A Pension Benefit Guaranty Corporation (PBGC) study finds that more than half of the people in terminated multiemployer plans that run out of money in the near future face a reduction in benefits under current PBGC guarantees. This compares to 20% of workers and retirees who saw reduced benefits under plans that have already run out of money and are relying on PBGC financial assistance.
The study, PBGC’s Multiemployer Guarantee, also looks at the depth of benefit reductions. For retirees and workers whose benefits were not fully guaranteed in the past, a typical loss was about 10% of the promised pension benefit. These reductions are likely to become deeper and more frequent for retirees and workers in plans that require PBGC assistance in the future.
Unlike the program for single-employer plans, PBGC does not take over failed multiemployer plans. Instead the agency provides ongoing financial assistance to insolvent plans, which enables them to pay guaranteed benefits. The amount of the guarantee is set by law.
The PBGC notes that its study was largely compiled before the enactment of The Multiemployer Pension Reform Act of 2014 (MPRA) legislation, which provides certain troubled multiemployer plans with additional tools to change benefits while keeping benefits above the PBGC guarantee amount, if doing so would maintain plan solvency. MPRA is expected to help some plans avoid running out of money, but, except with respect to pre-retirement survivor benefits, the legislation did not change the PBGC guarantee. Thus the findings of its study are not affected.
The agency reviewed guaranteed benefit payments of more than half of the nearly 152,000 workers and retirees in currently insolvent plans and terminated plans that are expected to need financial assistance in the future, including about 80% of retirees and workers in plans currently receiving assistance. PBGC also analyzed data for about 25% of retirees and workers in plans that have already terminated and are expected to require assistance in the future.
The study does not take into account reductions in guarantee levels that would occur if the multiemployer insurance program were to run out of money. PBGC has projected that its multiemployer guarantee fund is likely to run out of money within the coming decade, even with the changes in the Multiemployer Pension Reform Act of 2014 (MPRA).