Congress Considers Pension Relief Legislation
As the nation continues to grapple with the consequences of the COVID-19 pandemic, Congress is considering passing a second stimulus bill named the HEROES Act. Part of that legislation may include the Emergency Pension Plan Relief Act of 2020, which would provide additional security to multiemployer pension plan participants through the PBGC. The PBGC acts as an insurance company to pension plans should those plans go belly-up, providing benefits to the participants under those struggling or bankrupted plans.
Currently, under the Multiemployer Pension Reform Act, the PBGC can take over a portion of a pension plan’s payments to retirees in order for the plan to become financially stable. Once the PBGC takes over the payments, the plan must also institute pension benefit cuts. Under the Emergency Pension Plan Relief Act, however, there will be no benefit cuts in this situation. Additionally, benefit cuts that have already occurred under the Multiemployer Pension Reform Act may be restored.
Further, the Emergency Pension Plan Relief Act would double the PBGC maximum benefit level. Should a pension plan go insolvent, the PBGC may pay retiree benefits to participants, but only up to a relatively low amount. Maximum benefits are based on the retiree’s years of credited service; currently a 30-year employee receives a maximum of $12,870 annually, while a 40-year employee received a maximum of $17,160 annually. Under the Emergency Pension Plan Relief Act,, this maximum annual amount would be raised to $24,300 and $32,400, respectively.
Proponents of the bill argue this is a necessary step to protect millions of workers and retirees who rely on pensions that have been decimated by COVID-19 market collapse and economic shutdown, while opponents argue this is essentially a blank check with no funding mechanism. As the HEROES Act makes its way through Congress, the Emergency Pension Plan Relief Act will remain a topic of conversation.