Trade Adjustment Assistance (TAA) for Workers: Current Issues and Legislation

[Excerpt] Trade Adjustment Assistance consists of several programs: Trade Adjustment Assistance for Workers (TAA), Alternative Trade Adjustment Assistance (ATAA), Trade Adjustment Assistance for Firms, Trade Adjustment Assistance for Farmers, and a Health Coverage Tax Credit (HCTC). This report addresses the TAA and ATAA programs, as well as the HCTC. TAA and ATAA provide income support and other assistance to qualifying workers who lose their jobs directly due to increased imports or shifts in production out of the United States. The HCTC provides a refundable tax credit to offset 65% of the health insurance premiums of TAA- and ATAA-eligible workers. The Trade Adjustment Assistance programs were set to expire on September 30, 2007. P.L. 110-89 extended the programs through December 31, 2007. H.R. 4341, which would further extend the programs through March 31, 2008, was passed by the House on December 11, 2007. As of February 20, 2008, the Senate has not acted on the measure. However, P.L. 110-161, signed by President George W. Bush on December 26, 2007, fully funds TAA and ATAA through September 30, 2008. The Department of Labor has indicated that this is sufficient to continue the programs through the end of the fiscal year, including issuing new certifications of eligible workers. This report provides background on TAA and ATAA, summarizes key issues related to reauthorization, and briefly describes bills in the 110th Congress that affect the TAA and ATAA programs. These bills are H.R. 3920, H.R. 2764, H.R. 4341, H.R. 3375, H.R. 3943, H.R. 3801, H.R. 910, S. 1848, S. 122, H.R. 1729, S. 1652, S. 1739, H.R. 3589, and H.R. 3843. This report will be updated as legislative activity warrants

Multiemployer Defined Benefit (DB) Pension Plans: A Primer and Analysis of Policy Options

Multiemployer defined benefit (DB) pension plans are pensions sponsored by more than one employer and maintained as part of a collective bargaining agreement. About 3.2% of all DB pension plans, covering 25% of all DB pension plan participants, are multiemployer plans. Nearly all of the remaining DB pension plans are maintained by a single employer. A few DB pension plans are maintained by more than one employer but are not maintained under a collective bargaining agreement. In DB pension plans, participants receive a monthly benefit in retirement that is based on a formula. In multiemployer DB pensions, the formula typically multiplies a dollar amount by the number of years of service the employee has worked for employers that participate in the DB plan. DB pension plans are subject to funding rules in the Internal Revenue Code (26 U.S.C. §431) to ensure they have sufficient resources from which to pay promised benefits. Because single employer and multiemployer DB pension plans have different structures, Congress has established separate funding rules for these plans. Although most multiemployer DB pension plans have sufficient resources from which to pay their promised benefits, a few large plans are expected to become insolvent in the next 20 years. The Pension Benefit Guaranty Corporation (PBGC) is a U.S. government agency that insures the benefits of participants in private-sector DB pension plans. As with the funding rules, Congress established separate PBGC programs to insure single and multiemployer DB pensions. For example, PBGC becomes the trustee of terminated single employer DB pension plans. PBGC does not become the trustee of multiemployer DB pension plans; rather, it makes loans to insolvent multiemployer DB plans so the plans may continue to pay participants’ guaranteed benefits. Although PBGC has sufficient resources to make loans to smaller multiemployer DB plans, the insolvency of a large multiemployer DB pension plan would likely result in a substantial strain on PBGC’s multiemployer insurance program. In the absence of increased financial resources for PBGC, participants in insolvent multiemployer DB pension plans might not receive all of the benefits guaranteed by PBGC. In a report released in June 2014, PBGC indicated that the multiemployer insurance program is highly likely to become insolvent by 2025. The Multiemployer Pension Reform Act of 2014, enacted as Division O in the Consolidated and Further Continuing Appropriations Act, 2015 (MPRA; P.L. 113-235) made changes to some of the funding rules for multiemployer DB pensions and allowed plans that are expected to become insolvent to cut benefits to plan participants or to apply for a partition of the plan

U.S. Household Savings for Retirement in 2010

[Excerpt] This report provides data on a variety of household wealth measures in 2010 from the Federal Reserve’s triennial Survey of Consumer Finances. Although the amount of retirement assets is the primary focus of the report, other measures of wealth (such as the amount of total assets, financial assets, total debt, net worth, and housing equity) are also included. The report classifies the amount of assets and debt by the age of the head of the household for both single and married households. In general, the amount of household wealth is higher for married households than for single households. Household wealth generally increases as the age of the head of the household increases, although some measures decrease for those households in which the head of the household is aged 75 or older. In general, the median values are less than the average values, which is an indication that some households hold relatively large amounts of wealth compared with most households

401(k) Plans and Retirement Savings: Issues for Congress

[Excerpt] Over the past 25 years, defined contribution (DC) plans—including 401(k) plans—have become the most prevalent form of employer-sponsored retirement plan in the United States. The majority of assets held in these plans are invested in stocks and stock mutual funds, and the decline in the major stock market indices in 2008 greatly reduced the value of many families\u27 retirement savings. The effect of stock market volatility on families\u27 retirement savings is just one issue of concern to Congress with respect to defined contribution retirement plans. This report describes seven major policy issues with respect to defined contribution plans: 1. Access to employer-sponsored retirement plans. In 2007, only 61% of employees in the private sector were offered a retirement plan of any kind at work. Fifty-five percent were offered a DC plan. Only 45% of workers at establishments with fewer than 100 employees were offered a retirement plan of any kind in 2007. Forty-two percent were offered a defined contribution plan. 2. Participation in employer-sponsored plans. Between 20% and 25% of workers whose employer offers a DC plan do not participate. Workers under age 35 are less likely than older workers to participate. 3. Contribution rates. On average, participants in DC plans contributed 6% of pay to the plan in 2007. The median contribution by household heads who participated in a DC plan in 2007 was $3,360. This was just 22$15,500 in that year. 4. Investment choices. At year-end 2007, 78% of all DC plan assets were invested in stocks and stock mutual funds. This ratio varied little by age, indicating that many workers nearing retirement were heavily invested in stocks and risked substantial losses in a market downturn like that in 2008. Investment education and target date funds could help workers make better investment decisions. 5. Fee disclosure. Retirement plans contract with service providers to provide investment management, record-keeping, and other services. There can be many service providers, each charging a fee that is ultimately paid by participants in 401(k) plans. The arrangements through which service providers are compensated can be very complicated and fees are often not clearly disclosed. 6. Leakage from retirement savings. Pre-retirement withdrawals from retirement accounts are sometimes called leakages. Current law represents a compromise between limiting leakages from retirement accounts and allowing people to have access to their retirement funds in times of great need. In general, borrowing from a 401 (k) plan poses less risk to retirement security than a withdrawal. Pre-retirement withdrawals can have adverse long-term effects on retirement income. 7. Converting retirement savings into income. Retirees face many financial risks, including living longer than they expected, investment losses, inflation, and possible large expenses for medical care and long-term care. Annuities can protect retirees from some of these risks, but few retirees purchase them. Developing polices that motivate retirees to convert assets into a reliable source of income will be a continuing challenge for Congress and other policymakers

Extending Trade Adjustment Assistance (TAA) to Service Workers: How Many Workers

[Excerpt] Trade Adjustment Assistance (TAA) provides income support and training assistance to workers who become unemployed for certain trade-related reasons. Only workers who make an article (i.e., manufacturing workers) are eligible for TAA. Under current law, service workers who become unemployed for a trade-related reason (e.g., outsourcing) are ineligible for TAA. Several bills in the 110th Congress (S. 1848, H.R. 910, H.R. 3589, H.R. 3920) would expand TAA to include service workers and public sector employees. The available data indicates that the number of displaced manufacturing workers in offshorable occupations from 2003 to 2005 (489,000) roughly equals the number of TAA-certified manufacturing workers over the same period (450,000). There were 840,000 workers displaced from offshorable nonmanufacturing occupations from 2003 to 2005, suggesting that the pool of TAA-eligible workers could have increased by over 170% if service workers had been eligible for TAA. In January 2006, nearly three times as many employed nonmanufacturing workers were in offshorable occupations (20.7 million) than employed manufacturing workers in offshorable occupations (7.7 million), suggesting a large increase in the pool of potentially eligible TAA workers. This report will be updated as circumstances warrant

Worker Participation in Employer-Sponsored Pensions: A Fact Sheet

[Excerpt] This fact sheet provides data on the percentage of U.S. workers who have access to and who participate in employer-sponsored pension plans. The data are from the National Compensation Survey (NCS), conducted by the Bureau of Labor Statistics (BLS)

401(k) Plans and Retirement Savings: Issues for Congress

[Excerpt] Over the past 25 years, defined contribution (DC) plans—including 401(k) plans—have become the most prevalent form of employer-sponsored retirement plan in the United States. The majority of assets held in these plans are invested in stocks and stock mutual funds, and the decline in the major stock market indices in 2008 greatly reduced the value of many families’ retirement savings. The effect of stock market volatility on families’ retirement savings is just one issue of concern to Congress with respect to defined contribution retirement plans. This report describes seven major policy issues with respect to defined contribution plans: 1. Access to employer-sponsored retirement plans. In 2007, only 61% of employees in the private sector were offered a retirement plan of any kind at work. Fifty-five percent were offered a DC plan. Only 45% of workers at establishments with fewer than 100 employees were offered a retirement plan of any kind in 2007. Forty-two percent were offered a defined contribution plan. 2. Participation in employer-sponsored plans. Between 20% and 25% of workers whose employer offers a DC plan do not participate. Workers under age 35 are less likely than older workers to participate. 3. Contribution rates. On average, participants in DC plans contributed 6% of pay to the plan in 2007. The median contribution by household heads who participated in a DC plan in 2007 was $3,360. This was just 22$15,500 in that year. 4. Investment choices. At year-end 2007, 78% of all DC plan assets were invested in stocks and stock mutual funds. This ratio varied little by age, indicating that many workers nearing retirement were heavily invested in stocks and risked substantial losses in a market downturn like that in 2008. Investment education and target date funds could help workers make better investment decisions. 5. Fee disclosure. Retirement plans contract with service providers to provide investment management, record-keeping, and other services. There can be many service providers, each charging a fee that is ultimately paid by participants in 401(k) plans. The arrangements through which service providers are compensated can be very complicated and fees are often not clearly disclosed. 6. Leakage from retirement savings. Pre-retirement withdrawals from retirement accounts are sometimes called “leakages.” Current law represents a compromise between limiting leakages from retirement accounts and allowing people to have access to their retirement funds in times of great need. In general, borrowing from a 401(k) plan poses less risk to retirement security than a withdrawal. Pre-retirement withdrawals can have adverse long-term effects on retirement income. 7. Converting retirement savings into income. Retirees face many financial risks, including living longer than they expected, investment losses, inflation, and possible large expenses for medical care and long-term care. Annuities can protect retirees from some of these risks, but few retirees purchase them. Developing polices that motivate retirees to convert assets into a reliable source of income will be a continuing challenge for Congress and other policymakers

Growing Disparities in Life Expectancy

[Excerpt] In a continuation of long-term trends, life expectancy has been steadily increasing in the United States for the past several decades. Accompanying the recent increases, however, is a growing disparity in life expectancy between individuals with high and low income and between those with more and less education. The difference in life expectancy across socioeconomic groups is significantly larger now than in 1980 or 1990. A similar trend is evident in Great Britain but not in Canada, where the gap in life expectancy between high- and low-income individuals has declined. Increasing longevity, by itself, has clear implications for Social Security and Medicare expenditures. As beneficiaries live longer, they will receive benefits for a longer period, putting additional pressure on the programs’ finances. The implications of a continued widening of the gap in life expectancy by socioeconomic status are clear for Social Security but less so for Medicare. For Social Security, a widening gap would worsen the long-term shortfall in financing and reduce the program’s progressivity — the extent to which it redistributes resources from high-income to low-income beneficiaries on a lifetime basis. For Medicare, it is not clear whether a widening gap would exacerbate the cost increases that will result from increasing longevity. How the share of Medicare spending on low-income individuals would change depends on how the percentage change in life expectancy at age 65 compares for the various groups of beneficiaries

Federal Benefits and the Same-Sex Partners of Federal Employees

[Excerpt] This report examines current policies on the application of benefits to the same-sex partners of federal employees and reviews certain policy debates about the extension or removal of these benefits. This report also presents data on the prevalence of same-sex partner benefits in the private and public sector. This report focuses on federal benefits for same-sex partners and not on same-sex relationships in general

Benefit Reductions in the Central States Multiemployer DB Pension Plan: Frequently Asked Questions

[Excerpt] Under the Multiemployer Pension Reform Act (MPRA), enacted as Division O in the Consolidated and Further Continuing Appropriations Act, 2015 (P.L. 113-235) on December 16, 2014, certain multiemployer defined benefit (DB) pension plans that are projected to become insolvent and therefore have insufficient funds from which to pay benefits may apply to the U.S. Department of the Treasury to reduce participants’ benefits. The benefit reductions can apply to both retirees who are currently receiving benefits from a plan and current workers who have earned the right to future benefits. On September 25, 2015, the Central States, Southeast and Southwest Areas Pension Plan (Central States) applied to the Treasury to reduce benefits to plan participants in order to avoid becoming insolvent. At the end of 2014, Central States had almost 400,000 participants, of whom about 200,000 received $2.8 billion in benefits that year. The plan reported$18.7 billion in assets that was sufficient to pay 53% of promised benefits. In its application to reduce benefits, Central States projects that it will become insolvent in 2026. If Central States does not reduce participants’ benefits and the plan becomes insolvent, then the Pension Benefit Guaranty Corporation (PBGC) would provide financial assistance to the plan. PBGC is an independent U.S. government agency that insures participants’ benefits in private- sector DB pension plans. Multiemployer plans that receive financial assistance from PBGC are required to reduce participants’ benefits to a maximum of $12,870 per year in 2016. However, the insolvency of Central States would likely result in the insolvency of PBGC, as PBGC would likely have insufficient resources from which to provide financial assistance to Central States to pay 100Under MPRA, participants’ benefits in the Central States plan could be reduced to 110Treasury is currently reviewing Central States’ application and must approve or deny the application by May 7, 2016. If Central States’ financial condition and proposed benefit suspensions meet the criteria specified in MPRA, then Treasury must approve the application for benefit reductions. The plan has proposed to begin implementing the benefit reductions beginning in July 2016. If Treasury approves a plan’s application to reduce benefits, it must also obtain the approval of the plan’s participants via a vote of plan participants. However, MPRA requires Treasury to designate certain plans as systematically important if a plan is projected to require$1 billion or more in financial assistance from PBGC. Plans that are labelled systematically important may implement benefit suspensions regardless of the outcome of the participant vote. Central States is likely a systematically important plan. Legislation has been introduced in the 114th Congress that would affect potentially insolvent multiemployer DB pension plans. H.R. 2844 and S. 1631, the Keep Our Pension Promises Act, would, among other provisions, repeal the benefit reductions enacted in MPRA. H.R. 4029 and S. 2147, the Pension Accountability Act, would change the criteria of the participant vote and would eliminate the ability of systematically important plans to implement benefit suspensions regardless of the participant vote