NECA TransmissionsNotes from the front lines of the electrical contracting industry
  • A New Model for Multiemployer Pensions

    Posted on Sep 06, 2011 by John M Grau

    In the union segment of the construction industry, multiemployer pension plans are the norm. In addition to covering construction workers, these plans are also commonly found in coal mining, trucking, retail trades, printing, health care and performing arts. All told, more than 10 million Americans participate in multiemployer pension plans.

    Special rules under the Pension Protection Act of 2006 apply to multiemployer plans, and they are scheduled to sunset in 2014. While that’s still over three years away, it has generated a lot of activity among policymakers and those interested in shaping the future of these plans.

    I recently attended the formation meeting of a new coalition of multiemployer pension plan stakeholders. This group, comprised of both employer plan sponsors and unions, is attempting to draft and promote legislation prior to the 2014 sunset that will fundamentally reform the multiemployer pension plan model. The one thing on which everyone in the room agreed was that the current models for multiemployer pensions aren’t working and aren’t sustainable.

    Right now, the choices for multiemployer pension are either defined benefit plans or defined contribution plans (or some variation thereof). Neither is performing very well in today’s financial environment. When interest rates are near zero, pension plan savings don’t benefit from the “miracle” of compound interest. Liabilities mount without offsetting fund increases. In defined benefit plans, the shortfall becomes a burden for contributing employers. In defined contribution plans, the participant bears that responsibility.

    If the purpose of these plans is to attract workers to and keep them in an industry, as well as to provide them with retirement security, then they are coming up short no matter which type of plan is being used. A big part of the problem is risk. A big part of the solution will be sharing responsibility for, and managing, that risk.

    That’s why we need a new model. Apparently, they exist. Multiemployer pension arrangements exist in other countries that aren’t at the same crossroads faced by U.S. plan sponsors and participants. Currently, our laws don’t allow some of these alternatives. So we may need to blow up the current system and fundamentally rewrite our multiemployer pension laws, as well as make substantial changes to ERISA, the tax code, and labor laws. That’s the task this new coalition has started down the road to accomplish.

    For those wanting a quick fix to our pension plan problems, this isn’t it.  But ultimately, this effort promises a more permanent and sustainable solution. Stay tuned.

  • Obamanomics and Democratic Leadership 101

    Posted on Dec 12, 2009 by John M Grau

    I spent last weekend in Miami at the newly renovated Fontainebleu Hotel, which re-opened only three weeks ago. I was there for a meeting of the Associations Committee of 100, representing the CEOs of the most influential national associations in the country. The meeting was actually an educational event — an introductory course, of sorts — as various speakers prepared us for issues and legislation expected at the start of the Obama administration and the incoming 111th Congress.

    The two biggest agenda items are likely to be first out of the box in January — a stimulus package and health care reform. Both will be important to our industry, so it’s a good idea for industry leaders to learn about them. I took a copy of an 89-page paper on health reform by Senate Finance Committee Chair Max Baucus with me for airplane reading.

    I also used my networking time during coffee breaks to form a coalition of construction associations interested in promoting building issues for the stimulus package. The existing infrastructure coalitions are more focused on highways and bridges. We think some of the stimulus should be spent on building construction as well.

    One interesting observation noted during our discussions is that the Obama economic team is mainly composed of individuals with PhDs in economics. That’s considered a positive sign for business groups because economists, whether conservative or liberal, believe in markets and market solutions. We were told that our arguments on domestic issues will have their best chance of being accepted if they are supported by economic data and principles.

    A special treat during our meeting was a briefing by General James Jones, nominated to become President-Elect Obama’s National Security Advisor. General Jones is currently CEO of the Institute for 21st Century Energy and a member of our group of 100.

    We first crossed paths three years ago when I was one of a dozen association executives invited to Brussels for a briefing by our United States missions to the European Union and NATO. After our visit to NATO headquarters, General Jones invited us to SHAPE headquarters in Mons, Belguim, where he then served as SACEUR (Supreme Allied Commander Europe — a post also previously held by Dwight Eisenhower and Wesley Clark). We were briefed on NATO’s changed military mission around the world.

    For the past year, General Jones has headed up a coalition to develop and promote energy policy recommendations for the United States. NECA fully supports the coalition’s recommendations. It was good to hear General Jones say that he truly believes in the policy positions they helped develop and will be an advocate for them within the White House.

    Just being at the meeting in Miami confirmed that NECA is recognized as a highly influential organization. Now, as a result of the education I received there, I feel better prepared to help lead NECA in influencing the major legislative initiatives we’ll face in the next few months.

     

About NECA Transmissions

NECA Transmissions is a collaborative effort from CEO John Grau and NECA staff to provide insight and feedback on key issues from the front lines of the electrical contracting industry.

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