The $1.4 trillion spending bill passed by Congress last week quietly achieves what a parade of select committees and coordinating councils could not: rescue a dying pension fund that is the lifeblood of nearly 100,000 retired coal miners.

For the first time in 45 years of federal pension law, taxpayer dollars will be used to bail out a fund for workers in the private sector. And now that there’s a precedent, it might not be the last.

“We could be the blueprint,” said Chuck Pettit, who mined coal for 42 years. “But we’ve got to do it right.”

The coal miners belong to one of about 1,400 pension plans that cover a large group of workers in a single industry or trade. These so-called multiemployer plans cover more than 10 million workers in unions including the Teamsters, the American Federation of Musicians, the Screen Actors Guild and, in Mr. Pettit’s case, the United Mine Workers of America. Even President Trump has a multiemployer pension, worth about $70,000 a year, earned in his reality-TV days.

But nearly three-quarters of the people with this type of pension are in plans that have less than half the money they need to pay promised benefits, according to the Pension Benefit Guaranty Corporation, the federal agency that insures pension plans. Chronic underfunding, lax government oversight and serial bankruptcies have left them in dire straits. And the guaranty corporation’s program backing up these plans — which operated under the assumption that they were inherently strong — would be wiped out by the failure of just one of the major pension pools.

Unbalanced Sheet

One coal company after another has gone bankrupt and stopped paying into the miners’ pension plan, but the retirees are still there. Its assets are dwindling, but the liabilities have stayed about the same.




$10

billion

9

8

The plan’s

liabilities

7

6

The plan’s

shortfall

5

4

The plan will run out of money soon.

3

Total assets of the

United Mine Workers

of America pension plan

2

1

0

’10

’11

’12

’13

’14

’15

’16

’17

’18

’19

’20

’21

’22

’23

Forecasts by the plan’s actuaries

$10

billion

9

8

The plan’s

liabilities

7

6

The plan’s

shortfall

5

4

The plan will

run out of

money soon.

3

2

Total assets of the

United Mine Workers

of America pension plan

1

0

’10

’12

’14

’16

’18

’19

’20

’21

’12

’23

Forecasts by the

plan’s actuaries


Sources: Plan regulatory filings

By Karl Russell

“It’s a disaster waiting to happen,” said James P. Naughton, an associate professor at the University of Virginia’s Darden School of Business and an actuary whose clients have included multiemployer pension plans.

The solution approved by Congress uses the Abandoned Mine Lands Reclamation Fund, which is partly supported by a per-ton fee that all coal companies pay. In 1992, Congress allowed the fund to help pay for retired miners’ health care, and the new legislation — the Bipartisan American Miners Act — uses the fund as a vehicle to support the pensions, too. The bill, among other changes, allows the Treasury to send as much as $750 million a year into the fund as it covers the unfunded pension obligations.

How Taxpayers Will Now Help Pay Miners’ Pensions

When the mine workers’ retiree health plan ran out of money in 1989, Congress arranged for new funding sources, including the Abandoned Mine Lands Reclamation Fund and, later, the Treasury. That precedent is now being followed for the miners’ pensions. Starting next year, the Treasury’s transfers to the Abandoned Mine Lands fund will rise to a maximum $750 million a year, and will help pay for pensions as well as retiree health care. This may prompt other unions to seek federal assistance for their plans, too.




PAYMENTS

The U.S.

Treasury

Taxpayers

AS OF DEC. 2019

Supplements pay pension as well as health costs

Abandoned

Mine Lands

Reclamation

Fund

Coal companies

(both union

and nonunion)

Interest and principal diverted to pay miners’ health and pension costs

United

Mine Workers

of America health and pension funds

Coal companies

with union

workers

Less and less as companies have gone bankrupt; $30 million in 2018.

Coal companies

with union

workers

Taxpayers

Coal companies

(both union

and nonunion)

Less and less as companies have gone bankrupt; only $30 million in 2018.

Interest and principal diverted to pay miners’ health and pension costs

AS OF DEC. 2019

Supplements pay pension as well as health costs

United

Mine Workers

of America health and pension funds

Abandoned

Mine Lands

Reclamation

Fund

The U.S.

Treasury

Set up in 1977 to clean up abandonded coal mines. Since 1992, some of its money has been used for retired miners’ health care.


Illustrations by Guilbert Gates

A failure to act would have had dire consequences: Tens of thousands of miners, many in already economically distressed areas, would have lost their benefits. And coal pensions support not just families but sometimes whole towns.

Image

Credit…Ross Mantle for The New York Times
Image

Credit…Ross Mantle for The New York Times

The collapse of the miners’ plan was hastened by the parade of bankruptcies that have hit the industry in recent years. By this fall, just one major employer, Murray Energy, was still paying into the fund. On Oct. 29, Murray declared bankruptcy — the eighth coal producer to do so this year.

Usually, leaving a multiemployer pension plan is an expensive proposition for a company. It must pay off its share of any shortfall to leave. But bankruptcy provides a cheap exit ramp, because the pension plan is treated as an unsecured creditor — the kind that goes to the back when everyone lines up to be paid.

After Alpha Natural Resources declared bankruptcy in 2015, for example, the pension fund’s trustees calculated that it owed $985 million. Alpha got out for about $75 million: a $10 million payment spread over four years and the rest in stock in the new company.

But when companies get out of the pension pool, their employees stay in — and become the responsibility of the companies still kicking in money. As more companies failed, it only increased the pressure on the others to get out.

‘Orphaned’ Miners

When a company goes bankrupt and exits a multiemployer pension plan, it leaves behind its retirees, who are said to be “orphaned.” The companies that remain are responsible for the orphans’ pensions, but the additional cost gives them a motive to leave the plan, too, creating even more orphans. As of 2018, the miners’ plan had 95,990 members — and 84,900 of them were orphans.




120,000

100,000

Total members in the United Mine

Workers of America pension plan

80,000

60,000

40,000

‘Orphaned’ members

20,000

0

’11

’12

’13

’14

’15

’16

’17

’18

120,000

members

100,000

Total members in the United Mine

Workers of America pension plan

80,000

60,000

40,000

‘Orphaned’ members

20,000

0

’11

’12

’13

’14

’15

’16

’17

’18


Source: Plan regulatory filings

By Karl Russell

The result has been a complicated cascade of splits, sales and financial collapses.

Mr. Pettit, 70, started his career at the Consolidated Coal Company and stayed with it until he retired in 2011. He spent more than four decades at the vast Shoemaker Mine, just south of Wheeling, W.Va.

When he started there, Consolidated was one of more than 180 employers paying into the pool, he said. Times were good: He could work plenty of overtime, put his two children through college and accrue retirement benefits that would provide for his wife if he died.

“That’s the reason we fight so hard,” he said. “A good friend of mine got killed in the mine, and his wife is still taken care of.”

By the time he retired, he said, just 11 companies were paying into the pension fund. His former employer — by then known as Consol — sent the most, $35 million. But two years later, Consol announced that it wanted to diversify into natural gas and was selling the Shoemaker Mine and four others with union contracts. The high bid came from Murray Energy, whose owner, Robert E. Murray, has lobbied hard on behalf of coal-fired power plants.

Murray Energy also took over Consol’s stake in the pension fund, until its bankruptcy.

Mr. Pettit is upset with the way Consol was able to rid itself of its pension obligations. In his view, the bill should now go back to Consol, which has never declared bankruptcy.

“When does common sense come into the picture?” he asked.

The average coal miner’s pension is about $7,150 annually, according to Lorraine Lewis, executive director of the United Mine Workers’ Health and Retirement Funds. More recent retirees typically get more.

John Leach, a 70-year-old retired miner in Bear Creek, Ky., gets $698.18 a month. That pays the bills while he and his wife, Rhonda, care for their two adult children, Christopher and Elizabeth. Both have Friedreich’s ataxia, an incurable disease of the nervous system. (A third child, Dena, also had Friedreich’s ataxia. She died in 2001.)

Mr. Leach retired in 1995 after 23 years at Peabody Energy, America’s biggest coal company. He worked at five mines, and at every stop, he said, he got the same speech: “You work here for 20 years and you get your pension for life.”

But starting in 2007, a decade of corporate reorganizations and bankruptcy filings meant that hundreds of millions of dollars in unpaid pension liabilities for Peabody retirees were settled for pennies on the dollar.

That year, Peabody spun off all but one of its union mines into a new company, Patriot Coal, which got 13 percent of Peabody’s assets but 40 percent of its liabilities — including those for paying pensions to people like Mr. Leach. Patriot soon went bankrupt, and when the pension plan sent Patriot a bill for $888 million, the company said it couldn’t pay.

The trustees then sued Peabody, accusing it of creating Patriot just to dump its pension obligations. Less than a year later, Peabody itself went bankrupt. The trustees billed it $644 million for its own share of the shortfall. Once again, the bill was an unsecured credit.

In 2017, Peabody settled it for roughly $75 million in stock and cash, payable over four years.

“There’s something wrong with whoever lets the company file bankruptcy like that and get rid of all the people who made that company what it is,” Mr. Leach said. “That is what they do with us. They just drop us.”

While the new legislation ensures that Mr. Leach and Mr. Pettit will be paid, it does nothing to address the problems of other multiemployer plans.

“Every plan is in a precarious position,” said Professor Naughton, the former actuary. “If you’re in any declining industry, your plan is in trouble. If you’re in a growing industry, your plan is O.K. until it starts to decline.”

Not Enough Money

Each year, the plan pays retirees more than $600 million. When all its money is gone, the federal pension insurance program is supposed to step in. But it takes in premiums of only about $300 million a year — and that has to cover all multiemployer pensions, not just the miners’.




Payments to beneficiariesof

the United Mine Workers

of America pension plan

$700

million

600

500

Premiums received by the Pension Benefit Guaranty Corporation’s multiemployer program, for all plans.

400

300

Employer

contributions

to the plan

200

100

0

’10

’11

’12

’13

’14

’15

’16

’17

’18

$700

million

600

500

Payments to beneficiaries of

the United Mine Workers

of America pension plan

Premiums received by the Pension Benefit Guaranty Corporation’s multiemployer program, for all plans.

400

300

Employer

contributions

to the plan

200

100

0

’10

’11

’12

’13

’14

’15

’16

’17

’18


Sources: Plan regulatory filings; Pension Benefit Guaranty Corporation

By Karl Russell

Many of the problems can be traced back to the 1970s, when Congress enacted sweeping pension laws. Multiemployer plans were thought to be much safer than single-employer plans, and unions and employers argued against holding them to the same standards. The logic was simple: The risk was spread out over a large number of companies.

But that lack of oversight created a host of problems. Unions and employers negotiated pension-funding commitments as part of their labor contracts, with little regard for the actual funding needs of the plan. In some cases, even the funding needs aren’t clear: In 1993, the Securities and Exchange Commission began pushing single-employer plans to use new and improved calculations, but it had no power over multiemployer plans, which generally still use the old math.

The government’s oversight power is limited in other ways, too. The Pension Benefit Guaranty Corporation can completely take over a single-employer plan that is found to be too far behind, but it cannot legally take over a dying multiemployer plan until it has spent down all its assets — which means problems that have been clear for years can go unfixed and become worse.

Until this fall, a number of unions were pushing legislation to let troubled multiemployer plans borrow cash from the United States Treasury. Proponents said the plans were viable, just temporarily short of cash because retired baby boomers were drawing their benefits. Once the boomers were gone, they argued, the plans would repay the loans.

The House passed such a bill in July, but the Senate held back, especially after the Congressional Budget Office debunked the notion that weak plans would bounce back once the boomers were gone. It reported in September that many plans were doomed to fail no matter what and would never pay the government back.

Image

Credit…Philip Scott Andrews for The New York Times
Image

Credit…Philip Scott Andrews for The New York Times

The miners’ fund is one of the largest multiemployer plans, but it’s not the biggest. One ailing Teamster plan is larger, with $40.5 billion in unfunded liabilities, for 390,079 workers and retirees. It, too, is destined to run out of money — in 2025, according to the plan’s most recent funding notice, sent to all participants.

Like the miners’ plan, the Teamsters’ plan is large enough to wipe out the federal multiemployer insurance program. To keep that from happening, lawmakers will almost certainly have to intervene again — although the other unions don’t have something like the abandoned mine fund to channel the money through.

John Murphy, the Teamsters’ international vice president, said his union still thought the loan program was a viable solution.

“I believe that our government will respond to the plight that American citizens face,” he said. “I wish they would do it quicker, but I believe they will.”

It’s unclear when the loan program — or some other proposal — will get enough traction to move forward. But, for now, the miners’ pensions appear to be safe.

Mr. Leach said he was “tickled to death” that Congress had finally found a way to keep his benefits coming.

“This is what we fought for so long,” he said.

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