The pension guaranty program for single-employer defined benefit plans is headed in the opposite direction of the multiemployer program, which faces a $53.4 billion deficit and insolvency by 2025, said two new reports released Friday by the Pension Benefit Guaranty Corp.
The Kline-Miller Multiemployer Pension Reform Act of 2014 required the PBGC to assess whether current premium levels would cover the next 10 and 20 years, and if not, what new premium levels would. In Friday's MPRA report, the agency said it would take premium increases ranging from 59% to 85% to avoid 10-year insolvency, and 363% to 552% to avoid 20-year insolvency, depending on a number of variables, including investment returns and how many plans need help. The report also acknowledged the need to avoid accelerating plans' insolvency by raising premiums too sharply, and called on Congress to give the PBGC authority to increase or decrease premiums depending on a plan's situation.
In a letter to House Speaker Paul Ryan, R-Wis., Labor Secretary Thomas Perez, the PBGC's board chairman, said, “We cannot afford to be complacent. … Nine years is a very short period in which to address a problem of this magnitude.” While the PBGC multiemployer guarantee is modest compared to single-employer plans, participants would get “only a tiny fraction of the benefit” if the program becomes insolvent, Mr. Perez said.
The single-employer program projections “show somewhat better prospects,” with the potential to reach a net surplus of $2.6 billion over the next 10 years, the PBGC said in its fiscal year 2015 projections report released Friday.
Both programs “are in significant net deficit positions, but the multiemployer program is far more serious,” PBGC Director W. Thomas Reeder Jr. said on a press call. “The single-employer program is likely, but not certain, to improve … These reports make it clear that more reform is needed in order to stabilize the multiemployer program.”
MPRA co-author Rep. John Kline, R-Minn., chairman of the House Committee on Education and the Workforce, said in a statement that the reports are “a reminder of the urgent need to enact additional reforms to strengthen multiemployer pensions, reforms that would modernize the system for workers and provide PBGC additional resources to meet its obligations.” Mr. Kline called on opponents of MPRA provisions allowing for benefit suspensions “to be honest about these challenges and put forward responsible solutions.”