Pension Benefit Guaranty Corporation: FY 2014 PBGC PROJECTIONS REPORT

This report looks first at PBGC’s multiemployer program, which covers roughly one- quarter of private sector defined benefit pension participants, but has deficits exceeding those of the single-employer program. As shown in this report, recent legislation is expected to postpone the date that PBGC’s multiemployer program fund is likely to run out of money and could significantly reduce the magnitude of future program deficits, but it does not fully resolve the issues facing the program and the participants whose benefits it guarantees.

Multiemployer Plans:  The multiemployer program reported a deficit of $52.3 billion. The nearly $10 billion increase from last fiscal year is due to a drop in interest factors and the addition of 17 plans that are “newly terminated or are projected to run out of money within the next 10 years,” PBGC said.

Most multiemployer plans are projected to remain solvent over the next 10 years, but a core group of plans appear unable to raise contributions sufficiently to avoid insolvency. The Multiemployer Pension Reform Act of 2014 (referred to as Kline-Miller or MPRA) was enacted in December 2014, to improve the financial outlook of multiemployer plans and of PBGC’s multiemployer program. For some plans facing insolvency within the next twenty years, MPRA allows trustees to permanently reduce benefit promises to participants if, by “suspending benefits,” the plan can remain solvent over the long term and preserve benefits at levels above the PBGC guarantee amounts. MPRA also provides additional premiums to fund PBGC’s multiemployer program and gives PBGC new ways to help plans remain solvent by providing financial assistance by plan partition or merger.

This report reflects how plan sponsors may utilize MPRA and also reflects changes in our model of the multiemployer system that further improve our estimates of plan benefit outflows, recognize PBGC’s establishment of a reserve for small plans on its books, and use updated mortality tables.

After updating the model, and incorporating the premium increases and other provisions under MPRA, but assuming no plans elect suspensions or partitions, PBGC’s projected 2024 multiemployer deficit averages $44.3 billion discounted to today’s values.1 The solvency of the multiemployer program fund is extended by three years; the multiemployer program fund is more likely than not to run out of money in 2025 rather than 2022.

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Source: PBGC