Backgrounder

American Rescue Plan Act- Reconciliation Bill

*Updated 2/26/21*

Congress intends to approve major parts of the Biden Administration’s American Rescue Plan via the budget reconciliation process. This legislative procedure limits the scope of the legislation to budget-related matters but provides a speedier path needing only 50 votes in the Senate rather than the 60 votes for a typical resolution.

Included in the American Rescue Plan Act reconciliation bill set to be voted on in the House are the Raise the Wage Act to increase to the federal minimum wage and the Butch Lewis Emergency Pension Plan Relief Act to bail out failed, private multiemployer pension plans.  The Senate parliamentarian, however, ruled that the minimum wage provisions do not comply with the budget reconciliation rules and the language will be removed in the Senate after it has cleared the House.


Minimum Wage Increase:  Raise the Wage Act

The Raise the Wage Act would increase the federal minimum wage to $15 per hour by 2025 through incremental, annual increases.

  • Beyond 2025, the federal minimum wage would automatically increase annually, tied to the percentage increase in the median wages of all workers.
  • The federal tipped wage and youth wage would be phased out through a series of annual increases until their elimination in 2027.
  • The minimum wage for individuals with disabilities would also be phased out through a series of annual increases until that wage is eliminated in 2025.

Background: The last federal minimum wage increase came in 2007. A Democrat-majority Congress approved the Fair Minimum Wage Act of 2007 (H.R. 2) – increasing the minimum wage from $5.15 per hour to $7.25 per hour through three increments over a period of two years. Eighty-two House Republicans and all but three Senate Republicans voted Yes. President Bush signed the wage increase into law as part of a larger emergency supplemental appropriations bill.

In the 116th Congress, the Raise the Wage Act was approved by the House on July 18, 2019 by a vote of 231-199. Previously, it had been marked up on March 6, 2019 by the House Committee on Education and Labor and approved on a party-line vote of 28-20. There was no legislative activity in the Senate.

The nonpartisan Congressional Budget Office in 2021 released a study on the Raise the Wage Act’s effects of increasing the federal minimum wage to $15 in 2025 and found employment would be reduced by 1.4 million workers.

Former Labor Secretary Alexander Acosta told the Wall Street Journal in 2019 that more than doubling the federal minimum wage would result in a loss of jobs in the U.S: “What I think is clear is $15 is something that will undermine this economy and job creation.”

Click here for more information on the Raise the Wage Act. 

 

Bailout of Multiemployer Pension Plans: “Buch Lewis Emergency Pension Plan Relief Act”

Rep. Robert “Bobby” Scott, chairman of the House Committee on Education and Labor, and Rep. Richard Neal, chairman of the House Committee on Ways and Means, recently introduced largely identical bills to bail out failing multiemployer pension plans and the Pension Benefit Guarantee Corporation (PBGC).  Their “Emergency Pension Plan Relief Act” is similar to multiemployer pension plan provisions included last year by Congressional Democrats in their COVID-19 response bills and also approved by the House as a standalone bill in the 116th Congress (H.R. 397, 116th Congress). Included in the reconciliation bill and renamed as the “Butch Lewis Emergency Pension Plan Relief Act,” the legislation was further amended to use tax dollars to bail out failing multiemployer plans while making no significant structural reforms.

Reps. Scott and Neal’s original version of EPPRA would create special partition relief measures for the PBGC to partition out unfunded pensions from a failing plan to leave the remainder healthyPBGC would assume financial responsibility for the partitioned bad pensions and be required to keep them solvent over 30 years with no reduction in a participant’s or beneficiary’s accrued benefit. “Such amounts as necessary” of tax dollars would be appropriated to cover this expenditure.

The amended “Butch Lewis” EPPRA would provide failing plans with the same “such amounts as necessary” of tax dollars through September 30, 2030 but not give PBGC the special partition relief measures.

In 2020, the Congressional Budget Office scored similar legislation as costing approximately $52 billion and the National Taxpayers Union says the pension provisions add “tens of billions of dollars to the cost of the legislation.”

Background: Several massive union pension plans, such as the Teamster’s Central States Pension Fund, are woefully underfunded and destined for collapse in the coming years. That failure would cause the collapse of the federal backstop for these plans, the PBGC.  Scores of retirees would lose their pensions at no fault of their own.  Current projections indicate these cascading failures could occur as soon as 2026.  Knowing this, however, Congress has been unable to agree to a bipartisan solution.  Even a House-Senate pension supercommittee tasked solely with finding a workable solution to this crisis folded in 2018, unable to agree on a compromise.

In December, 2020, Sen. Chuck Grassley (R-IA) introduced multiemployer pension reform legislation drafted with former Sen. Lamar Alexander (R-TN), the “Chris Allen Multiemployer Pension Recapitalization and Reform Act” (H.R. 5045, 116th Congress). Like EPPRA, it would grant PBGC greater partition abilities, but unlike EPPRA, it would increase PBGC premium payments for employers, unions, and retirees to better fund the federal backstop for these plans.  New rules for pension plan funding, governance, and disclosure would also be applied to prevent systemic failure of multiemployer plans going forward.

Click here for more information on the Emergency Pension Plan Relief (EPPRA) Act. 

Click here to download this American Rescue Plan backgrounder. 

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