U.S. lawmakers have drafted legislation to create the Pension Rehabilitation Administration (PRA), a new office within the U.S. Treasury Department that would allow pension plans to borrow money to remain solvent while providing retirement benefits for retirees and workers, CIO Magazine reported. “With this bill, we responsibly shore up multiemployer pension plans and guarantee retirees the full benefits they earned,” said Rep. Richard Neal (D-Mass.), of the House Ways & Means Committee. The Senate and House Democrats who proposed the legislation said that the money for the loans, and the cost of running the PRA, would come from the sale of Treasury-issued bonds in the open market to large investors, such as financial firms, and other institutional investors. The PRA would then lend the money from the sale of the bonds to the struggling pension plans. To ensure that the pension plans can afford to repay the loans, the PRA would lend them money for 30 years at interest rates of around 3 percent. The 30-year loans are intended to buy time for the pension plans so they can focus on investing for the long-term health of the plan, while the loans pay benefits owed to current retirees. Under the proposed program, pension plans would borrow money from the PRA to purchase conservative investments that will cover the cost of paying current retiree benefits each month. Annuities, cash matching with investment grade bonds, or duration matching with a suitable bond portfolio were cited as possible investments for these funds. Retirees and their families would be guaranteed their promised benefits, and the loan proceeds would be prohibited from being invested in risky investments.
