The PGGC is running out of cash flow to support multiemployer plans that are on their way towards insolvency. Every year, the number of insolvent plans grows and the PBGC’s fund declines at a corresponding rate.
“Over a million people participate in multiemployer pension plans that are expected to run out of money over the next 20 years,” said PBGC Director Tom Reeder in an announcement over a newly insolvent union pension fund.
Over the past year, the union pension fund has been unable to pay pension benefits to plan participants and has been using the PBGC for financial assistance – one of many union funds in a similar situation. “This is a big issue for us [..] it’s a big issue for others in the same situation across the country,” Reeder said.
PBGC funds decline at a steady pace
“We’re projected to run out of money in eight to 10 years. Many union pension plans are projected to run out in twenty years,” Reeder stated. There are many union pension funds that are slowly heading in the direction of insolvency; unfortunately, with higher stakes – more participants and higher pension benefit amounts.
Most recently, Reeder stated, “the insurance program for insolvent multiemployer plans is in dire financial condition and, absent reform, is likely to run out of money by 2025. I am committed to working with the Administration, Congress and other stakeholders to find solutions that stabilize multiemployer pension plans and make the pension insurance program one that people can rely on well into the future.”
This warning should not come as a shock, as the PBGC has been making statements over the past several years. There are a few reasons for the steady increase of insolvent multiemployer plans that include:
- Steady decline in the number of participants
- As plan benefit levels increased the plan was not sufficiently funded
- Significant losses from the financial crisis in 2008-2009
“We are fairly confident that we will be insolvent on the multi-employer side by 2022 or 2028 barring a legislative change,” Reeder said. In 2016 alone, over $113 million dollars of financial help was given to 65 multiemployer plans.
For more information on the PBGC’s statement you can find it in their press release.