Multiemployer Pension Plans Continue to Experience Shortfall
In an annual report by the Pension Benefit Guaranty Corporation (“PBGC”), the agency addressed the current state of multiemployer pension plans. According to the FY 2013 Projections Report, despite the stock market’s recent gains and an improving economy, multiemployer plans are rapidly deteriorating and labor union-sponsored plans have become underfunded. Facing a severe shortfall, the PBGC projects over a million of the 10.4 million workers in multiemployer plans could lose their benefits.
Responsible for covering benefits in failed pension plans, the PBGC guarantees the single-employer and multiemployer insurance programs. While the finances for 23,000 single-employer plans are expected to improve due to stock market gains and interest rate increases, 1,400 multiemployer plans are most likely to face budget cuts. Part of the reason behind the cuts is due to employers enduring the recession’s impact on their bottom line. Additionally, as single-employer plans recover from the recession, some multiemployer plans continue to struggle. Per the PBGC’s report, the majority of multiemployer plans will stay afloat, but others are so severely underfunded that slashing benefits will not be enough to prevent bankruptcy.
By the numbers, the report predicts the PBGC’s multiemployer program’s $8.3 billion deficit for fiscal 2013 will increase to $49.6 billion by fiscal 2023. Adding to the dire news, the multiemployer insurance fund has a 99 percent probability of going bankrupt by 2033. Conversely, single-employer plans will likely improve and lower their fiscal 2013 deficit ($27.4 billion) to the projected $7.6 billion by fiscal 2023.
As the PBGC continues to struggle with multiemployer pension plans, the insurance program’s fate could fall on Congress. The Senate Finance Committee is aware of the multiemployer plan’s financial situation, and will seek ways to properly address the matter before the PBGC is no longer able to guarantee benefits.