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Pension Funds

Cheiron finds 114 multiemployer plans heading to insolvency

As many as 114 multiemployer pension plans expect to become insolvent within the next 20 years, according to an analysis released Tuesday by actuarial consulting firm Cheiron.

The 114 plans have declared themselves to be in "critical and declining" status, a category created by the Multiemployer Pension Reform Act of 2014 to alert regulators to plans in worsening financial condition that expect to fail within 20 years. The 114 plans have total assets of $43.5 billion and liabilities of $79.9 billion, and represent 1.3 million participants.

Of the $36.4 billion in underfunding for all 114 plans, 62.6% comes from three plans: Teamsters Central States, Southeast & Southwest Areas Pension Fund, the Bakery & Confectionery Union and Industry International Pension Fund, and the United Mine Workers of America 1974 Pension Plan. The three plans together have $22.8 billion in unfunded liability and cover 603,000 participants.

Cheiron analysts looked at the latest annual financial reports filed by multiemployer pension plans with regulators showing the total universe, which covers filings for plan year 2015.

"It is the first real glimpse of how big the problem is. We are just trying to get a good picture of what we are up against," said Joshua Davis, a Cheiron principal consulting actuary who did the analysis.

Mr. Davis noted in an interview that 1,200 multiemployer pension funds are in better shape, and some of their trustees are "trying to put in procedures to make sure they never become part of the 114. A lot of plans are going to be around for a very long time," he said.

In addition to the 114 critical and declining plans, another 53 multiemployer pension funds are in even worse shape, because all contributing employers have withdrawn, which means the Pension Benefit Guaranty Corp. will have to step in with financial assistance, which it currently provides to 72 multiemployer plans.

"I think you're looking at over 200 plans, if nothing is done," Mr. Davis said.

A further risk comes from premium increases included in MPRA to help the PBGC with its own financial crisis, if they wind up hurting healthy plans and local economies all across the country, he warned. "If you do try to solve this just by premiums, it's going to hurt everyone," he said.