Despite relief currently available (e.g., benefit reductions), several major multiemployer defined benefit plans are projected to become insolvent simultaneously with the Pension Benefit Guaranty Corporation (PBGC). The PBGC estimates that as many as 1.3 million participants with vested participants are at risk of not receiving promised benefits.
The Joint Select Committee on Solvency of Multiemployer Pension Plans was organized to propose legislation to address the crisis, but the committee’s term ended before it was able to do so. However, in 2019, two solutions were formalized and made public.
First, the Rehabilitation for Multiemployer Pensions Act of 2019 was introduced in summer 2019; it establishes a Pension Rehabilitation Administration within the Department of Treasury to extend loans to plans in either critical and declining status or insolvent and appropriates funds to the PBGC to cover the funding requirements. The bill passed in the House and is currently with the Senate. It was read for the second time on December 19, 2019 and placed on the Senate Legislative Calendar under General Orders, Calendar No. 390.
Second, on November 20, 2019, Senator Charles E. Grassley (R-IA) and Senator Lamar Alexander (R-TN) released an alternative legislative proposal: the Multiemployer Pension Recapitalization and Reform Plan (MPRRP). The white paper and technical explanation are open for comment and have not yet been presented as a legislative bill. The MPRRP proposes special partitions for eligible multiemployer plans, PBGC premium increases paid by multiemployer plans, new PBGC premiums payable by unions, participating employers and retirees, limitations to discount rates used by actuaries to value plan liabilities, increased PBGC guarantee levels, modifications to plan governance, and more. The proposal is extensive and complex, but the International Foundation of Employee Benefit Plans has summarized the details in digestible format, here.
As of 2018, 125 of 1,400 multiemployer plans insured by the PBGC were in critical and declining status yet the PBGC reports that “insolvency is a near certainty by the end of FY 2026.” Lawmakers, multiemployer plan trustees and administrators, and participating employers can work together to find a solution to stave off the looming crisis. It is likely that both solutions proposed during 2019 will necessitate modifications before either could become law. But, on behalf of at-risk participants, we can hope that amenable solutions can be agreed upon and enacted during 2020.