Mature pension plans with more benefit payouts and expenses than contributors are particularly at risk from deteriorating conditions and without a rapid recovery in financial markets,  or Congressional intervention, a wave of pension-plan failures could eventually result, the report said.

More than 10 million Americans rely on the multiemployer defined-benefit retirement pension system, the study said.

According to a Dec. 2019 Milliman survey, 130 pension plans were in declining status or insolvent and receiving aid from the federal Pension Benefit Guaranty Corporation at the end of last year. Without a strong recovery from the current pandemic, that number could grow quickly, the consultants said. Entering 2020, 60% of plans, or 742 out of 1249 plans, were at least 90% funded.

A  Milliman survey on corporate pensions released this week found that the corporate pension funding ratio was about 87.5% in 2019 despite the best asset performance in more than 16 years.

The authors noted that pension plans already have suffered two so-called "once in a lifetime" events after the collapse of the dotcom bubble from 2000- 2002, and the mortgage meltdown and housing crisis of 2008. A third could bring down some pension plans that are still standing, they said.

Following the 2008 crisis, fewer participants elected to take voluntary retirements in the following years as they tried  to rebuild their savings. It's not clear if that would, or could, happen this time. It's also not clear whether mortality would increase from the COVID-19 crisis enough to reduce pension liabilities. Pensions may commonly have 10% to 15% of liability from participants who are 75 and older, the report said.

Multiemployer pensions have already shot most of the arrows in their quiver during past crises to help keep plans solvent. They include reducing benefits, increasing employer contributions, reducing early retirement options and reducing accrued benefits for all participants. As a result, each dollar contributed to plans now yields about half the benefit it provided in 2008, researchers said. Therefore, using the same strategies to improve plan funding this time may not be successful or even feasible, they said as the reduced benefits may make participation less attractive to employees.

The PBGC also would not likely be able to handle a new batch of struggling underfunded pension plans, they said, as its multiemployer insurance program was  slated to run out of funds in fiscal year 2025 even before the pandemic hit.

The report concludes that many plans may not be able to survive the COVID-19 crisis and a global economic recession, and that it may be time to look at different types of benefit plan designs including variable plans or modified variable plans that can withstand market volatility.

"They wouldn't  fix our current underfunding but they provide a viable path forward," said Coffing. "What I like about variable plans is that essentially each cohort pays for their benefits and the benefits they get from contributions made on their behalf retains longevity pooling without burdening the future cohorts to fund losses," she said.

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