The news isn't good for 1.5 million people across the country in a swath of multiemployer plans. According to PBGC's Projections Report, released last week, these plans are likely to fail putting the retirement benefits of current and future employees in jeopardy. Not only that, but if those plans fail it may bring down the entire system and with it the retirement security of the 10 million people within it.
Right now, there are more than 10 million people and their families covered by about 1,400 multiemployer plans in industries like construction, mining, supermarkets, transportation, and hospitality. Massive losses during the economic slowdown in 2008-2009, left many plans seriously underfunded. The economy has improved significantly, but for the plans most in trouble, the improved economy was not enough. These plans responded by increasing contributions and reducing future benefits but it still wasn't enough.
New numbers in PBGC's FY 2013 Projections Report show that:
- The multiemployer plan system is in increasing trouble
- 1.5 million people in almost 200 plans are projected to go insolvent in 10-15-20 years (depending on the plan)
- Participants who try to rely on PBGC guarantees will discover they are low
- And finally, PBGC's multiemployer insurance program could be insolvent by 2033
What does this mean? In short, it means that without the tools to set its financial house in order, PBGC will be unable to pay the pension benefits that people count on in the multiemployer system.
The report also shows that things are looking better on the single-employer plan side but those plans still are in a smaller but substantial deficit.
The common theme among each of the highlights above is — the math just doesn't add up anymore.
Interested in more blog posts like this one? Sign up to receive updates from Retirement Matters.