PBGC Interim Final Rules (IFR) on Butch Lewis Emergency Pension Plan Relief Act/American Rescue Plan
by David S. Blitzstein
On March 11, 2021, Congress passed the Butch Lewis Emergency Pension Relief Act under the American Rescue Plan Act of 2021 (ARPA). This section of ARPA is named after the deceased leader of Teamster pensioners, who was at the vanguard of this legislative campaign. ARPA provides dramatic and unprecedented financial relief to hundreds of multiemployer pension plans covering three million retirees and workers in plans projected to exhaust their assets and go insolvent over the next 20 years. The Act also prevents the Pension Benefit Guaranty Corporation’s (PBGC) multiemployer pension insurance program from becoming insolvent in 2026. The PBGC insures the benefits of multiemployer pension plans up to a level of $12,870 per year. Those benefit protections would have been eliminated if the PBGC insurance program becomes insolvent. Historically, pension reform is a long and difficult process. ARPA’s financial relief to these troubled plans represents the culmination of 15 years of lobbying by Organized Labor and the multiemployer pension community.
Multiemployer pension plans are the product of collective bargaining. There are over 1,200 multiemployer plans covering 10 million workers and retirees in industries like construction, trucking, warehousing, retail food, entertainment, health care, service and manufacturing. The plans are administered by joint boards represented equally by union and employer trustees. About a third of these plans were adversely affected by the financial shocks and deep recessions over the past twenty years. Decline in work in many unionized industries along with three historic stock market crashes put the pensions of three million plan participants at risk, and threatened the solvency of the PBGC multiemployer insurance program. This pension crisis was caused by economic and financial events beyond the control of plan trustees and plan participants.
Alarm bells starting going off early in the 2000’s after the 2001-2002 stock market Tech bubble and recession. Congress passed the Pension Protection Act of 2006 (PPA) the first of many pension reform bills that established new funding rules. These rules encouraged plans to take pro-active measures, including benefit reductions combined with employer contribution increases. Generally, these reforms included self-help remedies and changes in regulations that allowed plans to make funding progress through negotiated pain-sharing. PPA’s effective date of January 1, 2008 coincided with the breakout of the Great Financial Crisis and the second financial crash of the decade. The next legislated reform was the ill-advised Multiemployer Pension Reform Act of 2014 (MPRA). MPRA allowed plans that were projected to become insolvent to retroactively reduce retiree and active worker benefits. This was the first time such an exception was made to ERISA’s anti-cutback rule. All of these public policy reform efforts failed to resolve the multiemployer pension funding crisis, which progressively worsened over the past decade.
The Butch Lewis section of ARPA is a serious commitment by Congress and especially the Democratic Party Congressional leadership and the Biden Administration to protect the at-risk pensions of troubled multiemployer pension plans. ARPA establishes a fund at the U.S. Treasury Department to provide special financial assistance, in grant form, to eligible plans. There is no repayment obligation, nor required reduction of current benefits, with ARPA actually restoring the benefits for those 18 plans that adopted MPRA benefit cuts prior to 2021. The Act legislated these benefit protections for a 30-year period through 2051. The PBGC estimates that 200 plans covering three million participants will receive $94 billion from Butch Lewis/ARPA legislation. This was an unexpected but deserved victory for American workers and retirees and was a direct result of the Democrats’ recapture of the White House and the U.S. Senate in the 2020 elections.
Yet unbelievably on July 9, 2021, the PBGC issued highly restrictive interim final rules related to special financial assistance (SFA) that defeat the purpose and goal of Butch Lewis/ARPA to actually protect benefits through 2051 and beyond. The PBGC ruled that SFA amounts must account for existing plan assets, future employer contributions and withdrawal liability payments projected for the next 30-years, which dramatically reduces SFA amounts required to sustain eligible plans and maintain solvency. This interpretation is both contrary to ARPA’s language and legislative history. ARPA clearly states that “the amount of financial assistance provided to a multiemployer plan eligible for financial assistance under this section shall be such amount required for the plan to pay all benefits due during the period beginning on the date of payment of the special financial assistance payment under this section and ending … in 2051 with no reduction in a participant’s or beneficiary’s accrued benefit…”. PBGC’s ruling will be disastrous if it stands. A large number of eligible plans will receive zero or inadequate SFA amounts, guaranteeing their failure years or even decades before 2051. Under the PBGC’s mystifying interpretation, no plan receiving assistance will remain solvent beyond 2051, and the PBGC multiemployer insurance program will once again be at risk of going insolvent.
On August 11, 2021, scores of plans, companies, unions and other interested parties filed comments questioning and challenging the PBGC’s misdirected and irresponsible rules and guidance on SFA. With the exception of a highly politicized comment letter from the House Republican leadership of the Committee on Education and Labor, all the public comment letters unanimously raised legitimate concerns about the PBGC regulations. A joint letter from the U.S. Chamber of Commerce and affiliated employer organizations stated that the “PBGC should consider its interpretation of the amount of SFA to ensure not only that these plans are viable beyond 2051, but also ensure that current active employees and new hires want to participate in such plans and remain in the unions that represent them”. The International Brotherhood of Teamsters (IBT) questioned the very core of the PBGC’s rules on SFA, based on the ARPA’s language and legislative history. The IBT asserted that “The IFR (Interim Final Rule) effectively re-writes the statutory language to require that current and future plan resources be deducted from all benefits due through 2051. Such action is beyond the agency’s authority and usurps the role of Congress. Under the Administrative Procedure Act, a reviewing court may set aside agency action that is beyond the agency’s authority”.
The battle to protect multiemployer pension participants is far from over. The three department heads of Labor, Treasury, and Commerce that govern the PBGC may intervene and rewrite these final rules. Congress may push back and resolve this regulatory dispute by clarifying its intent in technical corrections to ARPA. Other stakeholders may exercise their legal options. In the meantime, those who support the future of multiemployer pension plans will rally in support of the Butch Lewis Act and against a reactionary and misguided Federal agency.
David Blitzstein, Currently with Blitzstein Consulting, has spent the past 41 years as an advocate for working people and Organized Labor specializing in negotiating and administering pension and health insurance benefits.
Mr. Blitzstein was employed by the United Mine Workers of America (UMWA) from 1984-1988, and was engaged as a professional trustee on behalf of the UMWA Construction Pension and Retiree Heath Funds between 1990 -1999. Mr. Blitzstein was employed by the United Food & Commercial Workers
International Union (UFCW) as a research economist from 1978-1983, and again in 1990, retiring in December 2013. Between 1990-2006, Mr. Blitzstein served as the UFCW’s first Director of the Negotiated Benefits Department, building a staff that supported and provided technical assistance to 600
local unions in collective bargaining and 150 multiemployer plans. During his tenure at the UFCW, Mr. Blitzstein advised three International Union Presidents on both retirement and health insurance public policy. In 2006, coincident with the enactment of the Pension Protection Act (PPA), Mr. Blitzstein was designated the UFCW’s Special Assistant for Multiemployer Plans and appointed a trustee of six of the UFCW’s largest multiemployer pension plans, where he offered regulatory, funding and investment advice to boards of trustees.
During his career, Mr. Blitzstein has been a frequent speaker at public policy forums on retirement and health care. In addition to his work at the UFCW, Mr. Blitzstein served on the steering committee of the National Coordinating Committee for Multiemployer Plans (NCCMP) from 1990-2013. Mr. Blitzstein
served as a director of the Pension Research Council of the Wharton School, University of Pennsylvania from 1997 through 2019. Mr. Blitzstein was appointed in 2008 by the Governor of Maryland to be a trustee of the Maryland State Retirement System and is currently serving his second term. President Obama appointed Mr. Blitzstein to the Advisory Committee of the Pension Benefit Guaranty Corporation in 2011, which he served until November 2014. In January 2013 Mr. Blitzstein was elected to the Board of Directors of CareFirst Blue Cross Blue Shield, a non-profit health insurance company.
Mr. Blitzstein earned a B.A. with honors in History from the University of Pennsylvania in 1976, and a M.S. in Labor Studies from the University of Massachusetts at Amherst in 1978. In December 2014, Mr. Blitzstein completed and received a certificate for the Board Effectiveness Program for Pension and Other Long-Horizon Investment Institutions from the Rotman School of Management, University of Toronto and the Rotman International Centre for Pension Management. In November 2013, Mr. Blitzstein was named by Institutional Investor to its “Pension Forty” most influential leaders list. Mr. Blitzstein was also recipient of the 2013 CORPaTH International Pension Alliance Career Achievement
Award. In 2014, the National Coordinating Committee for Multiemployer Plans (NCCMP) awarded Mr. Blitzstein with its 14th Annual John. L, Lewis Award.
