New rules expected from the Financial Accounting Standards Board (FASB) are causing massive heartburn for Big Labor and fueling a new backroom push in Congress for a taxpayer bailout of underwater union pensions.
With nine Republican co-sponsors of the House bill, Big Labor is pushing for passage during a lame duck session after the November elections.
The proposed FASB rules would require a company to report as a liability on its books the amount of the withdrawal penalty from its union multiemployer pension plan.
The penalties are pricey. One of the largest of these multiemployer funds, Central States Funds, is in such bad shape that UPS paid a $6.1 billion penalty to extricate itself from employee participation in the fund.
The current unreported liability has long been cause for concern as in some cases the amount of the withdrawal penalty exceeds the value of company assets.
A bill introduced by Sen. Bob Casey (D-Penn.), and a bill from Rep. Earl Pomeroy (D-N.D.) in the House, would for the first time put taxpayers on the hook for these underwater union pension plans.
The union multiemployer pension distress was not caused by the recent economic woes but by mismanagement. The economic downturn has only exacerbated the problem.
The proposed bailout would create a new fund at the Pension Benefit Guarantee Corporation (PBGC). The PBGC is a government entity currently using premiums paid by private pension funds to insure a minimum pension benefit guarantee ($12,870 annually) to participants should a plan become insolvent. The PBGC itself already sports a reported $21 billion deficit.
The Casey and Pomeroy bills would inaugurate the use of taxpayer dollars to guarantee the minimum benefits — which Casey’s bill ups to $21,000 annually — creating incentives for the multiemployer union pension fund trustees to dump the plans on taxpayers.
Moody’s Investors Service estimates a whopping $167 billion price tag for these underfunded union pensions.
As previously reported on HUMAN EVENTS, the multiemployer plans were designed to let union members move from union job to union job and keep the same pension plan. But if a company participating in the plan as part of its collective bargaining agreement were to go bankrupt, the other participating companies in the plan are forced to fully fund these Cadillac union pensions.
The vested members with no participating company are called “orphans.” The Casey bill seeks to partition out these “orphaned” union members, putting taxpayers on the hook for the retirement benefit funding.
The proposed FASB rules bring new Big Labor-backed bailout urgency to the situation and a new co-sponsor to the Casey bill: Senate Democrat Whip Dick Durbin.
The Senate bill has no Republican co-sponsors but the House bill has nine:
Aaron Schock (R-Ill.), Jo Ann Emerson (R-Mo.), Thaddeus McCotter (R-Mich.), Steven LaTourette (R-Ohio), Pat Tiberi (R-Ohio), John Linder (R-Ga.), Tim Murphy (R-Penn.) and Peter Roskam (R-Ill.).
Brett McMahon of the Associated Builders and Contractors (ABC), a national trade association, told HUMAN EVENTS the bailout would provide a disastrous drain on the public treasury.
“There is nothing stopping a union from demanding all form of benefits knowing that at the end of the line the person actually paying it is the U.S. taxpayer,” McMahon warned.
We’ve already seen that formula in the government union pensions in states like California.
McMahon also cautioned that the Casey bill does not offer a one-time bailout but a new, taxpayer-funded entitlement with no set time limit.
“Most bailouts have a dollar figure attached, this much money over this period of time,” McMahon said. “That’s not the case here. It’s as much money as needed to solve the problem — which is the definition of an entitlement program.”
The failed, Big Labor multiemployer Ponzi-scheme would continue in the shadows funded by a taxpayer guarantee as the high-dollar benefits are touted to bring in new union members.
YRC Worldwide Trucking is a Teamster shop and part of the troubled Central States Fund that saw its assets shrink by 25% in 2007 — well before the financial meltdown. In 2009, YRC sought over $1 billion in pension bailouts. McMahon says the union pension rules haven’t changed since YRC was purchased and bought up all its competition.
“The multiemployer pension withdrawal penalty was the rule in 1980, in 1990, in 2000 and it’s the rule today,” McMahon said. “These companies have had 30 years to do something about this.”
The new FASB rules will expose the extent of underfunded pensions.
“The amount of information available on union pension plans is so slim,” McMahon said. “There is no question the new FASB rules would have an impact. All they’re really doing is recognizing the liability that has existed for a long time.”
The comment period for the new FASB accounting rules was extended by one month last week to September 20.
Congress returns the week after Labor Day.