U.S. lawmakers' generosity on pensions is just a starting point for bolstering retirement security

Multiemployer plans are created under collective bargaining agreements

  
The north view of the Manhattan skyline is seen from the 86th floor observation deck of the Empire State Building in midtown Manhattan, as the iconic tower prepares to open to more tenants and visitors following the outbreak of the coronavirus disease (COVID-19) in New York City, New York, U.S., June 24, 2020.

The north view of the Manhattan skyline is seen from the 86th floor observation deck of the Empire State Building in midtown Manhattan, as the iconic tower prepares to open to more tenants and visitors following the outbreak of the coronavirus disease (COVID-19) in New York City, New York, U.S., June 24, 2020.

Mike Segar

(The opinions expressed here are those of the author, a columnist for Reuters.)

CHICAGO- The U.S. Congress recently rescued the retirements of more than 1 million workers who faced the prospect that the pensions they earned and had been promised might evaporate.

The American Rescue Act signed into law last month by Democratic President Joe Biden allocated $86 billion for grants to struggling multiemployer pension funds that would allow them to continue paying full benefits. The law authorizes the Pension Benefit Guaranty Corporation (PBGC) to make the grants, which do not need to be repaid.

The generosity of the move came as a surprise. Previously, Democrats had been pushing a package of low-interest loans to aid the multiemployer funds, while Republicans wanted to boost insurance premiums paid by employers, add new premiums paid by plan participants, and force more conservative accounting assumptions.

But the Democratic majority is looking at things a bit differently this year. "They felt that since we've bailed out the banks and airlines over the years, why aren’t we doing that here We’ve got the votes,” said Gene Kalwarski, CEO of Cheiron Inc, an actuarial consulting firm that advises multiemployer plans.

The bailout makes sense. Multiemployer plans are created under collective bargaining agreements and jointly funded by groups of employers in industries like construction, trucking, mining and food retailing. The funds declined following stock market crashes in 2001 and 2008-09, and due to industrial decline that led to consolidation and sliding employment. Moreover, the pension plans’ financial problems threatened the health of the PBGC as well.

But so long as Congress is casting a benign eye on the well-being of these pensioners, I have a short list of other “must-do” retirement items for the consideration of lawmakers. And these are reforms that will impact a much larger - and more demographically diverse - group of retirees now and in the years ahead than the multiemployer plan fix.

EXPAND SOCIAL SECURITY

The economic devastation wrought by the pandemic makes expansion of our only universal retirement income program a critical item. As a presidential candidate, Biden proposed a series of moderate expansions that should be passed into law. One would award Social Security benefit credits to caregivers for time spent out of the workforce - a change that would especially benefit women, who already face a substantial retirement gender gap.

The president also proposed expanding benefits for widows and seniors who had collected payments for 20 years. He also favors shifting to a more generous yardstick for determining Social Security's annual cost-of-living adjustment.

REDUCE THE MEDICARE AGE

Short of Medicare for All, making Medicare available to younger workers is the smartest way to expand the program. And with millions of Americans retiring earlier than expected due to the pandemic, expansion would help them control their healthcare costs.

Senator Bernie Sanders is pushing to reduce the age of Medicare eligibility from 65 to 60 or lower as part of the big infrastructure spending bill now taking shape. His proposal also would add dental, vision and hearing care to Original Medicare. That change would plug a coverage gap that makes absolutely no sense, considering that these services are a critical part of overall good preventive healthcare.

REDUCE LONG-TERM CARE RISK

Medicare also should be expanded to include coverage of long-term care. This remains one of the largest gaps in our retirement security insurance net: the commercial insurance market continues to shrink, and Medicaid remains the largest payor - and the one of last resort.

The smart solution would add a baseline of coverage to Medicare, with all workers contributing through the course of their working lives. This could be coupled with streamlined, less expensive private policies that could be sold as add-ons to basic Medicare.

This approach was proposed by several bipartisan research groups in 2016, and it is an idea worth revisiting. And the Medicare for All Act of 2021 recently introduced in the House of Representatives proposes comprehensive long-term care coverage for older adults and people with disabilities.

FUND AFFORDABLE SENIOR HOUSING

The share of households headed by someone over age 65 will jump from 26% in 2018 to 34% in 2034, according to the Joint Center for Housing Studies at Harvard University - and the share of households age 80 and over will grow even more rapidly.

The nation’s housing stock is nowhere near ready to accommodate this age wave. A tiny percentage of housing units has the age-appropriate modifications such as single-floor living, no-step entry, and extra-wide halls and doors for wheelchair access.

And affordability is a critical issue. Nearly 10 million retirement-age households face cost burdens related to housing, meaning that housing consumes more than 30% of their income, according to Harvard. Homelessness among older adults is rising.

Expanded funding for Section 8 rental subsidies would help, along with increased funding for the Low-Income Housing Tax Credit program and increasing funding for Section 202 (Supportive Housing for the Elderly Program), which has historically funded new construction as well as operating costs for housing for older adults, said Jennifer Molinsky, senior research associate at the Harvard center.

“We need both more rental assistance as well as more funding to expand the supply of affordable housing,” she said.

Mark Miller

(Writing by Mark Miller Editing by Matthew Lewis) ((lauren.young@thomsonreuters.com))