On January 9, 2019, Rep. Richard Neal (D-MA) introduced the Rehabilitation for Multiemployer Pensions Act into Congress.
This bill seeks to help ailing multiemployer pension plans by establishing a new agency within the Treasury Department called the Pension Rehabilitation Administration (PRA). This agency would be authorized to issue bonds in order to raise capital. The capital would then be used to issue loans to critical and declining status plans and some already-insolvent plans that are currently receiving financial assistance from the Pension Benefit Guaranty Corporation (PBGC).
The loan would be interest-only for 30 years with principal due at end of 30th year and in an amount needed to fund pensions for current retirees only. The pension fund would be required to purchase a commercial annuity contract with the loan proceeds, or set the funds aside in a separate pool and invest in a bond portfolio which has cash flows that mimic the expected pension payouts. In certain situations, a loan could be combined with financial assistance from the PBGC in order to prevent plan insolvency.
Loan applications would need to demonstrate that the loan will enable the plan to avoid insolvency during the 30-year period and that plan would be reasonably expected to pay the loan back with interest. The plan would not be allowed to reduce benefits during the loan term and could not accept a CBA with lower contribution rates.