PBGC multiemployer program could run out of money by 2025
The Pension Benefit Guaranty Corporation’s multiemployer program is facing some serious challenges in the future and could run out of money by the end of fiscal year 2025, according to the PBGC’s 2017 annual report.
The multiemployer program — which covers pension plans created through a collective bargaining agreement between employers and a union, usually providing benefits for people in the same industry, like construction or transportation — is running at a $65.1 billion deficit compared to 2016’s $58.8 billion deficit.
“Restoring the program to long-term solvency requires congressional action,” according to the annual report. “PBGC works with troubled multiemployer plans to protect participants’ benefits and extend their plans’ solvency.”
The PBGC monitors multiemployer plan termination filings and plan merger notifications. It also monitors all multiemployer plans that request or receive financial assistance.
In fiscal year 2017, the PBGC began providing financial assistance to seven newly insolvent multiemployer plans covering about 13,900 participants. It also performed 10 audits of plans that cover more than 9,000 people and identified 82 findings.
“The chief objectives of these audits are to ensure timely and accurate payment of benefits to all plan participants, compliance with laws and regulations and effective and efficient management of the assets remaining in terminated plans,” according to the report.
In 2017, PBGC paid $141 million in financial assistance to 72 multiemployer pension plans covering 63,000 retirees and an additional 30,000 people who are entitled to benefits upon retirement.
The single-employer program also is running a deficit of $10.9 billion, down from $20.6 billion in 2016.
The organization took over responsibility for 23,000 people in 82 single-employer plans and started paying benefits to nearly 14,000 retirees in these types of plans. It paid $5.7 billion to nearly 840,000 retirees from 4,845 failed single-employer plans in 2017.
The multiemployer program protects more than 10 million workers and retirees in about 1,400 pension plans; and the single-employer program protects about 30 million workers and retirees in about 22,500 pension plans, according to the PBGC annual report.
The PBGC acknowledged that the single-employer program is on track for a surplus in coming years, but the multiemployer program could run out of money.
The PBGC is financed by insurance premiums set by Congress and paid by companies that sponsor defined benefit pension plans, along with investment income, assets from pension plans trusteed by PBGC and recoveries from the companies formerly responsible for the plans, the report stated. The PBGC doesn’t receive taxpayer dollars.
In 2017, the organization collected $7.2 billion in cash receipts, $6.9 billion of that from single-employer program.