Can PBGC Save Multiemployer Plans?

Multiemployer pension plans – defined benefit plans established through collectively bargained agreements between labor unions and two or more employers – have been weakened by two financial crises and a slow recovery from the recession. These plans also have very few active workers relative to retired and separated participants and a burden of orphaned workers from employers that have left the plans. Despite these challenges, the majority of troubled multiemployer plans have required the bargaining parties to negotiate higher contribution rates and some have cut the rate of future benefit accruals; these actions, combined with a strengthening economy, have improved their long-term financial position. But a number of plans, despite significant steps taken to address their funding problems, face the possibility of insolvency. These plans will require financial assistance from the Pension Benefit Guaranty Corporation (PBGC), the federal agency established under the Employee Retirement Income Security Act of 1974 (ERISA) to protect benefits of workers covered by insolvent plans. But the PBGC projects that its multiemployer program is highly likely to be insolvent itself within a decade. This brief, the third in a series of four on multiemployer plans, explores the role that the PBGC can play in addressing multiemployer plan insolvencies. The discussion proceeds as follows. The first section describes the nature of the PBGC program for multiemployer plans and how it differs from that for single employer plans. The second section summarizes PBGC activity to date. The third section presents the PBGC’s most recent projections of its multiemployer program’s finances. The fourth section explores various options that have been offered to address the PBGC’s impending funding crises and enhance its ability to assist severely weakened multiemployer plans. The final section concludes that the PBGC is unlikely to be able to meet the financial needs of severely underfunded plans, much less provide a reasonable level of guaranteed benefits.