By Sean Forbes, via  BNA, Inc. Construction Labor Report

July 10, 2014 · Volume 60 Number 2973 — The Pension Benefit Guaranty Corporation's multiemployer pension termination insurance program stands a 90 percent chance of insolvency by fiscal year 2025, and may be depleted even sooner, the PBGC said in a fiscal year 2013 projections report released June 30.

“An important reason why this report is disturbing is because it looks like the population of severely distressed plans has grown,” Joshua Gotbaum, director of the PBGC, said during a media conference call June 30.

The agency made changes to the methodology it used in its FY 2013 annual report (59 CLR 1195, 11/21/13), to take into account the actual steps that already distressed multiemployer pension plans have taken in an attempt to strengthen their financial positions, and found that the future appears more dire than previously projected.

Thanks to improving economic conditions, most multiemployer pension plans are projected to remain solvent, but some distressed plans, covering about 10 percent of the 10.4 million people covered by multiemployer plans “remain critically underfunded and will not be able to further raise contributions or reduce benefits sufficiently to avoid insolvency,” the PBGC said in a statement.

In the agency's FY 2012 Exposure Report, actuarial projections indicated there was a 91 percent chance that the multiemployer program would be insolvent by 2032.

The PBGC report projects that the multiemployer program's FY 2013 deficit of $8.3 billion will widen, on average, to $49.6 billion by FY 2023.

“Part of the reason why that population is distressed is because they have exhausted those measures which they can do that are legally feasible,” Gotbaum said.

“If the failure of these severely distressed plans leads employers to have lack of confidence in currently healthy plans, then there could be contagion to other currently health plans,” he said.

The PBGC's other termination insurance program, covering single-employer plans, is in much better condition, the report said. The agency said an average of its simulations of the program's financial future put the deficit at $7.6 billion in FY 2023, down from $27.4 billion in FY 2013.

‘Significant Challenges' Cited
The leadership of the House Education & the Workforce Committee and its Health, Employment Labor, and Pensions Subcommittee said the report “confirms in stark detail the significant challenges confronting the multiemployer pension system.”

“The systemic crisis we face threatens countless workers, employers, and retirees, and could ultimately harm American taxpayers, as well,” the lawmakers said in a statement. “We have an obligation to advance reforms that will modernize the system, encourage employer participation, protect taxpayers, and offer new tools to help rescue troubled plans.”

The statement was issued by the chairman of the full committee, John Kline (R-Minn.), and the senior ranking member, George Miller (D-Calif.), as well as the chairman of the HELP subcommittee, Phil Roe (R-Tenn.), and its ranking member, John Tierney (D-Mass.).