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PensionsMarch 1, 2021

Pension Relief Plan in COVID-19 Stimulus Bill That Passes House

The legislation goes to the Senate, which could vote on the proposal later this week.

By Sarah Min

On Saturday, a measure to give troubled multiemployer pension plans assistance from the Pension Benefit Guaranty Corporation (PBGC) passed the House of Representatives, as part of a larger $1.9 trillion coronavirus relief package from President Joe Biden.

The federal stimulus package, which includes $1,400 checks for many Americans and increased funding for vaccines, also holds the Emergency Pension Plan Relief Act of 2021 (EPPRA), an update to the Butch Lewis Act. It’s a bill that lawmakers expect will help stabilize the multiemployer pension plans that are in danger of insolvency.

Of the more than 10 million multiemployer plan participants, about 1.3 million are in plans that will soon run out of money.

“We cannot allow more than a million men and women to lose their hard-earned savings when we have the ability to stabilize these plans,” Ways and Means Committee Chairman Richard Neal, D-Massachusetts, said in a January statement when he released the bill.

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The bill moves to the Senate for consideration, which could vote on it later this week.

Under the bill, multiemployer pension plans in danger of insolvency are eligible to receive a single lump sum to make benefit payments for the next 30 years, or through 2051. Single-employer pension plans would be able to extend amortization periods to 15 years, up from seven years, to stretch the period in which plans can pay for long-term liabilities.

The legislation would also freeze all cost of living adjustments (COLAs), which are currently tied to inflation.

Still, critics argued that the relief bill fails to fundamentally reform pension plans, instead favoring bailing them out to the costly tune of $86 billion, according to the Congressional Budget Office (CBO). Others argued that the bill does not belong in the coronavirus relief package.

But the measure was supported by union workers. On Saturday, the International Brotherhood of Teamsters, which represents millions of multiemployer pension retirees and beneficiaries, applauded the provision.

“For my entire administration, the Teamsters have been fighting for members and retirees who only want to receive the nest eggs that they’ve worked so hard to earn for their golden years,” Teamsters General President Jim Hoffa said in a statement.

He added: “Now we are one step closer towards fulfilling that promise.”

OMERS Reports First Annual Loss Since Financial Crisis

Canadian pension attributes 2.7% loss to the effects of pandemic on real estate, transportation, entertainment.

By Michael Katz

Canada’s Ontario Municipal Employees Retirement System (OMERS) reported a 2.7% loss last year, well off its benchmark’s return of 6.9%. It’s the first time the pension fund has seen a loss since the financial crisis of 2008.

As a result, the fund’s total net assets declined to C$105 billion ($82.4 billion) from C$109 billion. The fund also reported three-, five-, 10-, and 20-year annualized returns of 3.7%, 6.5%, 6.7%, and 6.0%, respectively.

“We are a long-term investor that pays pensions over decades, and with a strong team and strategy in place, this single year will not define us,” OMERS President and CEO Blake Hutcheson said in a statement.

The pension fund attributed its first loss in 12 years to the effects of the COVID-19 pandemic on its investments in retail properties, as well as in the transportation and entertainment sectors, which accounted for more than half of OMERS’ underperformance compared with its benchmark.

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Real estate was the fund’s worst-performing asset class, losing 11.4% during the year, compared with an 8.3% return the previous year, followed by private equity and credit, which lost 8.4% and 4.3%, respectively, after returning 4.6% and 8.0%, respectively, in 2019. Infrastructure was the portfolio’s top-performing asset class, returning 8.6%, compared with 8.7% the previous year, followed by public equity and bonds, which earned 1.5% and 1.1%, respectively, down from 20.3% and 3.6%, respectively, in 2019.

As of Dec. 31, the fund’s asset allocation was 31% in public equity, 20% in infrastructure, 17% in credit, 14% in private equity, 14% in real estate, 6% in bonds, and negative 2% in short-term instruments. And, as of the end of 2020, OMERS’ funded status was 97% when calculated on a smoothed basis, which is unchanged from 2019, and 93% on a fair value basis, down from 101% in 2019.

“As we look to the future, we are making key decisions within our investment portfolio that enhance diversification, growing our exposure in new economy stocks, high-demand sectors in real estate, profitable investments with lower carbon intensity and more,” the fund said. “These changes will help to position the plan strongly to capitalize on the opportunities before us and to deliver on our commitments to members.”