United Mine Workers President Cecil Roberts and West Virginia Congressman Nick J. Rahall warned this morning that a crucial UMWA pension plan — covering 120,000 working and retired miners — is at risk of insolvency without some kind of fix.
The fix proposed by Rahall and the union has the support of the Bituminous Coal Operators Association, but it received a cold reception today from the Obama administration during a congressional hearing before the House Natural Resources Committee that Rahall chairs.
First, the UMWA was a bit upset with that post last evening, so let’s allow Cecil Roberts some space here to explain why he believes Rahall’s H.R. 5479 is so important, to protect pension benefits provided to UMWA members under what is known as the 1974 Plan:
The retirees and surviving spouses who depend on the 1974 Pension Plan live in all 50 states, but the majority of them still reside in the coal mining states of West Virginia, Pennsylvania, Kentucky, Illinois, Virginia, Alabama, Ohio and Indiana. Many of the retirees are elderly with nearly 40 percent of the retired population over 75 years of age and about 17 percent of the population over 85 years of age. The 1974 Plan provides them with modest but crucial income. The average pension benefit for a retired miner currently receiving benefits from the 1974 Pension Plan is $590 per month and for a surviving spouse the average benefit is about $304 per month.
In addition, noting the recent mine disasters at Upper Big Branch, Sago and Crandall Canyon, as well as the thousands of deaths from black lung disease, Roberts told lawmakers:
I think any reasonable observer would agree that coal miners work in harsh conditions that endanger their lives in many ways. They should not have to worry about the modest pensions that have been promised them after they retire.
OK … before we move to the details of the legislation, a little history is necessary …
When it passed the 1977 federal strip mining law, Congress created a tax on coal production, meant to raise funds to reclaim coal-mine sites that were abandoned prior to the law’s requirement that operators clean up after they’re done mining. Folks who have followed the issue know that the Abandoned Mine Land program hasn’t quite lived up to its promise, at least in part because Congress and the Office of Surface Mining have allowed money to be diverted from its primary purpose — cleaning up dangerous coal-mining sites — to other things. We outlined this whole problem a few years ago in a Gazette series, and this story summarizes it pretty clearly.
At the time, the biggest diversion of AML money was for the rescue of the UMWA’s retiree health-care benefit program, which faced insolvency because of a variety of trends, including coal companies going belly up or otherwise walking away from promised benefits to their workers and retirees. Congress passed measures allowing those diversions of AML money, and the union’s history of all of that is available here.
Now, when Congress extended the AML program in 2006, it included a few interesting changes, among them language that expanded the use of interest on the AML fund to help finance the UMWA’s retiree health-care program.
And the 2006 amendments also for the first time allowed the use of general U.S. treasury money to cover any deficit in the UMWA health-care plan. That language was part of an interesting provision aimed at least in part at dealing with certified states like Wyoming which, while they have cleaned up all their abandoned coal mine sites, continue to pay huge sums of AML taxes for coal production and want some of that money to keep flowing back to them for other projects.
Under this provision, Congress required a transfer to the AML program of up to $490 million, with that money to be used to allocations to certified states like Wyoming and for contributions to the UMWA health-care plans.
Now, fast forward to today’s hearing on Rep. Rahall’s Coal Accountability and Retired Employee Act of 2010 (the “Care” Act).
This legislation would allow money from that AML provision from the 2006 law to also be transferred by to the UMWA 1974 Pension Plan. And it’s probably worth noting that, so far, the money for paying off certified states like Wyoming and for the UMWA health-care funds has not approached the 2006 law’s $490 million annual cap. So, proponents of Rep. Rahall’s legislation argue that any pension transfers would only involve “excess” funds under that cap — somewhere between $75 million and $283 million annually.
Why? What’s the argument in favor of this?
Rep. Rahall did not make any introductory statements when he quietly introduced the bill last week. But at the start of today’s committee hearing, he explained his goals:
The problems which plagued the UMWA health program in the past are now afflicting their pension plan. At present, well over half of the current retirees never worked for the coal companies currently participating in that plan. This situation, as well as the recent economic downturn, has placed the pension plan on the road to insolvency.
Basically, the 1974 Pension Plan has suffered the same fate of many other pension programs — its assets dropped by 22 percent during the 2008 calendar year, largely because of the economic downturn and the nation’s financial crisis. To make matters worse, the UMWA pension plan covers 120,000 people based on employer contributions from only 10,000 active miners. And only 40 percent of the current retirees are former employees of current coal operators participating in the plan. Others are “orphans,” whose employers went out of business.
In his testimony today, the UMWA’s Roberts explained the impact on the pension plan and what might be needed to fix the problem:
As of May 31, 2010, the 1974 Plan had total assets of $4.3 billion and its funding level has fallen below 80 percent … Under the provisions of the Pension Protection Act, because the plan’s funding level is below 80 percent, the UMWA and the BCOA as the plan sponsors will have to adopt funding improvement plans that may raise contribution rates to $20 per hour [From the current $5.00 per hour] worked by UMWA members. If such rates are required, signatory employees may seek to withdraw from the plan or go out of business.
Both Roberts and David M. Young, president of the BCOA noted what they said was the federal government’s long history of involvement in ensuring health-care and pension benefits for coal miners. Young added:
Together, all of us, the miners, the companies and the government, have made a great deal of difference in the lives of people in the coalfields and for our energy needs. Today, we are once again at a juncture when the historic promise to these miners is in jeopardy. We believe that H.R. 5479 recognizes that stark fact and provides the best way to correct it.
As I mentioned earlier, the Rahall-UMWA proposal got a chilly reception from the Obama administration. At today’s hearing, Alfred Whitehouse, chief of the OSMRE Division of Reclamation Support, testified:
While we recognize the importance of ensuring that retired miners receive their pensions, we have serious concerns with this bill. We believe the AML program should remain focused on reclaiming high priority abandoned coal mine sites, and further, this bill is inconsistent with the President’s Budget and goals of ensuring greater fiscal responsibility during today’s challenging economic times.
Coal Tattoo readers will recall that President Obama has proposed to stop sending AML money to states that have already cleaned up their abandoned coal mines. Whitehouse told lawmakers today that Rep. Rahall’s proposal:
… Would also most likely eliminate all of the savings to be achieved through reductions proposed in the Presidents Fiscal Year 2011 budget. For example, the President’s FY 2011 budget proposes to eliminate AML payments to states and tribes that have certified as completing reclamation of their high priority AML coal problems. Under the proposal, the eliminated payments would remain in the treasurer; however, this bill would require that the full amount of the cap on SMCRA treasury allocations be spent every year, eliminating any savings.
Of course, coalfield lawmakers from West Virginia to Wyoming have offered absolutely no support for Obama’s proposals in this regard. They believe the administration is rocking a boat that led to the carefully crafted East-West compromise that allowed the AML program to be extended four years ago, and are wary of messing with that deal.
And Rep. Rahall made it clear today he’s going to push this legislation:
At stake are the pensions of over 120,000 people — around 38,000 who resident in my home state of West Virginia — and the economic viability of the contributing coal companies.
Think about that. These hardworking people, who engaged in the nobel but often dangerous occupation of mining coal for the energy security of this country, may no find, in their elderly years, dilemma and confusion when it comes to the security of their pensions.
I fought long. I fought hard, and I was relentless in my efforts to get these coal miners the health care they deserve. And I will not now allow their pensions to be threatened. This matter has been the first thing on my mind when I wake up in the morning, and it is in my prayers every evening.