Multiemployer Pension Plans: Current Status and Future Trends

The Center for Retirement Research at Boston College released a special report that provides a good overview of the current status of multiemployer (union) plans. Excerpts follow which include some interesting charts that the authors developed mostly from 5500 data:

Negative cash flow is not a problem if a plan is fully funded and drawing down its accumulated assets to pay benefits. In that case, liabilities decline in step with assets, and the plan remains fully funded. However, if a plan is not fully funded – like many multiemployer plans today – a large negative cash flow causes assets to decline faster than liabilities. This dynamic is hasten ed by the fact that the gap between benefits and contributions tends to rise over time for mature plans. As a result, the plan falls into a downward spiral and assets are depleted before all promised benefits are paid. Large negative cash flow rates are a serious problem for two well -known plans facing insolvency: the Central States Teamsters and the United Mine Workers. In each case, cash flow is at or below – 13 percent. That means they are digging into assets each year to pay benefits and are projected to exhaust their assets within the next 10 years. (page 20)
After considering options for filling the hole, the question then becomes who should pay for these initiatives. In the end, only three parties are available to bear the burden: 1) taxpayers –
primarily through propping up the PBGC; 2) employers – through some form of increased contributions or increased PBGC premiums; and 3) plan participants – through some sort of
benefit reductions. Currently, the PBGC does not have the resources to serve as a safety net for these plans. (page 35)
The hole for “critical and declining” plans is $76 billion, based on the current view of funding that uses the market value of assets and values liabilities using a four-year average yield on 30-
year Treasuries for the discount rate. Of this amount, about $45 billion is for plans that have already applied to the Treasury requesting the ability to cut accrued benefits for plan participants. For all plans in the red zone, both “critical” and “critical and declining,” the hole is $187 billion. And, for all multiemployer plans, the hole is $553 billion. Most multiemployer plans have taken remedial action and have put themselves on a sustainable path. However, the “critical and declining” plans face large negative cash flows and a potential death spiral. (page 58)

17 responses to this post.

  1. Posted by skip3house on December 3, 2017 at 10:30 am

    What happened about 20 years ago? Did political needs trump honest actuary figures, or a combination of these……….?


    • Posted by S Moderation on December 3, 2017 at 11:28 am

      Twenty years ago, tax deductibility?

      This is what Munnell says…

      “Multiemployer plans thrived during the 1980s and 1990s; the stock market soared,
      participants had plenty of work, and employers were making good profits. By the late 1990s, many plans were fully funded. In this environment, unions were concerned that employers would stop contributing to the plans due to limits on the tax deductibility of employer contributions to fully funded pension plans. They were wary of interrupting the flow of contributions, because restarting contributions when markets cooled would require reducing other components of compensation.
      To ensure that contributions remained tax deductible for employers, plans offset the increased funded levels by repeatedly increasing benefits. The good times ended with the bursting of the dot-com bubble in 2000. All pension plans were hurt, but the collapse of stock prices was particularly painful for multiemployer plans, which – with many retirees and declining numbers of active participants – had been living off investment returns. As the returns turned negative, funded levels plummeted.”


      • Posted by Tough Love on December 3, 2017 at 12:30 pm

        Baloney. Other than for single-employee (ERISA-governed) DB Plans have essentially been a PONZI-scheme.

        Even though Mulit-employer plans are PBGC-insured and are Gov’t regulated, the structure allowed a union/Employer “negotiated ” contribution instead of a proper actuarial calculation and contribution.

        And the problems with State & Local PUBLIC Sector Plans are even worse because not only do these Govt’s NOT have to follow any contribution requirements, but the benefits are so ludicrously excessive (as a result of the Union/Elected-Official collusion) that they couldn’t be afforded even if there WAS the will to fund them.


      • Posted by S Moderation on December 3, 2017 at 3:01 pm

        What I meant to say was… “Mulit-employer plans” are a PONZI-scheme.

        What does Alicia Munnell know?


      • The tax deductability argument is a lie. The pension plans had full control of the expected rate of return. What they should have done, when the stock market bubbled up above its long-term values, was reduced the assumed rate of return going forward.

        The Harvey Weinsteins of that generation raped the young sexually, but the whole generation has raped the young economically.


    • Posted by S Moderation on December 3, 2017 at 12:20 pm

      Blame the unions? Sure, the unions are self interested, like everyone else, but I frankly don’t think they are smart enough to see this far into the future to twist things around so they can ultimately (maybe) get a taxpayer bailout. That goes for public and private unions. These things that Munnell sees as the “causes” of the mess today are with 20/20 hindsight, and you can probably find another expert with an entirely different set of reasons. As we all should know by now, PUBLIC sector unions are a CANCER upon society. Private sector unions are OK (now) because they have already been zapped or chemo-ed into remission.

      How we got here. Multi-employer plans…

      Page 6… Financial Markets

      Page 10… Increasing Percentage of Inactive to Total Members.

      Page 13… Inadequate Withdrawal Liabilities and Orphan Workers.

      Page 14… Cyclical Nature of Construction.


      • Retroactive pension increases for, and smaller pension contributions by, older generations.

        Lied about and hidden for years.

        Employers fleeing these plans and unions to dump the burden on someone else.

        “Someone else,” if that’s the average taxpayer under 60, is worse off.


  2. Posted by skip3house on December 3, 2017 at 10:56 am

    …..Will future taxpayers honor our debts in Pensions/SS/National $21T debt/…..? as we treat Civil War monuments now?


  3. Posted by Anonymous on December 3, 2017 at 9:14 pm

    Much to my delight something funny happened this evening. As I was observing the super moon a psdrone crashed and burned.


    • Posted by PS Drone on December 4, 2017 at 9:42 pm

      I think there will be an awful lot of “psdrones” crashing and burning when these pension funds run dry. Personally, I cannot wait. No more “Battalion Chief” $200K pensions being paid.


  4. So how much should those in later-born generations, who didn’t get pensions and might not get Social Security either after Generation Greed bankrupts the government.

    Sacrifice in addition to ensure that Trump-voting, tax cut demanding older generations, that were better off at each point in the lives at the expense of those coming after, get the full pensions they promised themselves?

    Add money to the national debt, but not pay anything off until Generation Greed is gone? Cut Social Securing and Medicare for those born after 1957, and use some of the savings for the PBGC? How about saving money on Social Security and Medicare by having more Americans in later-born generations die before becoming old enough to qualify, either by raising the age again or by making sure they can’t afford to get health care before reaching it?


    • Posted by Tough Love on December 4, 2017 at 2:00 pm


      Of course you are correct with respect to “generation greed”, but there are MANY younger and mid-career PUBLIC Sector workers that continue to accrue pensions and retiree healthcare benefits that are equal or more egregious to many of those to which you refer (which are associated with older non-Public Sector workers).

      An end to this THEFT (these ludicrously excessive pension/benefit accruals) from PRIVATE Sector taxpayers by the insatiably greedy Public Sector Unions/Workers and enabled by our self-interested Elected Officials is AT LEAST AS IMPORTANT (and in my opinion MORE IMPORTANT) that many of the other issues you bring up re OLDER Americans.


    • Posted by Anonymous on December 4, 2017 at 3:23 pm

      What a joke 1957, did you pick that number out of your toilet or were you born on 56.


      • Based on those who hit age 16 in 1973, the year median male wages peaked in this country, and graduated college before the 1980s.


        • Posted by Anonymous on December 4, 2017 at 4:34 pm

          So how do you conclude their benefit cuts are justified. Especially at the expense of tax cuts for the top 1% and corporations who clearly have a recent track record of hoarding profits for executives.


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