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Multiemployer Plans Face Threat of Insolvency, CRS Warns

A report by the Congressional Research Service (CRS) says that although most multiemployer defined benefit plans have resources sufficient to pay promised benefits, a few large plans are expected to become insolvent in the next 20 years.

The report, “Multiemployer Defined Benefit (DB) Pension Plans: A Primer and Analysis of Policy Options,” also contains pointed warnings about the dangers of insolvency and failure of safety nets intended to cover those in troubled plans. That would affect a significant number of people, the report says, noting that multiemployer DB plans cover as many as 25% of all defined benefit plan participants.

The Pension Benefit Guaranty Corporation (PBGC) has sufficient resources to make loans to smaller multiemployer DB plans, the CRS says. But the report also contains sobering assessments about the PBGC’s ability to aid multiemployer plans in the future. It warns that failure to add to the PBGC’s financial resources puts participants in insolvent multiemployer DB pension plans at risk of not receiving all of the benefits guaranteed by PBGC. The report notes that in June 2014, the PBGC indicated that the multiemployer insurance program is highly likely to become insolvent by 2025. If a large number of multiemployer DB plans became insolvent, the CRS report says, it likely would put a “substantial strain” on that program.