TaxPayers’ Money Saving Private Pensions of Retired Miners

Last year, in December, spending bill worth $1.4 trillion was put through by Congress to save a pension fund that supports roughly a hundred thousand coal mining retirees.

Since the federal pension law was implemented nearly five decades ago, this is the first to have taxpayer money bail out a pension fund for a private sector. And now, there may be more to follow in the future.

There are around 1,400 private pension plans offered to a vast group of American workers in a single trade or field, and the coal miners are just one of them.

These plans, known as multi-employer pension plans, provide support to over 10 million people in the unions of their industry.

Unfortunately, the Pension Benefit Guaranty Corporation, the entity that insures pension plans state almost 3 out of every four people that are covered under this kind of pension are participants of plans that do not even have 50 percent of the funds needed to pay retirees.

Due to the continuous lack of funding, many bankruptcies, and lack of government attention, it has left these plans in serious trouble. If just one of these big pension plans failed, the Pension Benefit Guaranty Corporation would go under as well.

A dire trend is happening with coal companies filing for bankruptcy and halting money from going into pensions of the coal miners. However, the retired coal miners still need their pension to fund their lives.

The money that will pay for these pensions will be from the Abandoned Mine Lands Reclamation Fund. A portion of this fund comes from a fee that every single coal company must pay.

The new law that Congress passed will enable the U.S. Treasury to funnel up to $750 million annually into this fund to ensure pensions are covered.

In the late 80s, the retiree health plan for miners became drained. That is when lawmakers searched for new sources for money, which involves the Abandoned Mine Lands Reclamation Fund. They would also include the Treasury later on.

The same will now be done with the pensions for the mineworkers.

Beginning this year, the Treasure will put $750 million into the Abandoned Mine Lands Reclamation Fund to assist with paying for pensions along with health care for the retired mine workers.

Due to how this matter is being handled, struggling unions from other industries may follow their lead to try and get federal government help.

I, however, because Congress has put through the act to assist the pension fund for mine workers, it has saved thousands of retirees from losing a significant portion of their retirement income.

In general, it is quite a hefty expense to exit a multi-employer retirement plan as the company is required to pay its deficit. However, many take the route for bankruptcy as pensions do not take precedence for payments as they tend to be the last to get a cut if any.

For the businesses that leave the multi-employer pension plan, the employees are left in the same plan. The companies that are still in the plan cover the costs of those employees. This is why as more companies go down, many also want to leave the plans to let go of the responsibility of covering those workers that were left behind by their companies.

Though the newly passed bill makes certain that retired mine workers will get their money, it does resolve the issues of multi-employer plans and companies abandoning their responsibilities.

The plan pays retired workers over $600 million. When the funds are dried up, the federal pension insurance program takes over.

However, the program only brings in about $300 million a year from insurance payments to cover all multi-employer pension pools.

So how did these issues come to be in the first place?

It started in the 70s when pensions laws were being put through by Congress. Multi-employer pension plans were considered to be more secure compared to the pension plans with a single employer as the risk was shared amongst many employers.

This is why many companies and unions fought against both plans being held to the same set of regulations as well.

However, because multi-employer pension plans were not regulated like single-employer plans, companies and unions would agree upon pension funding obligations without really going over the amount of money the plan needed to meet those promises.

In certain situations, the amount of money needed for these plans is not defined clearly.

In the early 90s, the Securities and Exchange Commission began cracking down on single-employer pension plans to implement better and new formulas to calculate their financial needs. However, because the multi-employer plans were not held to the same regulations, the SEC was not able to require them to do the same. In other words, multi-employer plans were left to use old calculations.

The Pension Benefit Guaranty Corporation also does not have power over the multi-employer plans as they do with single-employer plans. The entity can take control over a single employer if it is shown that the employer is way behind. They cannot do the same for multi-employer plans.

Until autumn of last year, several unions were advocating a bill to allow struggling multi-employer plans to borrow funding from the Treasury.

Those that supported the legislation stated that the pension plans were functioning properly but that they were short of funds due to the wave of retirements made by the Baby Boomer generation. They said that once that generation was no longer there, the pension plans would pay back the borrowed money.

The legislation was passed in July by the House. However, the Senate did not put it through–more than likely due to the fact that the Congressional Budget Office analyzed the situations of these pension plans recovering once the Baby Boomer was no longer in the picture and saw that the plans would still fail.

It is uncertain whether the legislation to allow failing pension plans to borrow money will get enough support to be seen through.