Democrats Introduce Bill to Protect Pensions, Expand PGBC’s Power

Proposed legislation would create PBGC partition program and end ability to seek benefits cuts under MPRA.


KEY TAKEAWAYS

  • Bill would create a special partition program that would expand PBGC’s authority.
  • Pension plans would no longer be able to seek a reduction in benefits under MPRA.
  • PBGC would begin receiving federal funding and double its maximum guaranteed benefit.

    Four Democratic US representatives are introducing legislation they say will protect workers, retirees, employers, and taxpayers from the multiemployer pension crisis and beef up the Pension Benefit Guaranty Corporation (PBGC).

    The Emergency Pension Plan Relief Act of 2021 (EPPRA), sponsored by Rep. Robert Scott, D-Virginia; Rep. Donald Norcross, D-New Jersey; Rep. Haley Stevens, D-Michigan; and Rep. Joe Morelle, D-New York, would create a special partition program that would expand PBGC’s authority, increase the number of eligible plans, and simplify the application process.

    Under current law, PBGC has limited authority to partition certain troubled multiemployer pension plans. With a partition, the PBGC would assume financial responsibility over some of the benefits of an eligible plan so the plan can remain solvent, and a plan would be able to receive enough financial assistance to keep it solvent for 30 years without cutting earned benefits. Additionally, plans that had previously reduced benefits would have to restore them to the retirees who earned them. In exchange for the financial assistance, each plan would have to comply with certain conditions and would be required to file regular reports to PBGC and to relevant congressional committees.

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    The proposed legislation would also require PBGC to annually report to Congress, and the Government Accountability Office (GAO) would be required to evaluate PBGC’s implementation and administration of the special partition relief program regularly. The pension lifeboat would also be required to establish and regularly update a website so plan administrators, employers, participants, beneficiaries, and the public could track the implementation and administration of the special partition relief program. And because PBGC currently receives no federal money, the legislation includes funding to cover the costs of the program.

    The EPPRA would also put an end to multiemployer plans’ ability to apply for a suspension of benefits under the Multiemployer Pension Reform Act (MPRA) and would double PBGC’s maximum guaranteed benefit. 

    PBGC currently provides a maximum guaranteed benefit of $12,870 to a participant in a multiemployer plan with 30 years of service. The guarantee is 100% of the first $11 of the monthly benefit rate, plus 75% of the next $33 of the monthly benefit rate, multiplied by the participant’s years of credited service. The EPPRA would nearly double the guarantee to 100% of the first $15 in monthly benefits per year of service and 75% of the next $70 in monthly benefits per year of service, and it indexes it after that.

    Under the bill, a plan in endangered or critical status for a plan year beginning in 2020 or 2021 would be able to extend its rehabilitation period by five years to give it time to improve its contribution rates, limit benefit accruals, and maintain plan funding. The legislation would also allow a plan to use a 30-year amortization base to spread out losses over time instead of the typical 15-year time frame during which investment losses are generally required to be recouped.

    The bill was lauded by the Teamsters, which said it would boost the viability of pension plans currently in financial jeopardy.

    “With a new administration and new Congress now in place, the Teamsters want to let elected officials know it is time to work together across party lines to secure the hard-earned retirements of retirees and workers,” Teamsters General President Jim Hoffa said in a statement. “These hardworking Americans deserve to receive the benefits they were promised.”

    The Congressional Budget Office (CBO) has not yet provided an official cost estimate of EPPRA this term. However, according to the House Committee on Education and Labor, the CBO scored similar provisions in the Heroes Act last year at approximately $52 billion over the 10-year budget window. 

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    Texas Tech DCIO Dan Parker to Leave Endowment

    The investor will take a senior position at a firm he says ‘will be familiar’ to investors.

    Dan Parker

    Dan Parker, the deputy chief investment officer at the Texas Tech University System, is leaving the endowment for a senior management position at a thus-far unidentified new employer. 

    “I’m excited to announce that, after more than four years, I’m moving on from Texas Tech University System’s endowment,” Parker said in a Wednesday LinkedIn post, where many investors extended their congratulations to the DCIO. He has previously been named a NextGen with this publication.

    “I’m proud of the significant improvements I’ve delivered across the portfolio and organization, and confident that my impact will continue to benefit the university for many years,” he added. 

    The investment official was not forthcoming with additional details on the switch except to say the organization “will be familiar” to many investors. Texas Tech, under budgetary pressures, has no immediate plans to hire a replacement, he said.   

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    Parker arrived at the $1.2 billion university endowment roughly five years ago with career experience both in the military and in investment banking. He leveraged his network and his knowledge of asset classes, particularly in hedge funds and private equity, to vet managers and develop investment strategies at the fund.

    Among his achievements at the university endowment is his management of the venture capital portfolio, which recently saw a big return of about 100 times the multiple on invested capital on its investment into Abcellera Biologics. This firm, which has done pioneering work into COVID-19 antibodies, went public in December at triple its offering price. It specializes in antibody discovery, an attribute Parker shared last month on LinkedIn. The endowment’s portfolio, he wrote, had “significant” exposure to the tech firm’s public debut.

    Among the allocators who congratulated Parker on the social media platform is Texas Tech CIO Tim Barrett, who wrote: “Dan, Congrats again on your new role & thank you for your friendship and contributions to the TTU System.  I, along with the entire team, wish you nothing but the best in your new endeavor!” 

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