PBGC Sees Hike in Multiemployer Benefit Payments Ahead

(August 23, 2010) — The Pension Benefit Guaranty Corporation (PBGC) expects to spend about five times as much in the next 10 years as it has over the past three decades in multiemployer benefit payments.

The group, a US government-sponsored, privately funded insurance program whose rules are mandated by Congress, said it has shelled out more than $500 million in financial assistance to 62 insolvent multiemployer plans since fiscal year 1981. The agency estimates its liability for such payments will rise over the next 10 years to nearly $2.3 billion, paid to 104 plans.

“The increase in liabilities means there is financial stress in many industry sectors where multiemployer plans still exist,” PBGC spokesman Jeffrey Speicher told ai5000. “We foresee the need to provide additional financial assistance in the future, according to the law, when a multiemployer pension can no longer meet its obligation,” he said, noting that PBGC currently has a shortfall of about $700 million, yet it has assets in its multiemployer program to meet its obligations.

In its Pension Insurance Data Book 2009, the PBGC highlighted the burgeoning shortfall in the multiemployer program. The group said the number of insolvent plans receiving financial assistance on a year-by-year basis has continued to grow, increasing from just one plan receiving about $300,000 in 1981 to 43 plans receiving nearly $86 million in 2009.

According to the PBGC’s release, if an insolvent multiemployer pension plan recovers financially, it is required to repay the financial assistance with interest. However, in the program’s nearly 30 years of existence, only one multiemployer plan has repaid PBGC for the financial assistance it received. The disclosure by the PBGC follows ever-growing worries — amid declining stock markets and interest rates — about defined benefit pension schemes in the public and private sectors that pay retirees a percentage of their pay for their entire lives.