Yes, I’m going to prognosticate. But I’m also by nature very cautious. So, here goes!
First, I’m going to very cautiously predict that Congress will pass some sort of rescue for multi-employer plans.
Yes, I know it’s been over a year since I first wrote about the woes of multi-employer plans, and since the Joint Select Committee on Multiemployer Pension Plans dissolved without finding a way forward. And in the meantime, the House has re-passed the Butch Lewis Act promising to solve the problem via loans (with no realistic means for plans to repay those loans), and the Senate has proposed its own version of a rescue plan, which neither the AFL-CIO nor the NCCMP (a multiemployer lobbying group) have signed on to, and which does not yet even have the form of a bill rather than a set of principles and a white paper.
This does not look very promising.
Fundamentally, there are two issues:
How much money should the government kick in to resolve the issue of plans currently forecast to become insolvent? And how much stricter should funding demands be in the future, to balance the twin goals of ensuring plans are well-funded while not burdening them so much that they simply shut down? (The Butch Lewis loans? I don’t give them any credibility.)
Call me naive, but I do believe that both sides know that there’s too much at stake not to negotiate their way through to a solution that takes into account the analysis of actuarial experts rather than just politicians’ desire to provide money to interest groups, however much the opposite is generally true.
Second, we’ll begin to have enough data about auto IRA experiments in such states as Oregon, Illinois, and California to draw conclusions about those programs.
Yeah, I know, that’s going out on a limb.
But look at the timeline:
The OregonSaves program, the first of these, is still in the process of enrolling employers, with enrollment of employers with fewer than 20 employees now underway. Illinois’ Secure Choice program’s final deadline, for employers with 25 – 99 employees, was reached just last month. (Employers with fewer than 25 employees are exempt in Illinois.) California’s CalSaver’s program has only begun its pilot program, with the first enrollment deadline, for businesses with over 100 employees, not until June 30, 2020.
There’s a lot we don’t know about these programs, and whether this sort of state (contractor)-run auto-enrollment IRA is the right way to enable Americans without workplace retirement plans to save for retirement.
Third, with respect to state and local public pension plans in the most-indebted states, that is, Illinois, New Jersey, and Connecticut, and the most-indebted cities, such as Chicago, I’m going to go out on a limb and predict that . . . precisely nothing will happen.
Oh, sure, folks like Gov. JB Pritzker in Illinois will take some actions that they will claim have solved the problem, or at least take credit on what they’ll call a down payment on a solution. But, no differently than his trumpeting the consolidation of asset management of local police and fire plans as if it provided any sort of fix to the $137 billion in state pension debt, whatever “solutions” Pritzker proposes will not be genuine solutions to the debt these states have incurred — and the same is true elsewhere, e.g., in New Jersey (where they have already artificially set the asset return higher than it should be to keep liabilities low) and Connecticut (where they’ve reset the amortization schedule to lower annual contributions). Will Pritzker “transfer” state assets into the various pension systems? Will he designate a future funding source, in the same way as the lottery was meant to fund education spending? Whatever it is, it’ll be a farce rather than a true solution.
(And, yes, I believe we need a true solution, and I’ll get on my soapbox repeatedly to call for it, but sadly I don’t think the voices for reform will win the day.)
What about other retirement issues?
Will we have the sort of expansion in Social Security that Elizabeth Warren, etc., have promised? No.
Will we have the sort of fix to the pending depletion of the Social Security Trust Fund that bills such as Social Security 2100 promise?
No.
But what’s on my wishlist?
Yes, it may indeed be quixotic, but I will continue to promote my own Social Security benefit commencement flexibility proposal. It’s not the sort of monumental change that so many people want to see, but it’s practical and doable and genuinely a change that can be made without cost. And at a time when it seems that everyone is holding out for a future supermajority that supports their ambitious massive changes, rather than working together to make small changes, it’s a valuable proposal in that respect as well.
And, that being said, I’d like to extend to my readers best wishes for 2020 in all their endeavors, regardless of what happens in the wider world!
What do you think will happen? Share your thoughts at JaneTheActuary.com!