Why Would Congress Bail Out Miners’ Pensions?
If legislators don’t act by the end of April, miners will lose their health-care benefits. They may soon lose their retirement benefits, too.
For decades, being a coal miner has come with a deal: Work in dangerous, unpleasant conditions for years, and in exchange, get lifelong health-care benefits and a decent pension. Now, though, part of that deal is jeopardy, as the funds that provide those benefits have dwindled.
When Congress returns next week, legislators will be under intense pressure to fund health-care benefits and pension plans for coal miners that are otherwise set to expire at the end of April. The United Mine Workers Association is urging Congress to pass the Miners Protection Act, which would use money from a fund dedicated to cleaning up abandoned mines to instead shore up former mine workers’ health care and pension plans, which have been decimated as coal companies have filed for bankruptcy and stopped contributing to health-care and pension funds. America has a “moral commitment” to the nation’s retired miners, UMWA president Cecil E. Roberts wrote in a statement last month.
But does it really? The miners argue that Congress has an obligation to step in because of a deal signed between the federal government and the United Mine Workers in 1946 to end a nationwide strike. The federal government had taken control of the mines, and in order to get the miners to return to work, United Mine Workers president John King and Interior Secretary Julius Krug signed a deal that required coal companies to pay into a pension fund and a health insurance fund for miners. Today, the United Mine Workers of America refers to that deal as “The Promise,” and says that it means that the government (since Secretary Krug was one of the signees) committed to providing miners with health care and pensions for life.
But Congress is in a tight spot. If it bails out the miners, why stop there? Why not bail out all of the other pension funds, private and public, that are on the brink of insolvency? Miners are not the only group that is in danger of losing health care and pensions as their employers go bankrupt. One of the biggest private pension funds in the country, the Central States Pension Fund, which provides benefits for truck drivers, is also almost out of money and is proposing cutting benefits for current and future retirees. The miners and truckers funds are examples of defined-benefit multi-employer pension plans, meaning they provide a certain amount of money every month to covered workers from a number of companies. According to the Congressional Budget Office, such plans have $850 billion worth of benefit obligations, but have assets of only $400 billion. According to the Pension Research Council at the University of Pennsylvania, there are 1,300 such multi-employer pension plans, covering millions of workers.
“If you open the door here to the United Mine Workers, then you have 1,300 other plans waiting there to say, ‘Where's my bailout? Why is it fair that you preserved 100 percent of coal miners’ benefits?’” argues Rachel Greszler, a research fellow at the Heritage Foundation, a conservative think tank.
There is, however, a federal backstop for failing private pension plans (though not for failing health-care plans). When the automaker Studebaker went out of business in 1963, it terminated its pension plan and more than 4,000 workers lost most or all of their promised pension benefits. That eventually motivated Congress to pass the Employment Retirement Income Security Act of 1974, which set up the Pension Benefit Guarantee Corporation, which pays out reduced pensions in the event that a private pension fund becomes insolvent. (The Pension Benefit Guarantee Corporation itself is running out of money, which is another problem.)
The miners are no different than other employees who have had to turn to the Pension Benefit Guarantee Corporation when their pension funds failed, argues Greszler. “This would be entirely unprecedented to say that the government is going to step in and bail out a pension fund and not even allow it to go to PBGC,” she told me.
Congress has, however, stepped in to bail out the miners’ health fund before. In 1992, Congress passed the Coal Act, which provided funding for health-care benefits of so-called “orphaned” retirees whose employers had gone bankrupt. It is the only time that Congress had intervened to provide retiree health benefits that had been promised by a private party. Congress intervened again in 2006 after a series of bankruptcies in the coal industry.
That Congress has taken such actions raises another question: Why do miners get special treatment from Congress? The miners emphasize “The Promise” and say that because the federal government promised them health and welfare benefits in 1946, it still owes them such benefits now. They say that the government essentially prevented the miners from striking for better benefits and conditions at the mines, because coal was necessary for the nation to keep functioning. As a result, they argue that the government’s promise to ensure decent working conditions for miners and retirees needs to be upheld. “The fact of the matter is that there’s a moral responsibility here, and the government has always lived up to it,” Phil Smith, the spokesman for the United Mine Workers, told me. This was also the position of then-Secretary Elizabeth Dole in 1989, when she convened a commission to look into coal miners’ benefits. “Retired miners have legitimate expectations of health care benefits for life; that was the promise they received during their working lives, and that is how they planned their retirement years. That commitment should be honored,” the Coal Commission concluded.
Patrick McGinley, a professor of law at the West Virginia University College of Law, says that coal has long earned a special position with American lawmakers because of coal’s one-time essential role in powering the nation. It was coal that helped power factories through the wars, and that helped sustain the nation’s post-war boom. “Historically, the reason for congressional support for coal miners has been a recognition that they have contributed so much to the prosperity of American economy. Through the World Wars, through Vietnam, they have powered American industry,” he said. Smith, of the United Mine Workers, says Congress has also recognized that coal-mining jobs were dangerous. “It was because miners were putting their lives and limbs and health on the line to provide the energy to fuel the nation that caused the benefits to be set up in the first place,” he said.
Some in Congress also recognize that if the health benefits were to lapse, there could be huge ripple effects in local economies across the country. People who no longer have health insurance will show up at emergency rooms, those whose pensions are reduced will depend more on services like food banks, and local government will have to step in. About half of the 22,000 miners set to lose health insurance will be eligible for Medicare, according to Smith.
Greszler has a different argument. She says coal is special to Congress because mine workers are good at lobbying. The Senate Finance Committee passed the Miners Protection Act last year with a significant number of Republicans voting for it, which is unusual for a bill supported by a union. “Coal has a very prominent influence on the hill and among certain legislators,” she said.
That influence might not be powerful enough to get Congress to act on both healthcare and pensions. The most likely course, Smith said, is that Congress will step in to shore up the miners’ health care funds, but not the pension funds. The miners’ pension funds, then, will be left to the same fate as thousands of other flailing pension funds across the country—it will have to eventually depend on the Pension Benefit Guarantee Corporation. And the PBGC does not have enough money to guarantee those pensions in the long run.
About 90,000 mineworkers are currently receiving a pension, and if the PBGC has to step in and pay for those pensions, it could very well bankrupt the agency. PBGC was hard hit by the financial crisis of 2008, and went from running a surplus to funding shortages, according to the Pension Research Council. As various companies in dying industries go bankrupt and stop paying pensions, PBGC is under more and more financial pressure to step in and save multi-employer plans.
Congress will eventually have to figure out a way to save the PBGC, says Barry Slevin, a principal at the law firm Slevin & Hart and an expert on employee benefits. If it doesn’t, the government agency will go bankrupt. But Congress currently has little incentive to spend taxpayer money to shore up an insolvent government agency. “We know from the Social Security debate, from the Medicare debate, that Congress does not deal with issue like this early in the problem. They tend to react to emergencies,” he said.
Congress isn’t bound to take the long view, then. Even if it does step in to help the coal miners, Congress is eventually going to have to face all the other pensioners who were also promised benefits for life. If Congress could learn anything from the experience of the mineworkers, it would be that the problems of private pensions in America are just starting to emerge.