The Washington Post ran a scare story warning that the Pension Benefit Guaranty Corporation (PBGC) is “running out of cash” noting:
With roughly $2 billion in assets, the fund for multi-employer plans does not have enough money to pay benefits for the plans that are expected to become insolvent over the next decade.
The Central States fund alone, which pays about $2.8 billion in benefits each year and is the largest multi-employer plan in financial trouble, would overwhelm the multi-employer insurance program if it went under.
Yes, the Central States Pension Fund (CSPF) is likely to get PBGC money but two important facts and one speculation are omitted from the story since upon a PBGC takeover:
- CSPF retirees will NOT be getting $2.8 billion annually as PBGC limits the benefits it covers; and
- The PBGC WILL be getting all the remaining money ($15 billion?) in the CSPF plan so it will then have roughly $17 billion in assets.
- the people running these plans keep getting paid,
- the employers funding these plans keep making contributions, and
- the PBGC does not have to do (or farm out) a massive amount of work.
With the rejection of the CSPF application the MPRA is likely dead as, outside of the size, most other multiemployer plans would be similarly situated.
The solution: cut the benefits PBGC covers arbitrarily, raise PBGC premiums on ongoing plans arbitrarily, and locate another source of revenue, however arbitrary.
The trick: make it look like it’s not arbitrary.