The 2021 federal budget that President Donald Trump has proposed includes a measure that would improve the solvency of the Pension Benefit Guaranty Corporation (PBGC) by increasing the insurance premiums paid by underfunded multiemployer pension plans by $26 billion over 10 years.
The Department of Labor (DOL) says PBGC premiums are currently far lower than what private financial institutions would charge for insuring the same risk. If the premiums were increased, DOL says, PBGC would be able to fund the multiemployer program for the next 20 years.
DOL notes that the multiemployer program covers 10 million participants and is in dire financial condition. Its deficit in 2019 was $65.2 billion, with only $2.9 billion in assets and $68 billion in liabilities. If nothing is done to repair the program, it will become insolvent by the end of 2025, DOL says.
Currently, multiemployer plans are paying a flat rate of $30 per participant. The budget proposes creating a variable rate premium (VRP), as exists in the single-employer program, and an exit premium
The multiemployer VRP would require plans to pay an additional premium based on their level of underfunding, up to a cap that would be indexed to national average wages. An exit premium, equal to 10 times the VRP cap, would be assessed on employers that withdraw from a plan to compensate the insurance program for the additional risk imposed on it when employers leave the system and cease making plan contributions.
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