In the midst of debates over tax reform, budgets, and national security, there is a little-known crisis rising — multiemployer pension funding. You may have heard of the multiemployer pension crisis and thought of it as an unfortunate issue, but one that had nothing to do with you. Well, without a legislative resolution, you could be affected.
Currently, over one million retirees in multiemployer plans are in danger of losing benefits because the plans that pay them will go bankrupt. In addition, the federal agency that acts as a backstop — the Pension Benefit Guaranty Corporation — is also in danger of bankruptcy. Without a resolution to this crisis, there could be millions lost in retirement benefits. This loss alone will put a strain on local economies where these retirees will have less money for consumption and some may be forced to rely on state assistance.
There will also be an adverse impact on employers in these plans. Because of the current rules, employers cannot leave these plans without paying large sums or claiming bankruptcy. Both of these results negatively impact the ability to provide jobs, make capital investments, or increase salaries. Finally, taxpayers may ultimately be on the hook if Congress decides to replace the lost benefits with taxpayer funding. Even if Congress does not provide direct assistance, all will feel the consequences of fewer jobs, less consumerism, and greater reliance on state programs.
The story of multiemployer plans is complicated. To provide context, the U.S. Chamber has issued a report, The Multiemployer Pension Plan Crisis: The History, Legislation, and What's Next?The report provides an overview of the current multiemployer crisis, an in-depth analysis of the events leading up to the crisis, attempts to fix it, and the current proposals to address the crisis.
There will not be any easy solutions to this crisis but if nothing is done, the consequences will be devastating. We call on all interested parties — and all parties should be interested — to encourage Congress to find a solution that minimizes the negative impact of this crisis.
About the authors
Aliya Wong was the Executive Director of Retirement Policy at the United States Chamber of Commerce.