AMO seeks 'first responder' exemption from IRS pension rule
Editor's note - As this issue of American Maritime Officer went to press, the joint union-employer trustees of the defined benefit AMO Pension Plan and of the AMO Defined Contribution Plan were to consider various proposals to ease the difficulties resulting from the December 2009 suspension of the AMO Pension Plan as deficient under the federal Pension Protection Act of 2006. The decisions made in these trustee meetings will be reported to all deep-sea, Great Lakes and inland waters AMO members and their families as quickly as possible.
In a recent related development, AMO National President Paul Doell sent the following letter to Treasury Secretary Steven Mnuchin and to President Donald Trump. In this letter, Doell made a national security case for an exemption from an Internal Revenue Service rule governing retirement funds - an exemption that would result in greater retirement savings for active AMO members with at least 20 years of covered employment under the AMO Pension Plan.
The Department of the Treasury and its Internal Revenue Service have an immediate opportunity to blunt a direct and growing threat to U.S. national security through an emergency "first responder" exemption from Section 402 (c) (4) of the Internal Revenue Code for U.S. civilian seagoing professionals whose work is invaluable to U.S. Armed Forces worldwide.
The issue here is a perilous shortage of civilian American merchant mariners the Department of Defense relies on exclusively for shipping services in support of U.S. military personnel deployed overseas in a crisis. These merchant mariners staff fleets of cargo vessels owned by the U.S. Navy's Military Sealift Command and by the Maritime Administration in the U.S. Department of Transportation - ships standing by for immediate mobilization in wartime.
These mariners also work aboard active, privately owned and operated U.S.-flagged cargo ships serving commercial trade markets - ships that are available on demand to the Department of Defense for sustained supply and resupply of U.S. Armed Forces abroad during prolonged conflict. These ships and their civilian officer and crew complements delivered 95 percent of the critical cargoes to U.S. military personnel in Afghanistan and Iraq during the long-term response to the terrorist attacks upon the United States on September 11, 2001 - a mission that lasted some 14 years.
In an Executive Order on March 4, 2019, President Trump acknowledged this threat to defense shipping capabilities when he said: "A robust merchant marine is vital to the national and economic security of the United States. Credentialed United States merchant mariners support domestic and international trade, are critical for strategic defensive and offensive military sealift operations, and bring added expertise to federal vessel operations.
"Unfortunately, the United States faces a shortage of qualified merchant mariners," the President continued. "As our strategic competitors expand their global footprint, the United States must retain its ability to project and sustain forces globally. This capability requires a sufficient core of credentialed merchant mariners available to crew the necessary sealift fleet."
An August 2019 sealift readiness analysis commissioned from RAND Corp, in Santa Monica, California by the Office of the Chief of Naval Operations, made the same compelling point in its report to the CNO: "There is a national shortage of qualified personnel that directly affects the ability to man the surge sealift fleet - mariner manning may be sufficient for initial activation, but activation crews may have long waits for replacement crews."
The uniform national response to this grim reality focuses appropriately on maritime policy through legislation to expand the U.S. merchant fleet and add to the jobs this fleet provides. The President's March 4 Executive Order compliments this effort by easing the transition of qualified men and women from military service to rewarding jobs at sea in the private sector.
However, we believe a Section 402 (c) (4) exemption would slow the troubling decline of the available maritime industry workforce considerably until broader Congressional and administrative measures are in place.
As the principal source of U.S. Coast Guard-licensed U.S. merchant marine officers qualified for defense shipping services, American Maritime Officers is concerned that a significant retirement security issue within our ranks could force many of the highly skilled, loyal, dependable and accomplished marine engineers and deck officers we represent to leave the American shipping industry early for work ashore. This would exacerbate a defense dilemma confronted each day by U.S. Transportation Command in the Department of Defense and by the Maritime Administration.
Our specific difficulty rests with the defined benefit American Maritime Officers Pension Plan, which was suspended as deficient under the 2006 Pension Protection Act in December 2009. Earned monthly retirement benefits remain at the level calculated at that point nearly 10 years ago.
The American Maritime Officers Pension Plan did not suffer insolvency, but it struggled through endangered and critical status as defined by the Pension Protection Act until the end of its fiscal year on September 30, 2018, when the Plan's actuarial consultants reported the Plan's funding status at 82.3 percent.
Having endured 10 years of nagging uncertainty, many of the ships' officers we represent doubt that they will ever receive the benefits they earned during many years in military support and economic services. Many of these officers are considering alternative career options ashore, where secure, comfortable retirement is for them a much brighter prospect.
We believe the modest Section 402 (c) (4) exemption we seek would encourage these vessel officers to remain in their jobs at sea and continue to be available for defense shipping assignments when the alarm sounds.
Under this exemption, active vested American Maritime Officers Pension Plan participants with 20 years or more of sea service in the U.S. merchant fleet would have the option of collecting all or portions of their earned but dormant monthly benefits from the Plan while continuing to work aboard ship.
These vested benefits would be rolled over directly to the vessel officers' separate, individual AMO Pension Plan Money Purchase Benefit defined contribution retirement savings accounts, where these benefit amounts would increase through return on investment.
Upon actual withdrawal from the shipping industry at age 65 or older, these officers would receive their American Maritime Officers Pension Plan benefits directly each month, instead of through rollover to their Money Purchase Benefit accounts.
Our proposed Section 402 (c) (4) exemption would serve legitimate and lasting national security interests by helping to ensure a sufficient number of licensed civilian seagoing personnel able and willing to serve in military contingencies.
The risk is real - in a one-front conflict, the maritime manpower shortage would limit U.S. mobilization capability and impair long-term U.S. troop supply strategy; in a two-front emergency, the U.S. would be paralyzed at the domestic shorelines.
Given the urgency of the situation outlined here, I ask respectfully that the Internal Revenue Service give all due, timely consideration to our request for a Section 402 (c) (4) exemption. I will answer any questions you may have during deliberations, and I can provide you with additional supporting documents as you may require.
Thank you for your time and attention.