Steve Freese, President and CEO
Over the past four years of working on behalf of Wisconsin electric cooperatives in Washington, D.C., we have reinforced our belief that nothing that really matters ever comes easy. We have had a great deal of success in the past—including securing and maintaining funding for programs such as the RUS Electric Loan Program and Rural Economic Development Loans and Grants, among others. But we also had some significant issues in which success has been elusive.
Our latest round of lobbying has been one of our most challenging yet because we had to battle the dysfunction, distraction, and disagreements surrounding the impeachment efforts, so that our commonsense messages could be heard, and Congress would act. I have to be honest—because of the volatile environment, I wasn’t always certain what the outcome would be. But this time, our efforts were successful in protecting Wisconsin electric cooperatives’ ability to provide safe, reliable, and affordable electricity to members.
Pension risk assessment
Most Wisconsin electric cooperatives participate in the National Rural Electric Cooperative Association’s RS Pension plan. Unfortunately, the Pension Benefit Guarantee Corporation (PBGC) treated electric cooperatives as risky businesses and failed to recognize that pension plans like ours pose virtually no risk of default. As a result, our cooperative’s premiums were unfairly inflated.
More than 880 rural electric cooperatives participate in the fund, which covers more than 56,000 employees in 47 states, including the 1,279 who work here in Wisconsin.
The PBGC was treating the 880 electric cooperatives in this defined-benefit “multiple-employer” pension plan as if they could all simply go out of business the same day, which is not a fair or accurate risk factor. These PBGC rules treat us like single-employer for-profit companies, which we are not. As a result, the premiums Wisconsin electric cooperatives pay are 87 percent higher than they should be, creating a strain on our ability to maintain the benefit for our employees.
We successfully educated Congress, and as a result the bipartisan SECURE Act became law, which immediately and permanently reduces pension premiums of cooperatives to reflect the extremely low risk of co-ops ever defaulting on pension plan payments.
Tax-exempt status
The second issue is one we’ve been fighting since 2017, when Congress made major changes to the Internal Revenue Code to provide tax breaks for most Americans. This law unintentionally put electric cooperatives at risk of losing tax-exempt status.
One part of the law was designed to ensure for-profit companies are paying their fair share in relation to land or grants given by state and local governments, but it failed to protect not-for-profit tax-exempt organizations, such as most of America’s nearly 900 electric cooperatives.
Electric cooperatives must receive at least 85 percent of income from members, which was not a problem until the 2017 tax law change, which said state or federal grants for things like broadband expansion, or FEMA and state disaster fund storm recovery must be counted as non-member income. Additionally, grants for renewable energy development, economic development, energy efficiency and conservation, and rural broadband initiatives would likely go by the wayside.
However, Congress corrected this issue in the RURAL Act, and the president signed it into law.
Excise tax
The third issue we have worked for some time is the elimination of the 40 percent excise tax on certain health care benefits we provide for all our co-op employees. This tax was delayed multiple times and had most recently been set to take effect in 2022. We fought for permanent repeal, and finally succeeded. Recruiting employees in rural areas can be a challenge, and this Congressional action helps us so we can compete for talented employees and retain our current workforce.
It was a welcome surprise when all of these issues were covered in the spending bill that received bipartisan support and was signed into law by the president back in December. I am continually amazed by the persistence of our electric cooperative community that fuels the drive that enables us to cut through dysfunction in Washington, D.C. Thanks for all your help in this accomplishment.