Current premiums paid by beneficiaries in multiemployer pension plans are not enough to sustain the Pension Benefit Guaranty Corp.'s multiemployer insurance program, according to a report the agency is required to file with Congress every five years.
In 2016, enrollees pay a $27 per-participant premium. The Multiemployer Pension Reform Act of 2014 doubled premiums to $26 for 2015.
PBGC's 2014 projections report estimated that the agency's premium levels and returns on assets will be enough to sustain the multiemployer program for the next five to nine years.
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As of September 2014, the program held $1.8 billion in assets, and had $44.2 billion in expected liabilities. PBGC projects that the program has a greater than 50 percent chance of going insolvent by 2026.
In 2015, PBGC reported the multiemployer plan deficit had widened to $52.3 billion.
The report does not recommend how much premiums need to be increased.
The White House's 2017 budget proposes giving PBGC authority to increase premiums, and set a variable rate premium that would assess higher rates on financially troubled plans. It estimates that would raise $15 billion for the program.
The budget also proposes a new "exit" premium for sponsors that leave plans.
Under existing law, Congress sets premiums. There is no variable rate premium in the multiemployer plan, while there is a variable rate assessed on some sponsors in the agency's single-employer program.
Some advocates for multiemployer sponsors and several unions swiftly criticized the proposals in the latest budget.
"I think the White House came to these numbers without enough thought and consideration," said Randy DeFrehn, executive director of National Coordinating Committee for Multiemployer Plans, in a recent interview.
"You can't have something this aggressive imposed on multiemployer plans right now. These proposals would prevent new employers from coming into plans, and drive existing employers out," added DeFrehn.
That would only compound PBGC's multiemployer program's funding woes, said DeFrehn.
The North America's Building Trade Unions, which represents the interests of 14 unions with 3 million members, said the best way to address the long-term viability of multiemployer plans is to incentivize employers' participation.
"Unfortunately, a PBGC premium tax would have the exact opposite effect," the association said of the White House's budget.
PBGC's report to Congress says the budget proposals to assess variable premiums and an exit premium, along with giving PBGC trustees authority to raise premiums, would "provide a path to solvency for the multiemployer program."
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
