Reducing the minimum monthly payment on someone’s massive credit card debt and issuing them an additional credit card won’t solve that person’s financial problems.
It will only make them worse, by allowing the individual to accumulate more debt.
Yet, that’s effectively what a special-interest bill scheduled for markup by Congress on July 18 would do for certain private newspaper companies.
Regulations specify that individual companies that provide defined-benefit pensions must contribute enough money each year to make good on their pension promises. H.R. 6377, the “Save Community Newspaper Act of 2018” would create a special-interest exemption for certain financially troubled community newspapers so that they could contribute significantly less than needed to make good on their promises.
That would be bad for the workers who are supposed to receive those pensions; bad for the government’s Pension Benefit Guaranty Corporation, which insures private pensions; and potentially bad for taxpayers, who could be forced to bail out private-sector pensions.
Under the bill, certain financially troubled community newspapers could use the same funding “rules” that apply to multiemployer or union-run pension plans. Those “rules” hardly qualify as rules, though: They just say that multiemployer plans can use whatever assumptions they want when determining how much they need to contribute toward their pension plans.
That means that while single-employer plans must use a specified discount rate based on high-quality corporate bonds, multiemployer plans can just pick a number—say, 7 percent or 8 percent—based on what they think they can achieve, or, more practically, what allows them to keep making big pension promises without having to make big pension contributions.
This practice has contributed significantly to multiemployer pension plans racking up nearly $600 billion in unfunded pensions promises and saddling the PBGC’s multiemployer program with a nearly $70 billion deficit.
That’s why it’s so ironic that at the same time that a joint select committee of Congress has convened to address the insolvency of multiemployer pension plans, Congress is also considering allowing troubled single-employer plans to follow the same rules that got multiemployer plans into the mess Congress is seeking to repair.
Have lawmakers learned nothing from the multiemployer crisis?
Millions of workers stand to lose hundreds of billions of dollars in pension benefits that their employers promised them as part of their compensation.
While changing the rules so that companies can contribute less to workers’ pensions may help those companies stay afloat in the short-term, it will hurt workers in the long-run when their planned-upon pension incomes aren’t there for them in retirement.
Congress wouldn’t pass legislation allowing financially troubled companies to dip into their workers’ 401(k)s for a loan, and it shouldn’t allow them to do the same by reducing employers’ pension-contribution requirements.
If pension contributions are too high for employers to maintain, they need to reduce contributions and promised benefits for future pension accruals, or they need to freeze their pension plans and shore up their existing pension promises.
At least then, workers would know with relative certainty what level of pension they can expect, rather than finding out near or during retirement—when it’s too late to save more on their own—that their promised pension benefits don’t exist.
Congress would be wise to not advance this bill, as doing so would set a bad precedent; namely, if companies face financial troubles, Congress will give them a leg up by allowing them to short-change their workers’ pensions.
Instead of permitting single-employer pension plans to follow in the failed footsteps of multiemployer pension plans, Congress should do the reverse and require multiemployer pensions to follow the same funding rules as individual employers.
