnt accuse anybody of shirking their duties. I dont intend its not what im implying. I want to understand premiums, paid by the employers entirely . Yes, yes. There are many good multiemployer plans that you said are solvent. Youre asking about the single. In the single world theyre paid by the employers. In the multiworld theyre paid by the plan. Come out of plan assets. Which ultimately who is paying for that then . I think the economists would say the participants are paying because it comes out of that package of compensation that the employer pays part of which goes to the plan and so thats an increase in obligation of the plan. So multiplans that are some that are solvent and some that arent. When premiums are raised, is that on all plans are only on those that are insolvent . An insolvent plan wouldnt pay any premiums at all. Theyre already receiving assistance benefits from the pbgc and it would be counterproductive for us to collect money and give the money back. And as i said if there were a variable rate premium the pbgc would forgive us of that. The current law the premiums are paid by all plans that are not terminated. Thank you. I have a will the more questions but i see im out of time. Thank you. Thank the gentleman. I recognize the gentle lady from oregon. Thank you very much, mr. Chairman. Thank you for holding this hearing. This is a critical issue protecting Retirement Security is crucial and im here advocating for the thousands of workers and retirees in northwest orgegon although my grandfather was a miner. As you state in your testimony, director, if the pbgc Multiemployer Program becomes insolvent, the result will be catastrophic for current and former workers, for retirees, beneficiaries and their families. In your testimony, director, you state that in the pension benefit guarantee corporations, 67. 3 billion in liabilities in the Multiemployer Program. 62. 7 billion of that is for 47 plans that are ongoing and have not terminated. You add that these are plans that the pbgc expects will exhaust plan assets and need Financial Assistance in ten years that was also indicated in your recent report the ongoing financial decline of several large multiemployer plans are expected to run out of money in the next decade. So unless congress acts, the pbgc is unlikely to be able to provide that Financial Assistance and as you noted the result would be catastrophic. I understand it is important that the pbgc does not publicly name the 47 plans for the same reason the fdic would not want to name the banks that might fail. Would you please discuss the demographics of these plans, the types of workers and employees participating in these plans and where they are located in the United States . I think the short answer is theyre everywhere. And there are plans that have been before you and so i dont think that theres too much and theyre represented by members sitting behind me, i dont think theres too much secrecy in two of the very large plans and but i think thats underrepresentative of where the people live in those 47 plans and i have to say that theres more theres actually more than 47 plans because we excluded from that number very small plans. But i think its safe to say theyre all over the United States. Is it reasonable to assume that people in the district of every member of congress or at least most of them will be effected by the economic fallout if these plans fail . I believe so. I believe so. Nearly ever district. Its hard to imagine a district not effected. I quoted your statement from your testimony about whats at stake. Can you talk a little bit about from your perspective how this might effect our communities, our economy and our families . Yes. I think there are there are plans that are concentrated that have retirees and active workers in more concentrated areas and there are some plans that are spread out but a lot of these plans are in the industrial world and a lot of these plans have communities where theyre dependent upon the incomes that the people get from the pension plan, and when the pension plan dries up and it goes down to the pbgc level or below if we become insolvent, it will be devastating on the community because the Grocery Store and the Hardware Store and the guys that mow the lawns, they depend on income from those people. Absolutely. Thank you, director. And its pretty clear that Congress Must act and as soon as possible. I think your testimony uses the word urgent. Theres an urgent need to address this and every day that congress delays in making changes to improve the solvency of the Multiemployer Program, the more egregious the problem becomes for participants plans, employers in the pbgc. We certainly need that action on the part of congress and im proud to be one of the 39 original cosponsors of the rehabilitation for multiemployer pensions act which was recently introduced by the ways and means Ranking Member mr. Neil. This bill will provide an innovate riff way to help financially troubled plans through loaned financed through the proceeds of Treasury Bonds and i urge my colleagues on both sides of the aisle to work with us on this issue so we can reach a meaningful solution for our constituents across the country and i yield back the balance of my time. Thank you, mr. Chairman. I thank the gentle lady and for your words that indicate youre very much committed to solutions. I now representative the proud representative from georgia, mr. Ferguson. Thank you, mr. Chairman. Before we get going id be remiss if i didnt mention my colleagues. Your time is being used with this. I understand but its an important comment, mr. Chairman. I got you. Thank you so much for coming today and i want to agree with your statement that this is an urgent issue and i also want to express my support for thoughtfully weighing in on our policy decisions and what our options may be and i think getting ahead of this is going to be very important. Its only fair to the men and women that have worked so many years to guarantee that theyve got some sort of comfortable retirement and its only fair to keep the promises that were made so how we get there, i think its important to recognize the folks on both sides of the aisle are trying very intentionally to find a good solution. So with that, a couple of quick questions for you, how many multiemployer plans have failed already . Theyre in the low 70s, 72. And how many participants in those plans have had their benefits cut before passage of the mpra . I dont know how many of them are cut, but the number of participants in those plans is 63,000, but not all those were cut. If their promised benefit level was below our guarantee they werent cut. How many Pension Plans for unions executives have failed or are failing . I couldnt tell you. Thats fine. So another question i have and im going to go back to something that my colleague from michigan, mr. Mitchell touched on and thats the reporting data. Im just curious, does the pbgc have the ability to go into these plans and get very detailed data as a condition of insuring the plans . I guess in my mind what im looking at is how the fdic would look at going into a bank and getting getting information and data. Do you have the same access . We dont. I think its pretty important that congress have that data and if were going to get involved in this conversation and be part of the solution, i think that its really important that we consider getting that data how would you suggest that that is accomplished . Is that something that needs legislative authority to do . Is that something you do administratively . Whats the right pathway there . I apologize for being too brief in my answering in saying we dont. Theres nothing thats that simple. We do collect a lot of data. We could use more data, but Additional Data not only costs to produce and report, but it costs to analyze and use it appropriately. So i do think that we are probably pushing the limit on what we can collect legally. Sir, not having access to that data, not analyzing it and not understanding the problem is about to cost us all a lot so it may be wise money spent to understand exactly whats going on in these plans to be for the plans to be as transparent as possible. Every single one of us whether republican or democrat, before we go and make a sidesable commitment to be able to keep these promises we need to be able to understand those plans in the most transparent way possible. Not having access to that data and not analyzing it is probably way more costly than what you just described. Any way, thank you so much for being here and thank you for offering to look forward to future conversations and mr. Chairman, i yield back. Thank you. I recognize the gentleman from connecticut, mr. Kourtney. Mr. Chairman, and can you for your thoughtful helpful testimony here today. I just wanted to see if we can focus again in terms of what the scope of the problem is in terms of families and individuals that are at risk. Again, your testimony said that multiemployer plans basically benefit about 10 million individuals . Yeah. Those are the actual awardees or recipients of pension payments as opposed to the size of their families . Yes. Thats the participants but theyre not all in pay status. I see. Some of them are active employees. But in terms so the population given the fact that these are like breadwinners or the Retirement Benefits put food on the table for other family members is really its bigger than 10 Million People. Right, right. Without putting you on the spot in terms of exact number. In the exposure in terms of what you indicated that the math shows right now its about 65 billion is the short fall that is looming. Yes, for us, yes. Right. So again just to try and put this in perspective. I was around here when in 2008 when this institution moved at mock speed to bail out the banks to the tune of about 800 billion and there really wasnt much asked in return in terms of, you know, the banks taking a hair cut, there were no premiums they had to pay to get tarp payments and again the bill that my colleague from oregon mentioned which is not even a payment out its really a loan that would be required to be paid back over time based on investments that would be supervised, again, i just think putting that in perspective compared to what this institution did in 2008, its actually a fairly modest proposal in comparison but the benefit obviously would be to help 10 million plus americans who basically paid into their retirements assuming there was going to be a promise kept at the end of the process. I think also its important to put a little bit of perspective just a couple weeks ago the house voted to cut the estate tax to eliminate the estate tax which effects about. 02 of americans. If you do the math were a country of about 300 Million People, that is a smaller fraction of people who are at risk in terms of what were talking about here this morning and obviously eliminating an estate tax that today has an exemption of 5. 5 million for an individual and 11 million for families, that is going to cost the treasury of this country 200 billion according to congressional budget office. So, you know, when were talking about we just saw this institution pass i voted no a benefit for. 02 of the country of 200 billion and ear really looking at a solution for this problem that really doesnt even involve it involves a loan that would be paid back to the treasury and i just think that this is not that hard to fix and particularly if you look at the history of what this institution has done in other cases as recently as just a couple weeks ago. These numbers are not as daunting as i think some of the gloom and doom that surrounds this discussion. Ive been on this committee now for ad nauseam with these hearings and its time to just, you know, again put it in perspective and really come up with what i think would be a manageable fiscally responsible solution that would protect peoples benefits. I yield back. I thank the gentleman. Now i recognize the gentleman from wisconsin whos Wisconsin Badgers who hopefully will take care of ohio state this coming weekend. I dont want to sound im looking for retribution but i am. Mr. Gothman. Thank you. I hope we come through for you. I was over in another hearing on government oversight so maybe this has been asked before, but i represent a lot of people in the central state plan which is a plan in a lot of trouble and a lot of people are scared out there, a lot of people have expectations raised and all of a sudden, you know, fearful that theyre going to get nowhere near what they thought they were going to get. Im aware that today most people probably are out there on their own 401 k and a lot of people ten years ago they thought they were all set, they had a 401 k , all of a sudden they wake up couple months later they are down 30 or 40 what they thought they had. I think particularly of government involvement i think its important we step up to the plate on these multiemployer plans. Could you comment at all as far as your vision, first of all, of when were going to get some finality here, were not going to wait until the last minute, but if you if you think that we will have some sort of solution before the final minute and secondly, give us options as to what you think is reasonable as far as helping these folks out . Yes. I cant give you a recommendation because the answer is political and the answer is going to have to politicals probably not the right word. The answer is going to require some sort of pain either from the government, from the participants, from the employers, from the plans themselves and the allocation of that pain is something that this body does and its not easy, but the answer from the perspective of making sure that the guarantee of the pbgc is good can come from increased premiums better than anything else. Increased premiums is not the answer for making good the promise that the Central States and other plans have made to their participants. That has to come from either some sort of government funding or participant benefit cut or a combination of those two. And i i cant hazard a recommendation as to which one of those things you feel its those two things. I guess you could call it government funding low interest loans or premium increases. You do not feel as theyre appropriate . Let me reiterate that i believe that premium increases are not the solution for making the promise whole of the plan. Premium increases make pbgc solvent for when the plan goes under and so the answer to keeping plans from coming to the pbgc has to be something other than premium increases. Okay. And when do you think right now the Central States fund will run out of money . Theyve told their participants that it will happen right about the same time that we go insolvent in 2025. Okay, and so right now if nothing is done in 2025, one month youre getting a check, next month youre getting nothing . One month youre getting a check and the next month youre getting almost nothing. Okay. Percentage wise how much . A tiny percent. Less than 5 . Okay. Thats assuming that they go under and we go under. Okay. And you feel that theres you think a premium increase is inevitable . I think thats a growing consistent for some kind of what is it right now . 28 per participant. For how long . Per year. Per year. Okay. And how were not going to do it, if you had to cover the whole thing with a premium increase, how big would that increase have to be . In our report last year to congress we said that it would have to be a little bit less than five times that. Okay, and if you feel you got that much then at least proinspect actively the plans would be solvent. That only protects our guarantee the plan solvency is going to have to come from some other source besides premiums, from increased contributions by employers, benefit cuts or money from the government. Okay. Thanks much. I thank the gentleman and now i turn to my Ranking Member for any closing comments you might have. Thank you very much, mr. Chairman. Mr. Reeder i want to make a personal thank you also to you because you have in yesterdays meeting and in todays meeting, you have gone out of your way to explain this huge complicated problem and make it presented in a way that i can understand as much as i can. Thank you. And i want to also thank you again for being here today and for providing us the subcommittee members the picture of the looming insolvency in the pbgc multiemployer mention program and i believe that director reeder is right when he said in his testimony that if the Multiemployer Program is allowed to become insolvent, the result will be catastrophic for many people, current and fornler workers, retirees, beneficiaries and their families, end of quote. I would add that i believe it would also be devastating for businesses and our economy. Working people, families, retirees and employers and all of our constituents are counting on congress to address this crisis and to do so soon and chairman i would like at this time to ask to inserting into the record a november 8 letter to the Speaker Senate majority leader the House Minority leader and the Senate Minority leader, a letter signed by 170 groups representing a Cross Section of employers, retirees groups and other stakeholders. Hearing no objection, they will be included. Thank you, sir. It is my hope that todays hearing is a first step toward solving finding a solution to this problem. And as we hopefully proceed forward, i believe we must do our best to protect americaas hard earned pensions. They he worked and sacrificed over a lifetime and they deserve to retire with financial security. The pension that this workers earned throughout their career should be there for them when they retire. Thats not a bailout. Thats keeping a promise. I want to thank chairman wahlberg for his courtesy and for holding this important meeting and i yield back. Thank you. I thank the gentleman and i too would like to thank mr. Reeder for being here. Sadly im sure you recognize you didnt even have the benefit of the sort of solemn to come up with an absolute solution that would be i will mean the fact that you provided testimony here today that had great clarity of the facts, but also the clarity of your caution relative to solutions. This has been a hearing on pbgc and it was relative to solution. This has been a hearing on ppgc, and it was for that purpose all of the other issues relative to ppgc are fair game here, and i think we have to get to those discussions as well. I think this really established some sense of clarity to the challenge we have, and the size of the problem. The difficulty of solutions. And i think as well, it showed us the impact of the decisions that were made, promises that were made. So thank you. We have the expression around here, dont let the perfect be the enemy of the good. Theres no perfect in this situation, so we dont have to worry that that. There 23450eds to be some sort of solution. I certainly commit to the members of this subcommittee. Those individuals that have come here in in the throws of this issue as retirees, as employees. As businesses that i see out here, that i have a very personal involvement with this problem, we intend to work toward a solution. Having done that, having had this hearing, and will in be questions and testimonies to be given. You and i at this point in time, i declare this hearing concluded and adjourned. Senate Judiciary Committee on firearm regulations and background checks. The committee will hear from witnesses from the fbi, the bureau of alcohol, tobacco and firearms, and the u. S. Air force. Thats wednesday, starting at 10 00 a. M. Eastern starting on cspanning three. Live at 10 00 a. M. Eastern. By the time i came back to the district or shortly thereafter, both of my uncles were sent to prison, they were convicted of one of them, sexual assault, and the other, armed robbery. For the part of my childhood i could remember, it was my mother, her two sisters, my grandmother and my cousins. In the house on 13th street. Sunday night on cspans q a, tiffany wright, senior associate talks about growing up in washington, d. C. And her time as