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Some pension plans are at risk of going insolvent leaving retirees and employers holding the bag, the Wall Street Journal reports [subscription required]:
At issue are multiemployer plans, common in transportation, construction and some other industries, that cover workers from many companies. Problems in some large multiemployer plans are so severe that they are likely to bankrupt the federal safety-net program for those pensions within the next decade, according the government’s Pension Benefit Guaranty Corp.
The dire conditions reported in the PBGC’s 2014 annual report raise the pressure on Congress to address the looming crisis.
The Associated Press reports that the deficit for PBGC’s “multi-employer insurance program increased by $8.3 billion in the past year to $42.4 billion.”
Employers who are part of multiemployer plans worry that if other companies in the plan go bankrupt, they’ll end up paying a greater share of retiree benefits—even for workers that never worked for them.
For example, bakers in one plan, faced this situation when Hostess when bankrupt in 2012.
In addition, some companies remaining in multiemployer plans are seeing estimates of their withdrawal liability—their share of unfunded benefits they would pay if they left the plan—be more than the worth of their companies.
Aliya Wong, Executive Director of Retirement Policy at the U.S. Chamber, wrote earlier this year:
Without multiemployer reform, many employers – including many small, family-owned businesses – are in danger of bankruptcy. Without real reform to the multiemployer system and resolutions to the underlying problems, more employers will be forced into bankruptcy and more workers will be left without a secure retirement.
Rep. John Kline (R-MN), Chairman of the House Committee on Education and the Workforce calls the current, unsustainable path of the multiemployer pension system, a “ticking time bomb” that will force businesses to close and put retirement security at risk.
The National Coordinating Committee for Multiemployer Plans (NCCMP), composed of labor and business leaders, developed a set of comprehensive reforms. Congress needs to act before it’s too late.