Failure to address the multiemployer pension funding crisis is placing a heavy burden on active participants in those plans, according to a report released Wednesday.
The report Multiemployer Pension Plan Reform Policy Issues (June 2019) was prepared by Horizon Actuarial Services for the Mechanical Contractors Association of America and the United Association of Plumbers and Pipefitters, whose members sponsor 144 of the 770 construction industry multiemployer plans in the U.S., the most of any single industry and union group.
In a letter to congressional committee leaders submitted with the report, UA General President Mark McManus and MCAA President Brian Helm urged them to consider the impact on active as well as retired participants, and "to step up this year to enact balanced reforms that are in sight to achieve sustainability in the multiemployer system."
An estimated 4 million active participants are already bearing the burden of recent decreases in benefits and increases in contributions, according to the report.
Of the seven plans in the report, the value of benefits has declined significantly over time, ranging from 37% to 79% for participants who work from the 2010s to the 2040s, compared to participants who worked from the 1970s to the 2000s.
The study also shows that contributions have increased significantly, and faster than wage inflation. Employees who began working in the 2010s can expect to contribute anywhere from three to five times the amount contributed by employees who began in the 1970s, depending on the plan.
The monthly benefit as a percentage of contributions has also declined. Measured as a percentage of contributions, it ranged from 2.4% to 3.1% for retired participants, while participants who work from the current decade into the 2040s can expect to earn a monthly benefit as a percentage of contributions of 0.3% to 1.3%. For five of the plans, the monthly benefit has increased gradually, but for the other two plans, it has gone down.
The report notes that if reform proposals place an additional burden on active participants, they might seek other retirement arrangements, "which will further erode the system and diminish benefit security for current inactive vested participants, retirees and beneficiaries."
