Pension Agency Sees Rise in Aid to Ailing Multiemployer Plans

The Pension Benefit Guaranty Corp. says its financial help—and potential future exposure—to failing multi-employer pension funds has climbed. Multi-employer plans are common in construction's unionized sector, covering more than three million of the industry's workers and retirees.

PBGC, a federal agency that assists or takes over troubled pension plans, projects in its fiscal 2011 report that the number of insolvent multi-employer plans will more than double in five years.

In the report issued on Nov. 14, PBGC Director Josh Gotbaum said many multi-employer plans "are substantially underfunded; for some, the traditional remedies of increasing funding or reducing future benefit accruals won't be enough."

PBGC estimates its "reasonably possible" obligations to multi-employer-plan participants were $23 billion at the end of fiscal 2011, up from $20 billion a year earlier and $326 million in 2009. PBGC says the main reason for the increase in potential obligations to multi-employer plans is that two large plans were added to the "reasonably possible" inventory.

One of the plans, whose net liability is $5.4 billion, is in the agriculture, mining and construction category. The agency would not disclose that plan's name. The other plan has a $16.4-billion liability and is in the transportation, communications and utilities sector.

PBGC reports it provided $115 million in aid to 49 multi-employer plans in 2011, up from $97 million in aid to 50 plans in 2010. Because added plans failed, PBGC says its multi-employer-plan insurance program's deficit jumped to $2.8 billion in 2011 from a $1.4-billion shortfall in 2010.

PBGC's multi-employer program insures 1,450 pension plans covering 10.3 million workers and retirees. Construction workers and retirees account for 36.4% of those covered—the largest group in the program, according to 2009 data, the most recent to be published by PBGC.

PBGC's multi-employer program assists troubled plans by providing loans, which it says are "rarely repaid." In its much larger, single-employer pension program, PBGC takes over insolvent plans.

Tom Ichniowski has been writing about the federal government as ENR’s Washington Bureau Chief since the George H.W. Bush administration, and he has covered at least five major highway bills. A recognized expert on government policy on infrastructure and regulation, Tom is also a Baltimore native and Orioles fan who grew up rooting for Brooks and Frank Robinson. He is a graduate of Columbia College and Columbia’s graduate school of journalism, where he once used “unrelentless” in a headline.

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