Preventing Another Pension Bailout
November 8, 2019
As more and more print newspapers are struggling to stay afloat in today’s predominantly digital media world, they are trying to come up with creative ways to cut costs.
And some of them have found a potential lifeline in their workers’ pensions.
In the name of “saving” a small group of community newspapers, a provision of a bill called the SECURE Act allows these newspapers to reduce their contributions to their workers’ pension plans while still promising the same benefits.
The problem? You can’t reduce compensation costs without reducing actual compensation. In the end, this measure hurts the very workers it purports to help.
Under current law, if a pension plan is failing to meet its funding target, the plan sponsor must eliminate the funding shortfall through additional plan contributions and associated interest at a discounted rate over 7 years.
The SECURE Act, however, changes that time period to 30 years and allows plans to use a higher discount rate for contributions.
As a result, it would decrease the amount that these newspapers are required to contribute each month; and, because of the longer payback window, would also make it less likely that they would ever make up the shortfall.
In other words, it grants a special-interest bailout to these newspapers by allowing them to raid their workers’ pensions.
This is both bad policy and bad precedent.
It’s true that this strategy might help prolong the life of these community newspapers in the short term. But it would do so at the expense of their employees, the government’s Pension Benefit Guarantee Corporation (PBGC), and all the other private pension plans that are not afforded this special treatment.
Because when the pension plans of these select newspapers inevitably become insolvent, they will most likely end up in the PBGC – a federally chartered organization that provides pension insurance through premiums paid by private companies, half of which are small companies with fewer than 25 pension participants. So, in the long run, all the companies required to pay into the PBGC – but which do not receive a special bailout from Congress – will be forced to bear the brunt of the cost.
This is neither helpful nor fair.
That is why I am offering an amendment that strikes this provision from the bill.
We should not be providing special treatment to a select group of community newspapers at the expense of others.
And we should not be setting a precedent that struggling companies can offload their costs onto their workers and other companies by shortchanging pensions, failing to pay them back, and getting bailouts from Congress.
We can find better ways to help keep struggling newspapers alive without raiding hardworking Americans’ retirement money. This amendment would ensure just that.