Multiemployer pension programs are in dire shape, the director of the Pension Benefit Guaranty Corporation told a congressional panel Wednesday, with the plan having liabilities of $67.3 billion but assets of just $2.3 billion to cover them.
"Projections show that the program is likely to become insolvent by the end of 2025, absent changes in law," PBGC Director Thomas Reeder told the House Education and the Workforce Committee, according to prepared testimony provided to the Washington Examiner.
The news will increase pressure on Congress to bail out the funds with taxpayer money. Lawmakers, led by Democrats, have sought to do so in recent Congresses, but the efforts have gained little traction.
Multiemployer plans involve several companies and unions jointly managing a pension fund for all of the workers. The plans are favored by unions because they remain with the workers even if they switch jobs. However, they can be risky for businesses because if one employer goes bankrupt, the others are legally obligated to cover its contribution.
The PBGC is the federally-created entity charged with monitoring and protecting the plans. It is self-funded through premiums paid by the corporations whose plans it monitors. Its multiemployer pension program protects 10 million workers and retirees in about 1,400 plans.
Those plans have been troubled for years. Reports of the financial woes of some have prompted many companies to try to get out of the system. In 2006, the United Parcel Service paid $6.1 billion to pull out of the drastically underfunded Teamsters' Central States plan.
Reeder said the situation has become worse in the last year. Liabilities in 2016 in were $61 billion, meaning they have risen $6.3 billion in a single year. Only a minority of plans are in significant trouble, but those include some of the largest, including ones covering more than a million participants.
"Today, the ratio of active to inactive participants is at its lowest point ever: Among multiemployer plans, fewer than four out of every 10 covered participants is actively employed by a participating employer. In addition, downsized companies that remained in business contributed on fewer hours worked," he noted.
"In the coming years, the demand for financial assistance from PBGC will increase as more and larger multiemployer plans run out of money and need help to provide benefits at the guarantee level set by law."