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 Pension Update: Industry Letter to Congress

Source:  Email sent Aug. 13 by AGC’s Senior Director, Congressional Relations for Labor, HR and Safety James Young

As many of you know, Congress established the Joint Select Committee on Solvency of Multiemployer Pension Plans (JSC or “Committee”) to improve the solvency of multiemployer pension plans and the Pension Benefit Guaranty Corporation (PBGC). The Committee has a statutory deadline to present a legislative solution this fall. However, many details of any possible solutions can change depending on the outcome of the mid-term elections.

A concern to AGC is some members of the JSC have expanded their interest from finding a legislative solution involving a loan program for critical and declining plans to suggesting plans change discount rates from the long-term rate of return to a more conservative corporate bond rate or 30-year Treasury rates. Either change would pose many challenges to otherwise healthy plans by forcing them into red zone status, thereby requiring employer contributions to increase up to three times. None of that increase would translate to any increase in benefits for participants. There has also been discussion of massive PBGC premium increases.

Because of the threats the JSC pose to the current system, AGC—along with other construction employer associations—delivered a letter to Congress today that focuses entirely on construction employers. The letter outlines the case for composite plans; the case against investment assumption mandates (a real threat to plans viability); and the case for not raising premiums. In addition, it outlines the efforts contractors have taken for years to address funding issues and emphasizes that time is running out.  The letter also reminds everyone that both labor and key legislators agreed to actively pursue composite plans after enactment of the Multiemployer Pension Reform Act in 2014.

AGC remains fully committed to having Congress authorize the composite plan design, as outlined in the GROW Act. In addition, the association continues to play defense against bad ideas. The members of the JSC are listed below. AGC will be reaching out to Chapters and members represented by these committee members on how to engage with them between now and the election.

16 Members of Joint Select Committee on Solvency of Multiemployer Pension Plans
Senate GOP Members Senate DEM Members
Chairman Orrin Hatch (R-UT) Chairman Sherrod Brown (D-OH)
Lamar Alexander (R-TN) Joe Manchin (D-WV)
Rob Portman (R-OH) Heidi Heitkamp (D-ND)
Mike Crapo (R-ID) Tina Smith (D-MN)
House GOP Members House DEM Members
Rep. Virginia Foxx  (R-NC) Richard Neal (D-MA)
Phil Roe (R-TN) Bobby Scott (D-VA)
Vern Buchanan (R-FL) Donald Norcross (D-NJ)
David Schweikert (R-AZ) Debbie Dingell (D-MI)