The $1.9 trillion American Rescue Plan will send $1,400 checks to most Americans, give aid to states and local governments, give aid to schools, change the tax code, and expand unemployment benefits.
It’s also the culmination of the decades-long push to shore up some of the country's financially troubled multi-employer pension plans.
The plans' well-documented troubles have put the retirement security of millions at risk. These funds were set up decades ago by both unions and employers with the idea that workers – like truck drivers, food processors or grocery store employees – would be able to have a unified retirement plan that would follow them from job to job within their industry.
But promises made outstretch the resources available and many plans face looming shortfalls. There are somewhere in the ballpark of 1,400 such plans in the U.S., covering 10 million people, with about 100 of them currently classified as in "critical and declining" status.
Perhaps the most prominent of these plans is the Central States Pension Fund, which was set up for many workers in the Midwest and covers about 400,000 retirees and workers currently paying into the fund. Administrators of the plan offered praise for the soon-to-be law as “essential to prevent Central States from becoming insolvent in 2025—and the catastrophic benefit reductions that our participants would have faced.”
The bill, which President Joe Biden signed into law on Thursday, creates a financial assistance program to send cash payments totaling $86 billion to the Pension Benefit Guaranty Corporation, the government agency that serves as a financial backstop but is currently nearly insolvent itself.
The money would then be turned around and made available to these plans. Analysts have predicted that pension plans covering more than 3 million of these workers may be eligible for the aid, but most expect the number that actually take it up to be lower, covering somewhere around 1.5 million workers.
Either a ‘a great relief’ or a ‘bailout’
In a recent interview with Yahoo Finance, Sen. Sherrod Brown (D., Ohio) said the bill “fixes the multi-employer pension system... That's probably 100,000 people in my state.” The provisions included in the new law were taken from a proposal called the Butch Lewis Act that Brown has been pushing for years.
In a statement other Congressional Democrats said: “It is a great relief that this important legislation to protect retirees’ benefits will be included in this urgent package.”
Some critics of the provision say it has nothing to do with the coronavirus pandemic, while others don't like how the money is distributed.
"I'm sympathetic to these workers,” but the deal “is completely irresponsible and doesn't, frankly, reflect the bipartisan nature that Congress had been pursuing for years," said Gordon Gray, director of fiscal policy at the American Action Forum.
Gray said there was no way Congress was going to let these plans go bankrupt but he wished that structural reforms had been part of the deal, specifically changing how the pension plans calculate their future liabilities.
Sen. Chuck Grassley (R., Iowa) was one of the Republicans who have worked on this issue and blasted the final product. “It’s just a blank check, with no measures to hold mismanaged plans accountable,” he said in a press release. Without more long-term changes, Gray said, “we're going to have to come back and do it again when these plans end up in trouble 30 years from now.”
Gray said he fears “the lesson that Congress is going to learn out of this is you don't have to make any hard decisions” – rather “you just send money.”
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.
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