Clock ticking on PBGC Multiemployer Insurance Program
“The alarm bells are ringing,” says PBGC director Gordon Hartogensis.
The Pension Benefit Guaranty Corp.’s multiemployer insurance program has a 99 percent chance of being insolvent by the end of fiscal year 2025, according to the FY 2018 Projections Report, released today.
“The alarm bells are ringing,” said PBGC director Gordon Hartogensis, in a press call.
About 125 of the 1,400 collectively bargained pension plans insured by PBGC are in critical and declining status, meaning they are expected to be insolvent within 20 years.
The largest of those plans, the Teamsters’ Central States Plan, is projected to be insolvent by 2025. That event will amount to the straw that breaks the camel’s back, leaving PBGC only able to issue loans to failed plans out of annual premium revenue.
That, in turn, will result in dramatic reductions in the current levels of guarantees to failed plans. Existing guarantees—which are already small–would be reduced $0.10 to $0.12 on the dollar, Hartogensis said.
Today, the maximum guarantee to a participant in a failed multiemployer plan is about $13,000. Absent changes to the law, the maximum annual payment to the same participant will be $1,300 after 2025.
Of the 500 economic simulations run by actuaries at PBGC, not one shows the agency as being solvent beyond 2026 under current law.
Payouts from the multiemployer program to failed plans begin to escalate next year, and will rise to $2.5 billion by 2025, peaking at $4.6 billion by 2037.
As of last year’s PBGC annual report, the multiemployer insurance program held $2.3 billion in assets, and had $56.1 billion in liabilities, or a deficit of $53.8 billion.
By 2028, the average projected deficit to the program will be $90 billion.
READ MORE:
Union pensions: Will Congress kick the can on a solution?