There’s no denying the pension industry has faced its share of challenges and setbacks in recent years, and a number of reports are urging Congress to step in before things get much, much worse.
The Pension Benefit Guaranty Corporation (PBGC), a group that protects the retirement incomes of more than 44 million American workers in more than 27,500 private-sector defined benefit pension plans, recently sent three different reports to Congress.
Those reports illustrated the dire situation certain multiemployer defined-benefit pension plans are currently in — and called for federal reforms to prevent plan closings and further PBGC deficits moving forward.
It’s worth noting that the reports are referring to a select number of plans. According to PBGC Director Joshua Gotbaum, “The majority of multiemployer plans are recovering and will do fine. There is a minority that, absent changes, will not.”
In the ‘Red Zone’
One report looked at the effect of the Pension Protection Act of 2006 on around 1,500 multiemployer pension plans.
What it found it found: Twenty-one percent — or 319 plans — are currently in the critical “red zone” and are facing significant and immediate funding problems.
Headed for insolvency
The second report was based on a five-year evaluation of PBGC multiemployer premiums and benefit guarantees.
According to that report, there is a 35% probability that the PBGC multiemployer pension insurance program will be insolvent by 2022 if current premium levels and economic conditions stay the same.
And, assuming current conditions stay the same, that percentage skyrockets to 91% by 2032.
Serious ‘exposure’ problems
Finally, the third report the PBGC sent over to Congress dealt with “exposure” issues. The exposure report showed that while the PBGC is expected to collect $1.3 billion in premiums over the next decade, a series of potential new obligations could increase by $37.6 billion.
While the PBGC’s reports were meant to show Congress the pressing need for multiemployer pension reform, Gotbaum said the agency made no recommendations in the reports on what the reform should entail.
We’ll keep you posted on any response from Congress.