The Pension Benefit Guaranty Corp. says its financial help—and potential future exposure—to failing multi-employer pension funds has climbed. Multi-employer plans are common in construction's unionized sector, covering more than three million of the industry's workers and retirees.
PBGC, a federal agency that assists or takes over troubled pension plans, projects in its fiscal 2011 report that the number of insolvent multi-employer plans will more than double in five years.
In the report issued on Nov. 14, PBGC Director Josh Gotbaum said many multi-employer plans "are substantially underfunded; for some, the traditional remedies of increasing funding or reducing future benefit accruals won't be enough."
PBGC estimates its "reasonably possible" obligations to multi-employer-plan participants were $23 billion at the end of fiscal 2011, up from $20 billion a year earlier and $326 million in 2009. PBGC says the main reason for the increase in potential obligations to multi-employer plans is that two large plans were added to the "reasonably possible" inventory.
One of the plans, whose net liability is $5.4 billion, is in the agriculture, mining and construction category. The agency would not disclose that plan's name. The other plan has a $16.4-billion liability and is in the transportation, communications and utilities sector.
PBGC reports it provided $115 million in aid to 49 multi-employer plans in 2011, up from $97 million in aid to 50 plans in 2010. Because added plans failed, PBGC says its multi-employer-plan insurance program's deficit jumped to $2.8 billion in 2011 from a $1.4-billion shortfall in 2010.
PBGC's multi-employer program insures 1,450 pension plans covering 10.3 million workers and retirees. Construction workers and retirees account for 36.4% of those covered—the largest group in the program, according to 2009 data, the most recent to be published by PBGC.
PBGC's multi-employer program assists troubled plans by providing loans, which it says are "rarely repaid." In its much larger, single-employer pension program, PBGC takes over insolvent plans.