I do not work on any multemployer plans as the actuary since, like government plans, it is a closed shop and there are only a few actuarial outfits that get all the work. But I did do one of these plans decades ago before the current collapse and bid to do another one before it’s own collapse. Over the years I have consulted for law firms representing employers in these plans, primarily on withdrawal liability calculations, and have studied their funding levels based on available 5500 data.
The multiemployer plan pension-cut bill about to be enacted makes sense if you consider:
- Employers in these plans, who are the source of its funding, have almost no say after they sign up. They often do not even know what other employers may be included in their plan as the Schedule R requires only employers that contribute more than 5% of total contributions to be disclosed.
- Funding rules, though stricter than government plans, still allow for discretion in selecting assumptions for funding which translates into a real underfunding crisis exacerbated by the nature of the contribution source (fixed dollar amounts based on active employee hours worked) that has been declining.
- Withdrawal Liability is a massive problem for employers who leave these plans (and an escalating source of funding for the plans themselves) as the cost of withdrawal may dwarf what they had been paying for what they believed was the cost of benefits for their employees.
- Fund employees, lawyers, actuaries, accountants, and investment advisers take money directly out of these plans that would be curbed with a Pension Benefit Guaranty Corporation (PBGC) takeover.
- There are already benefit protections and a federal guarantee from the PBGC. As I understand it a guarantee is incorporated in the new law wherein benefits cannot be cut to below 110% of the PBGC protected benefit.
- PBGC would take on a lot of liability if these plans all came to them and also a lot of work (calculating benefits for 10 million people is not something a government agency would necessarily be thrilled with doing).
With that as background it is easy to see the priorities behind this new law were to keep:
- paying those who have been running (and ruining) the system;
- PBGC out of it; and
- Employers paying – with a PBGC bailout presumably this source of funds would no longer exist.