Legislation aimed at bailing out multiemployer pension funds in danger of failing — including the fund that holds pensions for tens of thousands of Yellow Corp. and ABF Freight drivers and their spouses — could finally make it into law under the latest COVID-19 relief measure.
The Butch Lewis Emergency Pension Plan Relief Act of 2021, legislation that the Ways & Means Committee in the U.S. House of Representatives is considering this week to include in a broader COVID-19 stimulus package, would allow a plan that is in critical status at the start of 2020 or 2021 to extend its rehabilitation period by five years. “This would give a plan additional time to improve its contribution rates, limit benefit accruals, and maintain plan funding — all on its own terms,” according to a summary of the legislation.
The largest pension plan in danger of failing — by 2025, according to estimates — is the International Brotherhood of Teamsters’ Central States Pension Fund, which represents more than 1 million participants and includes over 30,000 current employees of LTL carriers ABF Freight [NASDAQ:ARCB] and Yellow Corp. [NASDAQ: YELL], formerly YRC Worldwide.
“The financial distress many of these plans are facing is beyond the control of retirees and workers,” said International Brotherhood of Teamsters General President Jim Hoffa, commenting on the latest proposal. “While multiemployer pension plans have been buffeted by economic turbulence over the decades, the situation has been seriously exacerbated by the current pandemic.”
U.S. Rep. Richard Neal, D-Massachusetts, Ways and Means chairman, has introduced multiemployer pension reform legislation several times over the past three years. The major difference between the 2021 legislation and previous bills: The source of the money that would allow employees to retain 100% of their benefits will be allocated directly from the U.S. Treasury, instead of being generated by the sale of Treasury bonds.
“Prior bills included a loan program, and the pension funds were to be paid back to the Treasury over 30 years,” Teamsters Vice President John Murphy told FreightWaves. “This is an outright cash infusion, with no obligation to pay it back.”
Murphy also contends that Yellow Corp. and ABF parent ArcBest should also look favorably on this proposal.
“First, they have an interest in making sure employees get the benefits they deserve. But in terms of their financial interest, this represents an unfunded liability that is carried on their books that will get funded if this passes. Their balance sheet will look better, so the banks will be happy. They should be breathing a sigh of relief.”
But ArcBest pointed out that the financial implications noted by Murphy were not accurate. “We have no unfunded liabilities on our balance sheet related to the multiemployer pension plans that we contribute to,” an ArcBest spokesman told FreightWaves. “The costs of our financial obligations for contributions to these plans run through our income statement and, throughout our history, we have fully paid the pension costs that we owe to these plans on behalf of our employees.”
Recent multiemployer reform proposals never made it past the Senate. However, with Democrats looking to pass COVID-19 relief through budget reconciliation — requiring a simple majority of 51 votes in the Senate instead of 60 — the 2021 pension proposal, if it makes it to the Senate floor, has the best shot in years of getting to the president’s desk.
“We see the goal line, but we still have to get it across,” Murphy said. “We’ve been disappointed in the past, so it’s not done till it’s done.”
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