"Over a million people participate in multiemployer pension plans that are expected to run out of money over the next 20 years," said Pension Benefit Guaranty Corporation (PBGC) Director Tom Reeder, in an announcement that the agency has started providing financial assistance to the Road Carriers Local 707 Pension Fund, a newly insolvent multiemployer pension plan based in Hempstead, New York.
The PBGC has been warning of trouble with its multiemployer program for years, and Reeder reiterated this in the announcement. "The insurance program for insolvent multiemployer plans is in dire financial condition and, absent reform, is likely to run out of money by 2025. I am committed to working with the Administration, Congress and other stakeholders to find solutions that stabilize multiemployer pension plans and make the pension insurance program one that people can rely on well into the future," he said.
For the past year, the 707 Fund has been unable to pay full benefits at the levels promised under the plan, and reduced retirees' benefits to levels that were supportable by available plan assets. However, starting February 1, 2017, benefits to retirees were cut back further to the PBGC guarantee limits set in law for insolvent multiemployer plans. The financial assistance will help pay the guaranteed portion of pension benefits earned by nearly 4,000 participants.
Like other financially troubled multiemployer plans, the poor financial condition of the 707 Fund is the result of several trends. They include a steady decline in the number of participating employers and aggregate employer contributions, increases in plan benefit levels that were not adequately funded, and investment losses suffered in the 2008-2009 financial crisis. The 707 Fund covers retired and current truck drivers represented by the Teamsters Local Union 707. NEXT: Retiree benefits cut drastically