The Honorable Orrin Hatch, Chairman
The Honorable Sherrod Brown, Co-Chairman
Joint Select Committee on Solvency of Multiemployer Pension Plans
219 Dirksen Senate Office Building
Washington, DC 20510
Dear Chairman Hatch, Co-Chairman Brown, and Members of the Committee:
On behalf of National Taxpayers Union’s (NTU) members and supporters, I write to encourage your continued efforts toward a comprehensive solution toward solvency of multiemployer pension plans (MPPs). It is our understanding from Chairman Hatch and Co-Chairman Brown that more time is needed than the originally established November 30 deadline will be able to provide in developing a legislative reform package. We hope you will make maximum use of this additional time to reach an accord on a solid plan for tackling MPP challenges.
Perhaps more than any other constituency, the nation’s taxpayers await the results of your work. While it is true that Pension Benefit Guaranty Corporation is not explicitly backed by the federal government, there is no doubt in our minds that the collapse of MPPs would lead to a crisis situation in which Congress would be tempted to put the entire operation under government (and taxpayer) conservatorship. Such was the case with Fannie Mae and Freddie Mac, despite assurances from elected and appointed officials just months before their federal takeover that the entities were neither explicitly nor implicitly backed by taxpayers. Ten years later, we await implementation of a plan that would finally resolve this untenable situation. Taxpayers literally cannot afford a redux of this debacle with PBGC, whose MPP liabilities alone (irrespective of other pension commitments) total more than $65 billion.
Any approach to resolving long term liabilities must be not only be prudent and determined, it must also be patient, and gradual. From a taxpayers' standpoint, resolving the liabilities of MPPs in particular should embody the following precepts:
• Avoid the bailout mentality. Infusions of cash from the Treasury with few restrictions tend to character overreaction rather than corrective action.
• Require PBGC to more fully embrace risk pricing and other management tools to safeguard against liability surprises in the future. Portions of PBGC’s operations have appeared on the Government Accountability Office’s High Risk List for over a decade, one reason being PBGC’s uneven implementation of these risk management practices.
• All stakeholders must be required to contribute to a solution. This includes a uniform, significant benefit reduction to show good faith in the reform effort. Indeed, beneficiaries themselves have the greatest advantage in accepting this adjustment: doing so will secure their future retirement.
• If the Committee is to propose Treasury loans as a bridge to solvency, the risk to taxpayers must be minimized. The loans must be collateralized with real-world assets that ensure the loans will be entirely repaid over a term measured in years rather than decades. They must also be backed by a risk reserve pool funded by modest premium increases and higher membership fees.
Your final product may not be ideal from the perspective of taxpayers, and in fact may suffer from serious flaws if it significantly deviates from the principles articulated above. Yet, it is vital that the Committee provide the reference point from which we can all have a rational debate over how best to tackle the impending crisis of MPPs.
Just last week, the Joint Select Committee on Budget and Appropriations Process Reform failed to reach agreement on moving legislation for floor consideration in both chambers. NTU was part of the diverse, trans-partisan Building a Better Budget Process project whose member organizations passionately sought a Congressional consensus on improvements to budgeting that would serve all stakeholders. That consensus will need to wait for the next Congress.
Taxpayers need not be further disappointed. We hope that the Joint Select Committee on Solvency of Multiemployer Pension Plans can, with a final exertion of effort, produce a workable bipartisan solution that is fair to taxpayers as well as employers, workers, and retirees. Such a solution may not be brought before Congress in the waning days of this session, but by reaching agreement on a plan before this session ends, you will have provided the foundation for urgently-needed reform that can be studied, refined, and enacted with confidence and alacrity next year.
Thank you for your consideration, and should you have any questions, I am at your service.
Sincerely,
Pete Sepp
President