PBGC Reports to Congress on Multiemployer Pension Plans
The Pension Benefit Guaranty Corporation (PBGC) is the independent government agency that insures pension plans by guaranteeing a specified level of pension benefits when a plan terminates or become insolvent. PBGC recently reported to Congress on the status of multiemployer pension plans it insures.
In the first report, the PBGC evaluated whether the current PBGC premium levels will support the multiemployer benefits guaranteed by the PBGC. Under ERISA, this evaluation must be conducted every five years. The report indicated that current premiums will not support future benefit guarantees. The report predicted a 36% probability that the PBGC multiemployer pension insurance program will be insolvent by 2022, and a 91% chance of insolvency by 2032.
Another report, looked at the effects of the Pension Protection Act (PPA) of 2006 on multiemployer plans. The report found that the demographics of participant populations complicated the situation of multiemployer plans because many are experiencing a decline in the percentage of active employees for whom contributions are being made. The report also noted that there has been about 20% decline in the number of participants who are in plans that are in endangered, seriously endangered, or critical status under PPA. Consequently, the report noted that while many plans are slowly recovering, the long-term financial condition of multiemployer plans does not appear to have improved as substantially as the change in plans’ certified statuses might suggest.
A third report, indicated that while the PBGC is expected to collect $1.3 billion in premiums in the next decade, potential new obligations could increase by $37.6 billion.
For more information on these reports, please contact your Trust Fund counsel.
By Patricia Davis