Cuts Ahead for Multiemployer Plan Benefits?
In coming years, more than half of workers and retirees in terminated multiemployer plans will face a reduction in benefits under current Pension Benefit Guaranty Corporation (PBGC) guarantees if their plans run out of money, according to a new study.
In the past, only about 20% of workers and retirees saw a reduction in their benefit. Typically that loss represented about 10% of their promised benefit, according to the PBGC. The agency’s Multiemployer Guarantee study
finds that these losses are likely to apply to more people and to be larger in percentage terms as more multiemployer plans run out of money and require financial assistance from the agency.
The study only looks at multiemployer plans. The PBGC notes that the guarantees for workers in single-employer plans are much larger than in multiemployer plans. The study also did not examine the reductions in guarantee levels that would occur if the multiemployer insurance program were to run out of money.
The multiemployer insurance fund is projected to exhaust its reserves within the coming decade, even with enactment of the Multiemployer Pension Reform Act of 2014, which provides certain troubled multiemployer plans with additional tools to avoid running out of money.
PBGC insures about 1,400 multiemployer plans covering more than 10 million people. The PBGC has previously stated
that plans covering more than 1 million participants are substantially underfunded and without legislative changes, many of those plans are likely to fail. The agency has noted that the program’s increased deficit is largely due to the expected insolvency of additional multiemployer plans in the next 10 years.