Grassley, Charles E

How Long Should It Take to Give Away Millions?

June 9, 2021 by Staff Reporter

Ms. Madoff and others pushing for change see a growing gap between reputation-burnishing promises of money and distributions to people who need it. The Giving Pledge, which was started by Bill Gates, Melinda French Gates and their friend and collaborator Warren E. Buffett, gave billionaires a space where they could announce their intention to give away half their fortunes or more, often to great acclaim. But it provides no mechanism to monitor or ensure the giving actually happens.

Earlier this year, the Chronicle of Philanthropy ranked Jeffrey P. Bezos, the founder of Amazon, as the top philanthropist of 2020 because he committed $10 billion to his Bezos Earth Fund to fight climate change. But he had handed out less than one-tenth of that, $791 million, to working nonprofits like the Environmental Defense Fund and Natural Resources Defense Council.

Charitable giving has remained relatively steady for decades, clocking in at roughly 2 percent of disposable income per year, give or take a few tenths of a percent. In 1991, the year that Fidelity began to offer donor-advised funds, just 5 percent of giving went to foundations and DAFs. By 2019, the most recent year available, that figure had risen to 28 percent.

It was January 2020 when that small group gathered at the offices of the nonprofit consulting firm the Bridgespan Group in Manhattan for a wonky brainstorming session about the state of philanthropy. The group included foundation leaders, former congressional staff members, former senior Internal Revenue Service officials and a key constituency in any effort to change how billionaires give away their money: billionaires.

One of the organizers was John D. Arnold. Once a trader at Enron, the Houston energy company that infamously collapsed in 2001, Mr. Arnold later ran his own hedge fund, which made him one of the youngest billionaires in the United States.

Ms. Madoff, another leader of the initiative, has written a book, “Immortality and the Law,” about the growing legal power of dead people in America and has applied her knowledge of estate taxes and inheritance law to the rising field of philanthropy.

The group focused on the fact that most of the laws governing philanthropy were half a century old, dating back to 1969.

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Rescue Package Includes $86 Billion Bailout for Failing Pensions

March 7, 2021 by Staff Reporter

Tucked inside the $1.9 trillion stimulus bill that cleared the Senate on Saturday is an $86 billion aid package that has nothing to do with the pandemic.

Rather, the $86 billion is a taxpayer bailout for about 185 union pension plans that are so close to collapse that without the rescue, more than a million retired truck drivers, retail clerks, builders and others could be forced to forgo retirement income.

The bailout targets multiemployer pension plans, which bring groups of companies together with a union to provide guaranteed benefits. All told, about 1,400 of the plans cover about 10.7 million active and retired workers, often in fields like construction or entertainment where the workers move from job to job. As the work force ages, an alarming number of the plans are running out of money. The trend predated the pandemic and is a result of fading unions, serial bankruptcies and the misplaced hope that investment income would foot most of the bill so that employers and workers wouldn’t have to.

Both the House and Senate stimulus measures would give the weakest plans enough money to pay hundreds of thousands of retirees — a number that will grow in the future — their full pensions for the next 30 years. The provision does not require the plans to pay back the bailout, freeze accruals or to end the practices that led to their current distress, which means their troubles could recur. Nor does it explain what will happen when the taxpayer money runs out 30 years from now.

said last week.

according to the agency itself. That would leave the roughly 80,000 other union retirees whose pensions the agency now pays without their payouts.

The new legislation changes that. It calls for the Treasury to set up an $86 billion fund at the pension agency, using general revenues. The agency would be required to keep the money separate from the funds it uses for normal operations. It would use the new money to make grants to qualifying pension plans, allowing them to pay their retirees. The Congressional Budget Office estimated that 185 plans were likely to receive assistance, but as many as 336 might under certain circumstances.

pensions that were cut in a 2014 initiative that tried to revive troubled plans by trimming certain people’s pensions. The stimulus bills — there is a House version and a Senate version that have minor differences — call for the affected retirees to get whatever money was withheld over the past six years.

The legislation requires the troubled plans to keep their grant money in investment-grade bonds, and bars them from commingling it with their other resources. But beyond that, the bill would not change the funds’ investment strategies, which are widely seen as a cause of their trouble.

For decades, multiemployer pensions were said to be safe because the participating companies all backstopped each other. If one company went under, the others had to cover the orphaned retirees. Because they were considered so safe, multiemployer pensions never got much oversight.

While companies that run their pension plans solo must follow strict federal funding rules, multiemployer plans do not have to. Instead, the companies and unions hammer out their own funding rules in collective bargaining. Both sides want to keep the contributions low — the employers to reduce labor costs, and the unions to free up more money for current wages. As a result, many of the plans have gone for years promising benefits without setting aside enough money to pay for them.

In hopes of making up for the low contributions, the plans often invest unduly aggressively for their workers’ advancing age. In bear markets they lose a lot of money, and they can’t ask the employers to chip in more because the employers are often struggling themselves.

The new legislation does nothing to change that dynamic.

“These plans are uniquely unable to raise their contributions,” said Mr. Naughton, whose clients included multiemployer plans when he was a practicing actuary. “When things go well, the participants get the benefits. If things go badly, they turn to the government to make it work.”

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