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The Union Multi-Employer Pension Plan System Is Going To Crash

It’s not a matter of ‘if,’ but a matter of ‘when’…

Experts predict the union multi-employer pension plan system is going to crash in 2025, unless Congress—using taxpayer money—bails it out.


Ever since the Carter Administration deregulated the trucking industry and global competition hit America’s shores, unions have had a structural problem with their multi-employer pension plans.

Too many unionized employers were moving out, shutting down or going out of business entirely, while more and more union members were (and are) expected to retire.

Simply put, there are too few unionized companies left to put money into a system designed to pay for retirees’ retirements until they die.

For years, pension trustees and economists sounded the warning but, generally, the can has been kicked down the proverbial road.

As time continues to drag on, however, that road is getting shorter and the cliff is coming into view.

As the Miami Herald noted earlier this month about the Teamsters Central States Pension Fund, “of the 50 largest employers paying into the plan in 1980, only three contribute today, according to testimony in Congress this year.”

Meanwhile, the Pension Benefit Guaranty Corp—the insurance plan designed to protect retirees when their plans go belly up—is warning that it will run out of money completely in six or seven years.

The program’s total assets remained largely unchanged, at $2.3 billion, putting the program’s funding deficit at $53.9 billion. In 2018, PBGC collected $292 million in premium income from multiemployer plans, the most it has received in the past decade, and 300 percent more than was collected in 2009.

In spite of the improvement in the program, the multiemployer program is still projected to run out of cash reserves by the end of 2025, if Congress doesn’t act.

Under the program’s existing structure, PBGC guarantees a maximum of roughly $15,000 a year for participants with 35 years of service in an insolvent plan and $13,000 for participants with 30 years of service. The maximum guarantee for workers with 20 years of service is $8,580, according to the annual report.

When the program’s cash reserves are exhausted in 2025, PBGC will only be able to insure a fraction of what it now guarantees from the revenue drawn on annual premium receipts.

Right now, unions and their Democrat allies in Congress want taxpayers to foot the bill by passing the so-called Butch Lewis Act, which gives the Treasury Department the authority to “loan” pension funds much-need money to cover their unfunded liabilities.

Beyond the immediate bad optics of taxpayers having to bailout pension schemes that the general public had no say in negotiating, the more pressing problem is that there is no means for these underfunded pensions to ever pay back those “loans.”

Worse, unless the entire pension system is re-structured, the problem will become a never-ending drain on taxpayers.

Further, as was the Heritage Foundation asked in 2016, if Congress is going to bailout “what will stop it from passing legislation to bail out the other 1,200 plans that have more than $600 billion in unfunded promises? If Congress forces taxpayers to bail out private union plans, why not also private non-union plans that have $760 billion in unfunded liabilities, and public plans that have as much as $4 trillion to $5 trillion in unfunded liabilities?”

One solution may be to restructure the whole pension system in the fashion the Miami Herald described earlier this month:

Multiemployer pension plans need to be restructured along the same lines already adopted by most private employers. The future of work, future lifespans and future economic growth are too uncertain to sustain open-ended guarantees of generous monthly checks. A new culture of individual savings must be fostered and accelerated through vehicles such as 401(k) plans and individual retirement accounts. Minimal backstop pensions might be part of a hybrid plan.

The problem with this, of course, is that politicians are more prone to continued can kicking than actually fixing problems.

In the meantime, the pension cliff is getting nearer.
Related:
Local 805 Teamsters cleared for benefit reductions; IBEW Local 237 applies
These Two Union Pension Plans Are In Really Bad Shape

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