Rep. Peter King, R-NY, is throwing his support behind the ButchLewis Act of 2017, a Democrat-sponsored bill that would channelbillions of dollars to struggling multiemployer pension plans through the sale of U.S. Treasurybonds.

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King, an influential lawmaker in the House on homeland securityand counter intelligence issues, is the first Republican toco-sponsor the bill, which was first introduced in the Senate bySen. Sherrod Brown, D-OH. Rep. Richard Neal, D-MA, is sponsoringthe House version.

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His announcement was made beside Sen. Chuck Schumer, theminority leader in the Senate, and members of the InternationalBrotherhood of Teamsters Local 707 at the chapter’s Hempstead, LongIsland facility.

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"Protecting retirees who worked hard for their pensions shouldnot be a partisan issue,” King said at the event. “Republicans andDemocrats should work together to allow workers to live theirretirement years in dignity. It's time to get started."

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The Butch Lewis Act, named after retired Teamster andparticipant in the Central States Pension Fund Butch Lewis, whopassed away shortly after retiring, is the brainchild of JamesHoffa Jr., general president of the Teamsters.

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The bill would establish the Pension Rehabilitation Agency within theTreasury Department.

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Under the PRA, loans would be extended to multiemployer plans incritical and declining status--pensions that are projected to beinsolvent in the next 20 years.

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Loan terms would be over 30 years. The plans receiving cashwould pay a 1 percent interest rate over 30 years, and would beexpected to pay back the principal on the loans in the lastyear.

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Money would be raised through the sale of Treasury bonds toinstitutional investors. Plans receiving loans would not have tomake cuts to promised pension benefits.

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More than 200 multiemployer pension plans covering 1.5 millionactive and retired participants are projected to run out of moneyin the next two decades.

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The largest of those is the Central States Pension Fund, whichcovers the retirement benefits for more than 400,000 Teamstermembers across the country.

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At the end of 2014, the CSPF held assets of $17.8 billion withprojected liabilities of $35 billion. The plan is expected to beinsolvent in less than 10 years.

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Last May, before legislation was formally introduced in theSenate, Thomas Nyhan, executive director of the CSPF, told Teamsterleadership that the plan then being promoted by Hoffa would not beenough to maintain the pension’s solvency.

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But in a November letter to Sen. Brown’s office, Nyhan shiftedcourse, presenting an actuarial analysis showing the Butch Lewisbill would in fact prevent the CSPF’s insolvency.

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Under the analysis, the plan would receive between $11 billionand $15 billion in loans, and another $20 billion to $25 billion inassistance from the Pension Benefit Guaranty Corp. The loans wouldbe repaid, but under the bill, the assistance from PBGC would nothave to be repaid.

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The loan itself would not be sufficient to maintain the plan’sindefinite solvency, or allow the CSPF to repay the loan, Nyhanexplained in the letter. “Financial assistance from PBGC would berequired to make the program work for the Fund,” wrote Nyhan.

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Segal Consulting, the CSPF’s actuary, provided the analysis. Theprojections are made assuming legislation is passed and the loansbecome effective by July 1, 2018.

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Passing the legislation in that timeframe would be aconsiderable accomplishment. But Rep. King’s support could becritical for bringing the White House onboard.

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Though King voted against the tax reform bill, he has been astaunch defender of President Trump amid the special counsel’sinvestigation into allegations the Trump administration colludedwith the Russian government to influence the 2016 election.

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Some pension policy experts doubt the law can pass aRepublican-controlled Congress.

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Critics of the Butch Lewis Act claim the bill would reward badpension management and bad public policy that allowed multiemployerplans to assume unrealistic investment returns that in turnunderestimated the cost of future liabilities, and encouragedunsustainable pension promises.

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“Congress must not put taxpayers on the hook for private losses,nor should it disrupt the market by putting companies and pensionplans that make good on their retirement promises at a competitivedisadvantage to those who do not,” wrote Rachel Greszler, aresearch fellow at the Heritage Foundation, a conservative thinktank.

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Issuing new federal debt to fund the loans “masks the fact thatthe bill is an outright bailout,” wrote Greszler in an analysis ofthe Butch Lewis Act.

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The bill prohibits plans that take loans from increasing pensionbenefits or lowering employer contributions.

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But Greszler argues that plans not taking loans will beincentivized to expand unsustainable pension promises so that theywill one day qualify for relief from Treasury.

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“In fact, the bill encourages private union pension plans to dojust this,” she wrote. “Of the approximately 1,300 multiemployerplans across the U.S., 95 percent are less than 70 percentfunded.”

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.