Multiemployer Projections Show Need for Program Changes

Absent changes in law, the financial condition of PBGC’s Multiemployer Insurance Program will continue to worsen over the next 10 years. About 125 multiemployer plans covering 1.4 million people are expected to run out of money over the next 20 years. More and larger claims on the Multiemployer Program over the next few years will deplete program assets and lead to the program’s insolvency by the end of FY 2025.

Projections for FY 2028 show a wide range of potential outcomes, with an average projected negative net position of about $90 billion in future dollars ($66 billion in today’s dollars).

If the Multiemployer Program were to run out of money, current law would require PBGC to decrease guarantees to the amount that can be paid from Multiemployer Program premium income. This would result in reducing guarantees to a fraction of current values. PBGC’s guarantee is the amount of retirement benefits that PBGC insures for each participant, which is capped by law.

The President’s FY 2020 Budget contains a proposal to shore up PBGC’s Multiemployer Program. The budget proposes to create a new variable rate premium and an exit premium for the Multiemployer Program. It would raise an additional $18 billion in premium revenue over the 10-year budget window. The proposal includes a provision allowing for a waiver of the additional premium if needed to avoid increasing the insolvency risk of the most troubled plans.

AGC of America is working to make Congress aware of this problem and proposing solutions.

Contact ICI’s Director of Labor Relations George Sheraw (317) 634-7547 with questions about PBGC’s Multiemployer Program.

AGC Composite Pension Plan Update

Source: Stephen Sandherr, AGC of America

Recently, AGC participated in a media rollout of the Give Retirement Options to Workers (GROW) Act with the future bill sponsors, the NCCMP and NABTU. The GROW Act is more commonly known as composite plans and has long been an AGC priority. Below are several media stories:

Sandherr/McGarvey OpEd The time is now to ensure multiemployer pension plan security, January 9, 2018 The Hill
Bill Meant to Stabilize Union Pensions on Way in House January 9, 2018 BNA (subscription required)
Lawmakers Working to Overhaul Pension Rules, January 9, 2018 The Washington Free Beacon
Roe, Norcross Unveil Bipartisan Plan to Give Retirement Options to Workers, January 9, 2018 Press Release
The legislation could be formally introduced soon and AGC is calling on members to send letters of support to their legislators by the AGC Legislative Action Center.

Additional Background:

AGC continues to work with Congress, the Building Trades and other stakeholders in the authorization of composite plans. AGC has long viewed the plan design as being comprised of the best features of defined benefit plans and defined contribution plans. These composite plans would offer voluntary options to share risks to provide funding stability, provide lifetime income to participants and limit employer obligations to negotiated contributions only.

Composite plans were was initially proposed in the NCCMPs Solutions not Bailouts but were not included in the Multiemployer Pension Reform Act of 2014 (MPRA). Since that time AGC has led efforts to advance composite plans.

Efforts are also underway to refine proposals to save distressed plans where MPRA is not an option (including but not limited to Central States). We are working to provide credible and realistic solutions to the solvency problems of these plans which will not increase the long-term financial exposure for non-distressed plans in the multiemployer system.

More information can be found on the campaign website: Save Our Futures

Two-Pool Withdrawal Liability

Source: Pension Benefit Guaranty Corporation (PBGC)

The Pension Benefit Guaranty Corporation is publishing a request for information (RFI) in the Federal Register seeking input on proposed “two-pool” alternative withdrawal liability arrangements. These arrangements involve an alternative method for measuring the withdrawal liability amount and the annual payment amount that an employer would owe the plan. PBGC wants input from the general public and all interested stakeholders, including multiemployer plan participants and beneficiaries, plan sponsors, and employers on these types of actions. For more information, visit: Request for Information: Two Pool Withdrawal Liability. To read the full request for information and provide input, please visit Requests for Approving Certain Alternative Methods for Computing Withdrawal Liability; Settlement of Withdrawal and Mass Withdrawal Liability.

Pension Benefit Guaranty Corporation Annual Report Shows Deficit

Source: Pension Benefit Guaranty Corporation (PBGC)

PBGC Fiscal Year 2016 Annual Report Shows Increasing Deficit in Multiemployer Program

WASHINGTON – The Pension Benefit Guaranty Corporation today released its Fiscal Year 2016 Annual Report showing the deficit in its multiemployer insurance program rose to $58.8 billion. The increase was driven by additional multiemployer plans that are expected to run out of money within the next 10 years, and by decreases in interest factors used to value PBGC’s liabilities.

PBGC’s single-employer insurance program showed improvement; its deficit narrowed from $24.1 billion, at the end of FY 2015, to $20.6 billion at the end of FY 2016. This was primarily due to investment and premium income and a low level of plan terminations during the year.

“The improvement in the financial condition of the single-employer program is a welcome result. However, it is clear that more reform is needed to stabilize multiemployer pension plans and to extend the solvency of PBGC’s multiemployer program,” said PBGC Director Tom Reeder. “First and foremost, we need to protect the promises that have already been made to workers and retirees. We are committed to working with Congress on long-term solutions that include increasing multiemployer premium revenues and reforming the premium structure.”

PBGC’s mission is to enhance retirement security by preserving pension plans and protecting participants’ benefits. PBGC protects the pension benefits of nearly 40 million Americans in private-sector pension plans and PBGC is already responsible for the benefits of about 1.5 million people in failed plans who otherwise may have lost their pensions. The agency operates two separate insurance programs: one that covers single-employer plans, and another that insures multiemployer plans. By law, the two insurance programs are operated and financed separately.

Multiemployer Program Deficit Rises to $58.8 Billion

As of September 30, 2016, PBGC’s multiemployer program had liabilities of $61.0 billion and assets of only $2.2 billion, resulting in a negative net position or “deficit” of $58.8 billion, up from $52.3 billion a year earlier. During FY 2016, PBGC provided $113 million in financial assistance to 65 insolvent multiemployer plans, an increase from the previous year of $103 million paid to 57 plans. PBGC’s obligations to provide financial assistance will increase dramatically in the coming years, when more and larger multiemployer plans run out of money and require PBGC assistance to provide benefits at the guarantee level set by law.

PBGC’s multiemployer program income is very small relative to its deficit, and to the increase in its liabilities during FY 2016.  Income for the multiemployer program totaled $425 million, comprised of $282 million in premium revenue and $143 million in investment income.  In contrast, multiemployer program liabilities increased by $6.8 billion. This was primarily due to a drop in interest factors used to measure the value of PBGC’s future financial assistance payments, and the identification of 11 additional multiemployer plans that terminated or are projected to run out of money within the next 10 years.

In the most recent Projections Report, PBGC estimated that its multiemployer program is likely to run out of  money by the end of 2025, and that there is considerable risk that it could run out before then. If the multiemployer insurance program becomes insolvent, PBGC will only be able to provide enough financial assistance to pay a small fraction of guaranteed benefits in insolvent plans.

Single-employer Program Deficit Shrinks to $20.6 Billion

As of September 30, 2016, PBGC’s single-employer program had liabilities of $117.9 billion and assets of $97.3 billion, resulting in a negative net position or “deficit” of $20.6 billion. In FY 2016, the agency paid $5.7 billion in benefits to nearly 840,000 retirees from more than 4,700 failed single-employer plans. The figures are up slightly from $5.6 billion paid to about 826,000 retirees during the previous year.

During FY 2016, PBGC assumed responsibility for more than 46,000 additional people in 76 trusteed single-employer plans. As in recent years, however, PBGC did not incur any large losses from completed or probable plan terminations.

Customer Satisfaction

Providing excellent customer service is among PBGC’s top priorities. Each year, many retirees served by PBGC consistently rank the agency among the best in the public and private sectors. In FY 2016, PBGC scored 90 out of 100 among retirees on the American Customer Satisfaction Index.

About PBGC’s FY 2016 Financial Report

PBGC’s financial statements are prepared in accordance with generally accepted accounting principles in the U.S. For FY 2016 PBGC received an unmodified audit opinion on its financial statements as well as an unqualified audit opinion on internal control over financial reporting. CliftonLarsonAllen LLP performed the audit under contract with PBGC’s Office of Inspector General, which oversaw the audit.

About PBGC

PBGC protects the pension benefits of nearly 40 million Americans in private-sector pension plans. The agency is currently responsible for the benefits of about 1.5 million people in failed pension plans. PBGC receives no taxpayer dollars. Its operations are financed by insurance premiums, investment income, and with assets and recoveries from failed single-employer plans. For more information, visit PBGC.gov.

ConstructorCast Episode Explores Multiemployer Pension Reform

Go in depth on the troubles facing multiemployer pension plans, what’s being done to address the growing problems and what it means for the construction industry and the economy at large on the latest episode of the ConstructorCast. In this episode James Young, AGC’s Director of Congressional Relations for Labor, HR and Safety, offers the full story on where reform might be headed and how government can help develop long-term solutions.

DOWNLOAD THE PODCAST HERE

 

Industry reaction to Central States Pension Fund rescue plan refusal

Many ICI members are signatory to Teamsters agreements and contribute to its pension fund. The fund filed to reduce benefits so that it could avoid insolvency, but the U.S. Treasury has refused to accept the rescue plan. Read more from AGC here.

Here is the Department of the Treasury’s letter to Congress.
Here is the Department of the Treasury’s letter to the Central States, Southeast and Southwest Areas Pension Plan.

The Department of the Treasury Internal Revenue Service recently published its final rule on the Suspension of Benefits Under the Multiemployer Pension Reform Act of 2014, and it can be found here.