COLUMN-The generosity of US pension lawmakers is just a starting point to strengthen pension security
(The views expressed here are those of the author, columnist for Reuters.)
By Mark Miller
CHICAGO, April 1 (Reuters) – The United States Congress recently saved the retirements of more than a million workers who risked losing the pensions they had earned and promised.
The American Rescue Act, enacted last month by Democratic President Joe Biden, allocated $ 86 billion in grants to struggling multi-employer pension funds, which would allow them to continue paying full benefits. The law allows the Pension Benefit Guaranty Corporation (PBGC) to provide the grants, which do not need to be repaid.
The generosity of the movement was a surprise. Previously, Democrats had offered a low-interest loan package to help multi-employer funds, while Republicans wanted to increase insurance premiums paid by employers, add new premiums paid by plan members and impose more conservative accounting assumptions.
But the Democratic majority sees it a little differently this year. “They felt that since we’ve bailed out the banks and the airlines over the years, why don’t we do it here? We have the votes, ”said Gene Kalwarski, CEO of Cheiron Inc, an actuarial consulting firm that advises multi-employer plans.
The bailout makes sense. Multi-employer plans are created by collective agreement and jointly funded by groups of employers in industries such as construction, trucking, mining and food retailing. Funds declined following the stock market crashes of 2001 and 2008-09, and due to industrial decline which led to consolidation and declining employment. In addition, the financial problems of the pension plans also threatened the health of the PBGC (https://reut.rs/3st48KT).
But as long as Congress takes a benevolent eye on the well-being of these retirees, I have a short list of other “must-do” retirement items for lawmakers to take. And these are reforms that will impact a much larger – and more demographically diverse – retiree group today and in the years to come than the multi-employer plan solution.
EXTEND SOCIAL SECURITY
The economic devastation caused by the pandemic makes expanding our only universal retirement income program essential. As a presidential candidate, Biden has proposed a series of moderate expansions that should be enacted. One would provide social security benefit credits to caregivers for time spent out of the workforce – a change that would particularly benefit women, who already face a large gender gap in retirement.
The president also proposed extending benefits for widows and the elderly who had received payments for 20 years. He is also in favor of moving to a more generous criterion for determining the annual adjustment of the social security cost of living.
REDUCE THE AGE OF MEDICINE
Outside of Medicare for All, making Medicare accessible to young workers is the smartest way to expand the program (https://reut.rs/39j8uga). And with millions of Americans retiring earlier than expected due to the pandemic, the 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 younger as part of the big infrastructure spending bill that is now taking shape. His proposal would also add dental, vision and hearing care to Original Medicare. This change would fill a gap in coverage that makes absolutely no sense, given that these services are an essential part of overall preventive good health (https://reut.rs/3waEtc3).
REDUCE THE RISK OF LONG-TERM CARE
Medicare should also be expanded to include long term care coverage. This remains one of the biggest gaps in our retirement insurance net: The commercial insurance market continues to shrink and Medicaid remains the biggest payer – and the one of last resort.
The smart solution would add a base of coverage to Medicare, with all workers contributing throughout their working lives. This could be associated with streamlined and cheaper private policies that could be sold as supplements to basic health insurance.
This approach was proposed by several bipartite research groups in 2016, and it’s an idea worth revisiting (https://reut.rs/3u5430w). And the 2021 Medicare for All law recently introduced in the House of Representatives provides comprehensive long-term care coverage for the elderly and people with disabilities.
ESTABLISHING AFFORDABLE SENIOR HOUSING
The share of households headed by someone over 65 will rise from 26% in 2018 to 34% in 2034, according to the Joint Center for Housing Studies at Harvard University – and the share of households aged 80 and over will increase further faster.
The country’s housing stock is far from ready to welcome this wave of age. A small percentage of housing units have age-appropriate modifications such as single story living, step-free entry, and extra-wide hallways and doors for wheelchair access.
And affordability is a critical issue. Nearly 10 million retirement-age households face housing-related financial burdens, which means housing consumes more than 30% of their income, according to Harvard. Homelessness among the elderly is on the increase (https://reut.rs/3cuDCLJ).
Increased funding for the Section 8 housing subsidies would help, along with increased funding for the Low Income Housing Tax Credit program and increased funding for Section 202 (Program Housing Support Services for the Elderly), which has historically funded new construction as well as operating costs for housing for the elderly, said Jennifer Molinsky, senior research associate at the Harvard center.
“We need both more rent assistance and more funding to expand the supply of affordable housing,” she said.
(Written by Mark Miller Editing by Matthew Lewis)