There is a looming crisis with regard to the collapse of some of the largest multiemployer pension plans that will devastate the retirement of more than 1 million hard working Americans, unless a solution is found — fast.
The Brown/Neal Pension Rehabilitation Administration bill is currently working its way through Congress. This legislation aims to create market-based investment opportunities in an effort to keep pension plans from failing. This is not a bailout.
Currently there are identified multiemployer pension plans that do not have sufficient available to pay promised pensions to retirees and current workers. Such plans are paying out in excess of what they take in through contributions and investment income. These plans cover unionized workers, pensioners and their families. They are jointly administered by employees and unions.
The bill would create the Pension Rehabilitation Administration, (PRA), as an agency within the Treasury Department. The PRA would sell Treasury-issued bonds in the open market to large investors and investment firms. The PRA would then lend the money raised from the sale of bonds, to the financially troubled pension plans.
To ensure that the pension plans can afford to repay the loans, the PRA would create oversight, terms, and conditions — ones closely monitored. Loans would be made for a period of 30 years at low interest rates. Long-term debt at low interest rates would allow pension plans to pay out current obligations while also allowing for long term investment adequately growing to pay future obligations.
In order to qualify for a PRA loan, pension plans must submit detailed and verified financials and projections. A PRA board will approve loans. Loan recipients will be responsible for reporting to the PRA to ensure funds are being used properly, pensions are being administered responsibly, and investments are getting the returns necessary to meet its current and future obligations.
To be approved for a PRA loan, pension plans must at a minimum demonstrate that the loan will enable the plan to avoid or emerge from insolvency for the life of the loan and that the loan is reasonably expected to pay benefits and interest on the loan and to accumulate sufficient funds to pay off the principle when due.
We must get a handle on and understand what went wrong, getting us to this point with respect to pension plan insolvencies. We must ensure that the PRA does not become the underwriter/guarantor of poor management — or worse.
As Americans we cannot in good conscience allow pension plans to fail without first attempting to find solutions that do not burden government. Solutions allowing for a market-based fix that the full faith and credit of the U.S. permits.
As a conservative Republican, I am not in favor of bailouts but I am in favor of helping pensioners and working Americans get the benefit of their bargain and not become the victims of circumstance beyond their control with government as an enabler.
The PRA would allow pension plans to get back on their feet without the need of an outright bailout, without obligation to either pay it back or ongoing oversight.
Investing your way to solvency is much more preferable to default and/or bankruptcy.
If in fact the government allowed pension plans to fail, millions of Americans would be forced to seek government assistance at federal, state, and local levels. This means they would become a burden on government — without obligation to repay for benefits received.
Let’s not be pennywise and pound foolish. Congress should pass the PRA as a result of a bipartisan effort, thereby allowing for a marketplace solution to an economic problem, one which has devastating implications for hard working Americans now — and in the future.
Bradley Blakeman was a member of President George W. Bush's senior White House staff from 2001 to 2004. He is also a frequent contributor to Fox News and Fox Business Channel. He currently is a Principal with the 1600group.com a consulting company. — Click Here Now.
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