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The Biden administration this week unveiled details of the final rules surrounding the federal bailout of hundreds of union retirement plans passed last year as part of Democrats’ $1.9 trillion US Rescue Plan Act coronavirus relief package. †
ARPA’s special financial assistance program injects $90 billion in taxpayer dollars into the federal government’s Pension Benefit Guaranty Corporation, which insures private sector pensions. Prior to the approval of the alleged COVID package, the PBGC would become insolvent in 2026.
The White House claims the plan will prevent 2 to 3 million workers from having to cut their retirement benefits when they retire, by saving more than 200 private sector union plans that were insolvent.
U.S. President Joe Biden speaks at Max S. Hayes High School in Cleveland, Ohio, July 6, 2022, about the economy and the eventual rule implementing the American Rescue Plans Special Financial Assistance program to protect multi-employer retirement plans . (Photo by SAUL LOEB/AFP via Getty Images / Getty Images)
President Biden praised the achievement during a speech in Ohio on Wednesday, saying that retirees in shaky plans who have already seen benefit cuts “will restore them retroactively” and that he has “a promise that has been broken.” turned into a promise that will be kept”.
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“We saw before the pandemic and the economic crisis that followed,” Biden said, “millions of retirees were at risk of losing their pension security through no fault of their own, based on circumstances and relentless attacks on unions that took place.”
But some retirement experts are skeptical of the plan and concerned.
One sticking point is that the rules have been changed to allow one-third of taxpayer-provided money to be invested in equities, which, according to The Wall Street Journal, “eliminates a previous restriction that generally limited them to investment-grade bonds.” .”
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In response to the plan, Wharton School of Business Professor Dr. Olivia Mitchell of the University of Pennsylvania, director of the school’s Pension Research Council: “Spare me!”
She called the move “risky” and said it is “unlikely” that multiple employers’ plans “will remain solvable until 2051, despite White House optimism.”
US President Joe Biden is greeted by (LR) US Representatives Shontel Brown and Marcy Kaptur, US Senator Sherrod Brown and Cleveland Mayor Justin Bibb, upon arrival at Cleveland Hopkins International Airport in Cleveland, Ohio, July 6, 2022. (Photo by SAUL LOEB/AFP via Getty Images / Getty Images)
Derek Kreifels, CEO of the State Financial Officers Foundation, noted that pension funds had been in trouble long before the pandemic, claiming the move was political and a gamble for taxpayers and union workers alike.
“The White House will give the same pension fund managers — who have historically been bad at their jobs — the ability to make riskier investments with not only hard-working American pensions, but the nearly $100 billion in tax dollars delivered to unions under the guise of of COVID aid,” Kreifels told FOX Business.
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He added: “In reality, this is a disaster that the Biden administration itself has caused, putting millions of American pensioners at risk with appalling economic policies that reverberate through every facet of our lives – from the gas pumps to the supermarkets.”
Ryan Frost, a policy analyst with the Reason Foundation’s Pension Integrity Project, says the bailout and the new rules will work “a mixed bag.”
People cheer as US President Joe Biden speaks about the economy and the final rule implementing the American Rescue Plans Special Financial Assistance program in Cleveland, Ohio, July 6, 2022. (Photo by SAUL LOEB/AFP via Getty Images / Getty Images)
“Obviously it will work for these retirees as they will no longer have to deal with benefits because the PBGC is out of money, but there are no safeguards to prevent the plans from running out of money again,” he said. he. “In fact, the bill even changes the PBGC guarantee formula to increase the maximum potential benefits the retiree can receive.”
Frost says the question is what the trade-off will be for US taxpayers to save these private pensions.
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“The plans are now expected to be 80% funded in 30 years, with an unknown discount rate that will vary between each plan,” he told FOX Business. Congress should come back next year and put some safeguards and rules around plans that accept this money so they don’t go further into insolvency, risk retirement cuts and need another ‘financial assistance’ program hidden in a budget package of $1.9 trillion.”