More than half of multiemployer plan participants will have their benefits reduced if their plans become insolvent and rely on government guarantees in the near future, said a study released Wednesday by the Pension Benefit Guaranty Corp.
That compares to 21% of participants now in plans that have already run out of money and rely on PBGC guarantees.
The new study, which is the first such report on the agency's multiemployer plan guarantee program, looked only at currently insolvent plans and ones that are terminated and headed toward insolvency. It did not include another 64 multiemployer plans that are projected to become insolvent within 10 years.
Many of the plans headed toward insolvency or projected to do so within 10 years represent plans with larger populations or more generous benefits. “That by implication suggests that as the benefit amounts get bigger, the current level of the (PBGC) guarantee will cut a lot more participants and the cuts will be a lot higher,” said a PBGC official involved with the study who declined to be identified. “Future insolvencies are going to be generally less well protected than the current system.”
The study was largely compiled before The Multiemployer Pension Reform Act of 2014 was enacted in December. The new law allows some troubled multiemployer plans to adjust benefits to keep the plan solvent, as long as they remain above the PBGC guarantee level, but it did not change the amount of the PBGC guarantee, which is based on a plan's benefit accrual rate. “The guarantee itself is going to be less and less effective,” the official said.
The study did not factor in the agency's projection that the multiemployer program will run out of money itself within a decade. Figures released Wednesday by the Congressional Budget Office project that the PBGC multiemployer fund will be exhausted in 2024.