Multiemployer Insurance Program Fact Sheet
The Pension Benefit Guaranty Corporation (PBGC) safeguards the retirement income of about 10 million workers and retirees in about 1,500 multiemployer defined benefit pension plans. These workers are among the more than 40 million whose pensions are protected under the Employee Retirement Income Security Act (ERISA).
A multiemployer plan is a collectively bargained pension arrangement involving unrelated employers, usually in a common industry, such as construction, trucking, textiles, or coal mining. This contrasts to a single-employer plan, which may be sponsored by either one employer (pursuant or not pursuant to a collective bargaining agreement) or by several unrelated employers (but not pursuant to a collective bargaining agreement). A defined benefit plan provides a specified monthly benefit at retirement. In many multiemployer plans, the participant's benefit is based on a flat dollar amount for each year of service.
PBGC's insurance programs were created as part of ERISA in 1974 to assure retirees pension benefit protection. In 1980 Congress enacted the Multiemployer Pension Plan Amendments Act (MPPAA) to strengthen the pension protection program for multiemployer plans. The amendments established mandatory requirements for financially weak multiemployer plans in "reorganization" and imposed new financial requirements on employers dropping out of multiemployer programs. Employers who cease to contribute to multiemployer plans are generally liable to the plan for their share of the plan's underfunding.
The multiemployer program is funded and maintained separately from PBGC's other insurance program, which covers only single-employer plans. Each multiemployer plan pays an annual insurance premium of $9 per participant to PBGC, increasing to $12 per participant for the 2013 plan year. Under the multiemployer program, PBGC provides financial assistance through loans to plans that are insolvent (that is, plans that are unable to pay basic PBGC-guaranteed benefits when due). Before a plan receives financial assistance from PBGC, it must suspend payment of all benefits in excess of the guarantee level.
Benefits Guaranteed by PBGC in Multiemployer Pension Plans:
MPPAA established a benefit guarantee limit for participants in multiemployer plans equal to the participant's years of service multiplied by the sum of (1) 100 percent of the first $5 of the monthly benefit accrual rate and (2) 75 percent of the next $15 of the accrual rate. For a participant with 30 years of service under the plan, the maximum PBGC-guaranteed benefit was $5,850 per year. This benefit guarantee formula remains in effect for participants in multiemployer plans that received financial assistance from PBGC at any time during the period from December 22, 1999, to December 21, 2000. The Consolidated Appropriations Act of 2001, signed into law on December 21, 2000, increased the benefit guarantee in multiemployer plans to the product of a participant's years of service multiplied by the sum of (1) 100 percent of the first $11 of the monthly benefit accrual rate and (2) 75 percent of the next $33 of the accrual rate. For someone with 30 years of service, this raised the guaranteed limit to $12,870.
Until 2003, the multiemployer insurance program had shown growing financial strength since enactment of the 1980 amendments. However, the program (which is vulnerable to the same economic and demographic pressures that have threatened the single-employer program) has reported a deficit every year since 2003. At the end of 2012, the program's deficit stood at $5.2 billion.Since 1980, PBGC has provided financial assistance to 81 multiemployer plans. During 2012, 49 of these plans received assistance. At the end of fiscal year 2012, the multiemployer program had assets of $1.8 billion and total liabilities of $7.0 billion. Most of these liabilities represent nonrecoverable future financial assistance to the 41 plans currently receiving financial assistance and to other plans expected to receive such assistance in the future.