2025 Insolvency for PBGC Multiemployer Program

Today the Pension Benefit Guaranty Corporation (PBGC) released its FY 2016 Projections Report, an annual actuarial evaluation forecasting the future financial condition of PBGC’s Single-Employer and Multiemployer Programs noting, among other things, that:

The risk of insolvency accumulates year by year, leaving the multiemployer program fund more likely than not to use up all of its assets by the end of fiscal year (FY) 2025. While the program covers only roughly one-quarter of private sector defined benefit pension participants, it continues to have deficits (i.e., negative net positions) much larger than those of the single-employer program. Those deficits are expected to grow, in nominal dollars, over time. (page 1)

Here are the other things  of note:

Over 100 of the multiemployer plans that PBGC insures, covering over 1 million participants, have declared that they will be unable to raise contributions sufficiently to avoid insolvency over the next 20 years. Multiemployer plans are, as a group, less well funded than single-employer plans. While most multiemployer plans are projected to remain solvent over the next 20 years, approximately one quarter of multiemployer plans are in critical status and will be unable to meet minimum funding requirements or remain solvent over the near term. Approximately one-third of these critical status plans are in critical and declining status and have disclosed they face insolvency in the next two decades. (page 1)

The current multiemployer system, covering approximately 10.5 million participants in about 1,350 plans, remains under severe stress. Multiemployer plans are collectively bargained plans that are maintained by one or more unions and multiple companies, generally in the same industry or as members of an association. (page 6)

Information on whether a critical and declining status plan will take action under MPRA to improve long term plan solvency by permanently reducing benefit promises to participants or apply for early financial assistance from PBGC is evolving. As of April 15, 2017, 15 plans had applied for approval to undertake benefit suspensions, of which also applied for partition. None of the applications was approved prior to September 30, 2016. One of the 15 applications for suspension was approved in January, 2017 and no plan had yet been approved for partition as of April 15th. (page 9)

This year’s projections continue to show it is more likely than not that the program will run out of money by the end of FY 2025. At the end of the 10-year projection period ending in 2026, PBGC’s multiemployer fund assets are depleted in over 70 percent of the simulations. Program risk continues to rise over time, exceeding 90 percent by 2029 and 99 percent by 2036. (page 10)

In 2016, PBGC’s single-employer program covered over 28 million participants in over 22,000 plans. (page 29)

The uncertainty in the future of PBGC’s single-employer program arises from questions we cannot now answer. These include not knowing which plans will fail, how much PBGC will owe participants as a result of these failures, how much PBGC will still owe people by FY 2026 (in outstanding benefits that remain beyond the 10-year projection period), what returns PBGC will realize on its assets, and how much PBGC will receive in premiums. (page 31)

5 responses to this post.

  1. Posted by bpaterson on August 4, 2017 at 3:00 pm

    this is horrible disaster waiting to implode and hurt a lot of workers. NJ and with most of the other states pension funding underwater, private sector funding shortfalls and the PBGC facing shortfalls from insurance revenues versus servicing costs also, how can we even assume the social security program to be clean of all this deterioration…especially with the baby boomer claims coming in droves for the next 10 years. The public sector certainly needs to be addressed and adjusted from the false promises as required and the private sector such as SS needs to face the spotlight of reality to figure where it truly stands. Ponzi schemes do not last forever.

    Reply

    • Posted by Anonymous on August 4, 2017 at 5:52 pm

      Nicely stated, but a major improvement in accuracy would be changing the words ………………………… “the false promises” to ………… “the fraudulent, self-dealing, and ludicrously excessive promises”.

      Reply

      • Posted by Anonymous on August 6, 2017 at 2:00 pm

        Anonymous to …Anonymous:

        Earth asked me to say your post is “all heat and no light”, whatever that means. Nor do I know why he couldn’t just post that himself?

        C’est la vie

        Reply

    • Posted by Earth on August 5, 2017 at 12:44 am

      Earth to bpaterson:

      “No matter how cynical you are, it’s not enough.”
      Lily Tomlin.

      You are thinking too small. Google “global pension crisis”

      “Look for the Union Label”

      Reply

    • Posted by Anonymous on August 5, 2017 at 7:32 pm

      Guess ‘they’ (the false phrophets) should be sued just like the GOP donor is doing over the failed Obamacare repeal/replace.

      Reply

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