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The Biden administration unveiled details this week of final rules on the federal bailout of hundreds of union pension plans passed as part of the Democrats’ $1.9 trillion America’s Rescue Act coronavirus relief package last year, saying it would provided workers’ compensation benefits for decades to come.
ARPA’s special financial assistance program injected $90 billion in taxpayer funds into the federal government’s Pension Benefit Guaranty Corporation, which insures private-sector pensions. Prior to the proposed COVID package, PBGC was set to become insolvent in 2026.
The White House said the plan would prevent 2 to 3 million workers from having their pension payments cut in retirement, saving more than 200 private-sector union plans that were at risk of bankruptcy.
U.S. President Joe Biden speaks about the economy and the final rule implementing the Special Financial Assistance Program of the U.S. bailout protecting multiemployer pension plans at Max S. Hayes High School in Cleveland, Ohio, July 6, 2022. (Photo by SAUL LOEB/ AFP via Getty Images / Getty Images)
President Biden touted the achievement during a speech in Ohio on Wednesday, saying that retirees in shaky plans that have already suffered benefit cuts “will have them restored retroactively” and that he “turned a broken promise into a kept promise.”
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“We saw before the pandemic and the economic crisis that followed,” Biden said, “that millions of retirees were at risk of losing their retirement benefits through no fault of their own, based on the conditions and the relentless attacks on unions that were taking place.”
But some pension experts are skeptical of the plan and are raising concerns.
One snag is that the rules have been changed to allow one-third of taxpayer-provided funds to be invested in stocks, which The Wall Street Journal says “overturns a previous restriction that typically limited them to investment-grade bonds. “
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In response to the plan, University of Pennsylvania Wharton School of Business professor Dr. Olivia Mitchell, executive director of the school’s Retirement Research Council, tweeted: “Spare me!”
She called the move “risky” and said it was “unlikely” to keep the multiemployer plans “solvent in 2051, despite the White House’s optimism.”
U.S. President Joe Biden is greeted by (L-R) U.S. Reps. Shontel Brown and Marci Kaptur, U.S. Sen. Sherrod Brown and Cleveland Mayor Justin Bibb upon arrival at Hopkins International Airport in Cleveland, Ohio, July 6, 2022. (Photo by SAUL LOEB/AFP via Getty Images/Getty Images)
Derek Kreifels, CEO of the Public Financial Officers Foundation, noted that pension funds were in trouble long before the pandemic, arguing that the move was political and a gamble for both taxpayers and union workers.
“The White House will allow the same pension fund managers — who have historically been terrible at their jobs — the ability to make riskier investments not only with hard-working American’s pensions, but nearly $100 billion worth of taxpayer dollars, delivered to unions under the guise of COVID relief,” Kreifels told FOX Business.
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He added: “In truth, this is a disaster, the work of the Biden administration, which is putting the retirements of millions of Americans at risk with terrible economic policies that reverberate through every aspect of our lives, from the gas pump to the grocery store.”
Ryan Frost, a policy analyst at the Reason Foundation’s Pension Integrity Project, says whether the bailout and its new rules will work is “unclear.”
People cheer as U.S. President Joe Biden talks about the economy and the final rule implementing the Special Financial Assistance Program of the U.S. bailout in Cleveland, Ohio, July 6, 2022. (Photo by SAUL LOEB/AFP via Getty Images/Getty images)
“Obviously, this will work for these retirees because they will no longer face benefit cuts as the PBGC runs out of money, but there are zero safeguards to prevent the plans from running out of money again,” he said. “In fact, the bill even changes the PBGC guarantee formula to increase the maximum potential benefits a retiree can receive.”
Frost says the question is what the trade-off will be for the American taxpayer to save these private pensions.
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“The plans are now projected to reach 80% funding over 30 years using some unknown discount rate that will vary between each plan,” he told FOX Business. “Congress needs to come back next year and put some safeguards and restrictions around the plans that accept this money so they don’t go even further into default, risking pension cuts and requiring another ‘financial assistance’ program hidden in $1.9 trillion budget package.
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