Three reports by the Pension Benefit Guaranty Corp. on the financial health of multiemployer defined benefit pension plans are raising calls from Capitol Hill for possible reforms to prevent plan closings and increased PBGC deficits.
The reports were sent to Congress by the PBGC on Tuesday.
“The majority of multiemployer plans are recovering and will do fine,” PBGC Director Joshua Gotbaum said in a conference call Tuesday. “There is a minority that, absent changes, will not.”
One report looking at the effects of Pension Protection Act changes in 2006 on multiemployer plans found a 48% aggregate funding ratio as of plan year 2009, with active participants (39%) — for whom contributions are still being made by employers —outnumbered by non-active participants (61%). Of about 1,500 plans, 21%, or 319, were deemed in the critical “red zone,” indicating the plans face significant and immediate funding problems.
Another report, a five-year evaluation of PBGC multiemployer premiums and benefit guarantees, found that at current premium levels and economic conditions, there is a 35% probability that the PBGC multiemployer pension insurance program will be insolvent by 2022, and a 91% chance of insolvency by 2032.
The third, “exposure” report shows that while PBGC is expected to collect $1.3 billion in premiums in the next decade, potential new obligations could increase by $37.6 billion.
Mr. Gotbaum said his agency made no recommendations in the report.
Josh Shapiro, deputy executive director for research and education with the National Coordinating Committee for Multiemployer Plans, said his group will unveil a package of proposals to address issues of underfunding and inflexible rules that discourage participation in such plans. “It's high time for a fresh look,” Mr. Shapiro said in an interview.
NCCMP's figures on multiemployer plans' aggregate funded status differ from those of the PBGC, which uses assumptions based on costs to terminate plans, rather than long-term assumptions dictated by ERISA, Mr. Shapiro noted. His group estimates that the average multiemployer pension plan is currently about 75% funded.
The reports highlight bipartisan interest on the House Education and the Workforce Committee, where Chairman John Kline, R-Minn., said in a statement that members are “ready to work … on responsible reforms that will strengthen the multiemployer pension system. We have some difficult choices to make, but working together, I am confident we can get the job done.”
Ranking member George Miller, D-Calif., said: “Congress will have to come together to secure the multiemployer pensions system for the millions of current and future retirees, the businesses that contribute to these important plans, and taxpayers who provide the final backstop.”