Updated with correction
Only one struggling multiemployer pension fund has landed on the doorstep of the Pension Benefit Guaranty Corp. so far after failing to win Treasury Department approval to reduce benefits, but the agency's dire financial condition has officials predicting painful cuts for more than 1 million multiemployer plan participants projected to need its help.
When the Multiemployer Pension Reform Act was passed in 2014 to allow trustees of deeply underfunded pension funds to reduce benefits even for current retirees, the hope was that the cuts though unpleasant, would be better than the alternative of plan insolvency, which would hurt every participant and add to the PBGC's already-taxed multiemployer program.
It hasn't turned out that way yet, with only one applicant approved by the Treasury Department to reduce benefits under MPRA — the Iron Workers Local 17 Pension Fund, Cleveland, with $86.9 million in assets and $221.8 million in liabilities as of April 30, 2015. Another four applications were denied and three more were withdrawn due to dim prospects. Those denied — like the 270,000-participant Teamsters Central States, Southeast & Southwest Areas Pension Fund, Rosemont, Ill., which is projected to become insolvent in 2026 — will need the PBGC once their assets are gone.
That has PBGC officials bracing for what they say will be a catastrophe that will sink the multiemployer program, which is projected to be insolvent by 2025. With $2 billion in assets to $60 billion in liabilities currently, it is only 3% funded.