Workforce
Federal Agency Sees Improved Picture for Multiemployer Pension Plans
Image Courtesy PBGC
The federal program that provides backstops for multiemployer pension plans for millions of construction workers showed a modest financial improvement from last year, but is in much better health than it was a few years ago, thanks largely to funding from the 2021 American Rescue Plan Act, according to a new report from the federal Pension Benefit Guaranty Corp.
PBGC said its multiemployer program covers about 1,360 defined-benefit pension plans, which have a total of approximately 11.2 million participants.
The agency said that based on 2019 data, more than 4 million individuals in the construction industry are participants in PBGC-insured multiemployer plans, 37.6% of the total and more than any other industry.
Construction also ranks first among industries in the number of PBGC-insured multiemployer plans, with 764, or 55.5% of the total. Multiemployer plans are common in construction's unionized sector.
PBGC oversees the multiemployer assistance program as well as a program for single-employer pension plans.
In its fiscal year 2022 Projections Report for both programs, released on Aug. 2, PBGC said that its multiemployer program is likely to stay solvent for more than 40 years. That compares with a pre-ARP forecast that the program would fall into insolvency in 2026.
The PBGC multiemployer program’s improved condition is tied to the improvements in the plans in the program, it notes.
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Gordon Hartogensis, PBGC’s director, said in a statement, “These projections clearly reflect the positive impact the ARP has made on the multiemployer pension system and on the pension security of millions of workers and retirees covered by troubled multiemployer plans.”
PBGC noted that after the 2008 financial crisis, many multiemployer plans were at risk of insolvency in the near term because of “severe underfunding.”
PBGC said that the main reason for the major turnaround over the past several years in the multiemployer plan category is the 2021 ARP’s Special Financial Assistance (SFA) program, which provides federal funds to bolster financially ailing multiemployer plans.
PBGC said that as through March 11, 2023, it had approved $45.8 billion in SFA to 41 plans. Of that, it says, $35.8 billion went to the Central States Teamsters Plan in January.
The assistance program applies to multiemployer plans that were in “critical and declining status” for pension plan years 2020 through 2022.
SFA funding allows troubled multiemployer plans to pay benefits to workers and retirees for many years without any reductions.
Projected Aid for Distressed Plans
To finance the SFA program, the legislation provides funding from the general Treasury. The law did not set a ceiling on the amount of total or annual funding.
But looking ahead, PBGC—which does a range of estimates for its report—says its mean estimate of projected SFA assistance is $79.7 billion, which would go to 211 multiemployer plans. That represents a decrease of $3 billion from the mean estimate in the 2021 Projections Report.
PBGC says one reason for the reduction is that most plans eligible for the SFA have submitted their applications or other information for the aid, giving the agency additional data that it can use in making its projections.
PBGC’s report also said that its single-employer pension program’s net financial position is expected to improve over the next 10 years.
Story updated on 8/4/2023 with additional information from PBGC.
