— FAQs —

GROW Act plans are designed to modernize and strengthen the multiemployer pension system for the future by combining the key features of defined benefit and defined contribution plans.

Participation in GROW Act plans is voluntary, and is designed to be an alternative to the 401(k)/defined contribution plans that are increasingly proposed when an employer can no longer assume the financial responsibilities of a defined benefit plan.

Under GROW Act plans, workers would still receive a lifetime benefit. But unlike the current system, GROW Act plans are designed to be more financially stable over the long-term, offering greater retirement stability for workers.

The plan benefits employers too. Employers would negotiate a fixed contribution rate and limit their risk by paying only for what they bargained. GROW Act plans provide greater certainty for employers and ensure that they are not driven out of business because of increasing costs or unexpected penalties down the road as a result of their participation in the multiemployer system.

Unlike a 401(k), GROW Act plans provide a lifetime benefit to workers and are designed to be more financially stable over the long-term. GROW Act plans would be required to maintain a target funded ratio (assets over liabilities) of 120%. Plans failing to meet this target would be required to take corrective action.

This new structure is meant to give peace of mind to workers who will still receive lifetime income, while giving employers certainty in how much they will be required to pay into the system. Extensive stress testing of the GROW Act plan model confirmed that GROW Act plans are flexible enough to weather financial crises like the Great Recession in 2008, without causing serious financial harm to workers or employers participating in the system.

There will be no change to the defined benefit that you already earned under your existing pension plan. That benefit will be protected and paid upon your retirement. A GROW Act plan would only affect your future service and the corresponding benefit that you earn for that service. Importantly, workers who are already retired will see no change to their lifetime benefit as a result of the GROW Act.

The GROW Act is needed to help modernize and strengthen the multiemployer pension system for the future. As the country still struggles to fully recover from the Great Recession, GROW Act plans will provide greater certainty and stability to employers and workers—incentivizing employers to stay in the multiemployer system and better positioning employees to bargain for their compensation and benefits.

There is significant risk to workers’ retirement security if we fail to act. It has become clear that the market is transitioning toward defined contribution type plans, but it has always been equally clear that 401(k) plans, which were never meant to be a primary retirement vehicle, would be insufficient for multiemployer plan participants. 401(k) plans do not guarantee lifetime incomes, which put retirees at risk of running out of money due to inadequate investments or market volatility. 401(k) plans are also individually managed by retirees themselves, rather than by professional asset managers who are better able to make complex investment decisions and calibrate risk.

That is why the GROW Act is so critical. Under the GROW Act, multiemployer pension plans are modernized by combining the key features of defined benefit and defined contribution plans. The benefits workers earned under the traditional pension system are protected as they shift onto the GROW Plan structure. And importantly, like a traditional pension, these plans still provide workers with lifetime income, but are designed to be more financially stable over the long-term.

Millions of workers have paid into the multiemployer pension system with the understanding that they were setting aside hard-earned wages now for a secure and dignified retirement in the future. Under a GROW Act plan, workers will still receive lifetime income. GROW Act plans are designed to give peace of mind to workers while also ensuring that the multiemployer system is strengthened and modernized for the future. They are designed as an alternative to the 401(k)/defined contribution plans that are increasingly proposed when an employer can no longer assume the financial responsibilities of a defined benefit plan.

GROW Act plans would eliminate the uncertainty and volatility that employers currently face in the multiemployer system. Employers would negotiate a fixed contribution rate and limit their risk by paying only for what they bargained. GROW Act plans provide greater certainty for employers and ensure that they are not driven out of business because of increasing costs or unexpected penalties down the road as a result of their participation in the multiemployer system.

There is no withdrawal liability going forward in GROW Act plans. Employers would negotiate a fixed contribution rate and limit their risk by paying only for what they bargained. GROW Act plans provide greater certainty for employers and ensure that they are not driven out of business because of increasing costs or unexpected penalties down the road as a result of their participation in the multiemployer system. Withdrawal liability in the defined benefit plan is unchanged.

Every day Congress waits, the harder this problem is to solve. Take action today by visiting the following link. Tell your member of Congress that you support the GROW Act. Ask them to co-sponsor the bill. Tell your member of Congress that you want to see the GROW Act passed today.