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.

  • Health Care Reform: Prognosis Undetermined

    Posted on Jun 12, 2009 by John M Grau

    I can't decide how I feel about health care reform. It's now near the top of the legislative agenda and lots of proposals and ideas are being floated by the House and Senate committees working on a bill.

    Almost every American has a stake in the outcome. The health care industry is a huge segment of our economy. We all use health care services and most of us are covered by some type of insurance. We almost all agree that there's something wrong with our current system. But we’re also afraid to change it.

    Both sides of the reform debate seem to agree that there should be some form of mandatory coverage. Under our current system, those who have insurance end up paying more for coverage to subsidize services for those who don't. If everyone were required to have health care insurance, the overall cost should even out and insurers should be able to guarantee coverage even for people with pre-existing conditions.

    The idea of allowing individuals to select coverage from a number of competitive plans also appeals to me. I understand how the concept of employer-provided health insurance got started, but is it really the best way? Why should the employer be responsible for health care, and why should an individual be restricted to the type of coverage provided by his or her employer?

    Every individual has different health insurance needs - just like we do for auto or life insurance. If we had guaranteed access to coverage, we could pick the type of coverage that best suits our individual or family needs.

    Now comes the harder decisions.

    Should there be a public option among the competing insurance plans? In other words, should the federal government offer an alternative to private insurance? Would the government plan eventually force the private plans out of business so that we would be left with only government-controlled health insurance?

    An even bigger question is how do we pay for all this? Some ideas include taxing the individual for coverage beyond a certain amount and/or limiting the deductibility of insurance premiums paid by the employer. I know the unions aren't too happy about this idea, since most unions plans offer top-tier coverage. From an employer's point of view, wouldn't that create some incentive to control the cost of health coverage in our labor agreements?

    I like the fact that the United States has the best and most innovative health care system. I like the fact that we have free access to the doctors and hospitals of our choosing and that we don't have to wait months for elective care. I hate the bureaucratic morass of insurance claims statements, bloated costs, unnecessary tests, waste and fraud.

    So what do I want from health care reform? Something better, but exactly what, I can't tell you.

  • Time to do what we're not doing

    Posted on May 19, 2009 by John M Grau

    The annual IBEW Construction Conference was in town last week. I dropped by to hear IBEW President Ed Hill address the business managers from IBEW local unions across the country.

    Ed threw some slides up on the screen showing the number of IBEW-signatory electrical contractors versus the total number of electrical contractors. He broke the numbers down by district and also showed how they looked for some typical local unions. In most cases, the number of non-union contractors exceeded the number of union contractors by six or seven times or more.

    No surprise there. Ed then asked the group what they were going to do about it.

    He also showed slides depicting various types of work, much of which has been abandoned by the union side of the industry - stuff like residential, small commercial, strip malls, churches, and fast food restaurants.

    Ed challenged the audience to go after this work. He told them that the IBEW Constitution does not allow them to decide that this is no longer union work. He suggested that every local union consider developing a small works labor agreement and to use all the tools available to capture this work — such as the CW/CE classification.

    Of course, capturing or recapturing work isn't the sole responsibility of the IBEW. In fact, they can't do it alone. For many reasons, both good and bad, we collectively have decided to walk away from huge segments of electrical construction work.

    We need to sit down in each local area, assess the work that we're not doing, and come up with a plan to do it. It's as simple, and as hard, as that.

    Based on Ed Hill's challenge to his local union leaders, I think NECA chapters may find a more sympathetic partner in attempting to seriously address these issues with their IBEW counterparts. And they will expect our contractors to be ready to accept the challenge as well.

    This isn't the time to score political gains. It’s the time to do what we're not doing.

  • An Open Letter to Our New Leaders

    Posted on Nov 07, 2008 by John M Grau

    Congratulations President-elect Barack Obama and Members of the Newly Elected 111th Congress.

    ECPAC didn’t support all of you in your election races.  Regardless, we do celebrate our democracy, and the fact that we freely and openly choose our leaders.

    Whether we supported you or not, you can expect to hear from us. We are the voice of the nation's electrical contracting industry. We are a significant segment of the construction industry, which is one of the largest employers of American citizens and represents a major portion of our nation's gross domestic product.

    We will offer you our thoughts, ideas, support when we can - and criticism when necessary. We look forward to a productive working relationship.

    We know you will have your hands full with a number of important issues. Here are a few things we would like Congress and the new Administration to place on your agenda.

    We need some help with our pension plans. It won't cost you anything, unlike the Wall Street bailout. Just give us some extra time to fund our obligations. We suspect that, in contrast to the last Administration, you won't have a bias against union multi-employer plans.

    We also suspect that we won't have to fight very hard to keep Davis-Bacon provisions intact. You're with us on that one. But please don't go so far with your promotion of union issues that you trample on the rights of small employers. We'll be watching you closely on that.

    We're encouraged that you will promote investment in infrastructure, energy conservation measures, and alternative sources of energy. That's right up our alley, and our members can help you rebuild, renew, and re-energize America.

    We most likely will part ways with you on some tax issues. Remember that, by and large, we are small, family-owned businesses. You claim that we are the engine for job growth in our country. Please don't stifle our ability to grow our businesses.

    Estate taxes, corporate tax rates, and marginal income tax rates do matter. As a matter of good faith, why not repeal the 3% withholding tax that Congress sneaked into some legislation a couple years ago? We all know it was a bad idea, so let's get rid of it.

    There's also the matter of regulation. We see the fallout from lax regulation in the financial markets. Don't use that as an excuse to swing the pendulum too far the other way. We see the need for regulations, and we will work with you to make any new regulations sensible and workable. We have a very productive coalition with OSHA that is advancing safety efforts in the line construction industry. Please don't destroy that.

    We know you will be busy setting up your offices, hiring your staff, and preparing to govern our country. So we won't bother you any more right now. We just wanted to introduce ourselves and let you know that you'll be seeing us down the road.

    Once again, congratulations, and good luck!

  • Meet Drew Gibson

    Posted on Sep 09, 2008 by John M Grau

    Drew Gibson is NECA’s Executive Director for the Midwestern Region. His career has been intertwined with mine for more than 30 years.

    Drew joined NECA’s chapter manager training program in 1973, and the following year he took a position as assistant manager of the Milwaukee Chapter. In 1976, he was hired as manager of the Central New York Chapter in Syracuse. Yours truly was hired to replace Drew as assistant manager in Milwaukee. Nine years later, when I moved to the national organization, the board of the Milwaukee Chapter asked Drew to come back as their chapter manager, replacing me. He spent the next 16 years with that chapter until I asked him to come on board as the Midwestern Region Executive Director in 2001.

    So Drew and I have been following each other around in NECA for a long time, and I can’t think of a better guy to know and work with. Drew is rock steady, dedicated, and savvy. His analytical approach to problems allows him to see all sides of an issue from which he develops logical and unique solutions. His dry sense of humor diffuses tense situations. His calm demeanor doesn’t mask his passion for NECA and its mission.

    Drew is a native of Batavia, New York. He served for four years in the Air Force and earned both an undergraduate degree and an MBA from American University. His major was Labor Relations.

    Drew has been married to Paula Gibson for 38 years. She earned her PhD in Psychology not too many years ago and is a licensed psychologist in Wisconsin. The Gibsons have two sons. Patrick is a graphic designer at the Wall Street Journal and Benjamin is an art director at a publishing company. They both live in Brooklyn and work in Manhattan.

    I don’t know if Drew has another career move in mind, but if he does I have a feeling it will impact me somehow as well.

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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