The window is closing on our last best chance to protect the pensions of 10 million American workers and retirees.
These workers are in multi-employer plans – traditional defined benefit pension plans jointly funded by groups of employers in industries like construction, trucking, mining and food retailing. Although many of the country’s 1,400 multi-employer plans are healthy, 1.5 million workers are in plans that are failing. And that threatens the broader system.
Losses during the crash of 2008-2009 left those plans badly underfunded. In many cases, the problems have been compounded by declining employment in their industries, which leaves sponsors with a growing proportion of retirees to current workers paying into the pensions funds
The plans are insured by the Pension Benefit Guarantee Corporation, the federally sponsored agency funded through insurance premiums paid by plan sponsors. But the level of PBGC protection for workers in multi-employer plans is – by design – much lower than for single-employer plans. Multi-employer plans historically have been stable, so policymakers set premiums,and benefits, at a lower level than for single-employer pension plans.
But the PBGC projects that about 200 plans will become insolvent over the next two decades. If it has to fund benefits for those plans, many beneficiaries will suffer. That’s because the maximum benefit for these retirees is much lower than for those in single-employer plans – it’s capped this year at $12,870 for a worker retiring at age 65, compared with $59,318 for workers in single-employer plans. PBGC estimates that multi-employer workers with 30 years or more of service would lose an average of $4,000 in annual benefits.
Policymakers, legislators, business and labor groups have debated the issue for two years. Now we’re at a key turning point, argues Josh Gotbaum, the PBGC’s director. “If Congress doesn’t act this year, it is very likely that major plans will fail and the multi-employer system will collapse,” he told me in a recent interview.