The Senate Finance Committee will mark up S.1714—the Miners Protection Act—on Wednesday, Sept. 21. This myth vs. fact analysis sets straight some common misinformation about the proposal.
S.1714 would extend an existing bailout of some of the United Mine Workers of America’s unfunded health benefits to cover a larger group of UMWA members (those who worked for the recently bankrupt company Patriot Coal). The proposal would also extend a taxpayer-financed bailout to the UMWA’s massively underfunded and soon-to-be insolvent pension system.
Here are some commonly reported myths, followed by the facts that refute those myths.
- Myth: The federal government made a promise to mine workers for health and pension benefits in 1946.
Fact: During its brief period of control of the coal mines, the federal government signed a temporary agreement—the Krug-Lewis agreement—to cover the terms of employment in the mines until they were returned to their private owners in 1947.
The Krug-Lewis agreement helped establish initial funds for health and welfare benefits, but it specifically excluded the government from having any role in those funds, clearly stating that the plan’s “trustees shall have full authority with respect to questions of coverage and eligibility, priorities among classes of benefits, amounts of benefits, methods of providing or arranging for provisions of benefits and all related matters.”
Moreover, it’s hard to see how an alleged promise in 1946 could be linked to the UMWA’s existing plan. The original 1946 pension plan was extremely short-lived. It was replaced by a new plan in 1947, reorganized into a pension-only plan in 1950, a separate pension plan was added in 1974, and in 2007, the 1950 and 1974 plans were combined.
- Myth: The money for the UMWA’s health and pension benefits will come from the coal-supported Abandoned Mine Land Reclamation Fund.
Fact: A CRS report confirms that 100 percent of all additional money granted by S.1714 will come from taxpayers. The reclamation fund is insufficient to cover even the UMWA’s existing unfunded health benefits, which have, since 2008, received more than $1 billion in federal taxpayer funds. All of the costs from S.1714—estimated in a Congressional Budget Office report to be $3.5 billion between 2017 and 2026—will come from federal taxpayers.
- Myth: This would just free up additional uses of money to which the UMWA already has access.
Fact: The UMWA’s access to federal dollars is limited to its unfunded health benefits for a certain group of workers. A CRS report confirms that extending access to federal taxpayer funds for the UMW’s pensions would mark the first time in history that the federal government bailed out a private-sector pension plan.
- Myth: This would prevent the UMWA from requiring assistance from the Pension Benefit Guaranty Corp., which could lower or reduce government costs.
Fact: A CRS report states that under existing obligation trends, the proposed UMWA pension bailout would delay but not prevent the plan’s insolvency. Thus, the UMWA pension plan would almost certainly still become insolvent and require either a larger taxpayer bailout or PBGC assistance.
Second, it cannot be cheaper to provide 100 percent of promised benefits through a taxpayer bailout than to pay less than 100 percent of promised benefits through the PBGC.
And third, the PBGC is not a taxpayer-financed entity, so if the UMWA pension plan does not receive a federal bailout and instead receives PBGC assistance when it becomes insolvent, it will not cost taxpayers a dime under current law.
- Myth: The UMWA is unique; taxpayers need not fear a bailout precedent.
Fact: The UMWA is not unique and the claim that the 1946 Krug-Lewis agreement forever tied the federal government to stand behind whatever benefits the UMWA promised its workers is bogus.
The UMWA is only one of more than 1,300 multiemployer pension plans—96 percent of which are less than 60 percent funded—that have promised over $600 billion more in pension benefits than they can afford to pay. Moreover, public-sector state and local pension plans have promised trillions of dollars in unfunded pension benefits. A bailout of one pension plan will open the floodgates to thousands more.