Rep. Peter King, R-NY, is throwing his support behind the Butch Lewis Act of 2017, a Democrat-sponsored bill that would channel billions of dollars to struggling multiemployer pension plans through the sale of U.S. Treasury bonds.

King, an influential lawmaker in the House on homeland security and counter intelligence issues, is the first Republican to co-sponsor the bill, which was first introduced in the Senate by Sen. Sherrod Brown, D-OH. Rep. Richard Neal, D-MA, is sponsoring the House version.

His announcement was made beside Sen. Chuck Schumer, the minority leader in the Senate, and members of the International Brotherhood of Teamsters Local 707 at the chapter’s Hempstead, Long Island facility.

"Protecting retirees who worked hard for their pensions should not be a partisan issue,” King said at the event. “Republicans and Democrats should work together to allow workers to live their retirement years in dignity. It's time to get started."

The Butch Lewis Act, named after retired Teamster and participant in the Central States Pension Fund Butch Lewis, who passed away shortly after retiring, is the brainchild of James Hoffa Jr., general president of the Teamsters.

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

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

Loan terms would be over 30 years. The plans receiving cash would pay a 1 percent interest rate over 30 years, and would be expected to pay back the principal on the loans in the last year.

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

More than 200 multiemployer pension plans covering 1.5 million active and retired participants are projected to run out of money in the next two decades.

The largest of those is the Central States Pension Fund, which covers the retirement benefits for more than 400,000 Teamster members across the country.

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

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

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

Under the analysis, the plan would receive between $11 billion and $15 billion in loans, and another $20 billion to $25 billion in assistance from the Pension Benefit Guaranty Corp. The loans would be repaid, but under the bill, the assistance from PBGC would not have to be repaid.

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

Segal Consulting, the CSPF’s actuary, provided the analysis. The projections are made assuming legislation is passed and the loans become effective by July 1, 2018.

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

Though King voted against the tax reform bill, he has been a staunch defender of President Trump amid the special counsel’s investigation into allegations the Trump administration colluded with the Russian government to influence the 2016 election.

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

Critics of the Butch Lewis Act claim the bill would reward bad pension management and bad public policy that allowed multiemployer plans to assume unrealistic investment returns that in turn underestimated the cost of future liabilities, and encouraged unsustainable pension promises.

“Congress must not put taxpayers on the hook for private losses, nor should it disrupt the market by putting companies and pension plans that make good on their retirement promises at a competitive disadvantage to those who do not,” wrote Rachel Greszler, a research fellow at the Heritage Foundation, a conservative think tank.

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

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

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

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

Instant Insights /

Rep. King first Republican to support multiemployer rescue plan

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