The Pension Benefit Guaranty Corporation (PBGC) on Aug. 6 announced that its multiemployer insurance program continues to be in worsening financial shape, while its single-employer counterpart has exactly the opposite condition.
The PBGC, in its FY 2018 Projections Report, says that the multiemployer program remains on course to run dry by fiscal year (FY) 2025. Meanwhile, the PBGC says that its single-employer program will continue to improve on its already solvent condition.
“Absent changes in law, the financial condition of PBGC’s Multiemployer Insurance Program will continue to worsen over the next 10 years,” says the report. While the agency’s new projections for FY 2028 show a variety of possible financial outcomes, none show positive values and there is an average projected negative net position of approximately $90 billion in future dollars ($66 billion in today’s dollars).
Single Employer Program
The program emerged from a deficit and began to run a surplus a year earlier than the PBGC had anticipated in its 2017 study and report. And the good news just continues: the PBGC not only projects that the single employer program’s condition will continue to improve in the next decade, its expectation for the mean program’s net value position in FY 2028, $26.7 billion, is even better than what it had projected last year, to the tune of $6.6 billion more.
But Not Entirely All That it Seems
While the news is sobering for the multiemployer program to say the least, there is a glimmer of good news: the PBGC says that while insolvency is highly likely by FY 2025 and nearly certain by 2026, the potential risk of insolvency during FY 2024 is lower than it was projected to be in the 2017 study. And while the PBGC projects that the single-employer program will continue to be healthy, it also notes that the number of the plans it insures that are underfunded is lower than in the year before, but still is higher than any year before 2009.
The stakes are high: The multiemployer program provides coverage for more than 10 million people, and the single-employer program covers 26 million participants in 23,000 plans.
Absent action by the government, the PBGC says that approximately 125 multiemployer plans covering 1.4 million people will run out of money over the next 20 years. And if the multiemployer program runs out of money, says the PBGC, current law would require it to decrease guarantees to the amount that can be paid from Multiemployer Program premium income. And that, in turn, would result in cutting what it could guarantee to provide to those plan participants and beneficiaries to a fraction of current values.