Back in July, NTUF wrote about the fiscal crisis facing the Pension Benefit Guaranty Corporation’s (PBGC) multiemployer pension programs. With a $53.9 billion budget deficit in its multiemployer programs alone, PBGC was already in dire straits last year. Unfortunately, the data from this year shows that the situation has grown even worse — the deficit that multiemployer programs are running has ballooned to $65.2 billion.
The PBGC is an independent federal agency established by Congress in 1974, intended to provide a federal backstop for employer pension plans. PBGC provides insurance on employee pensions in return for small premiums paid by the businesses whose plans are receiving the protection.
The problem is that the scale of the multiemployer pension plan problem is becoming so severe that PBGC is running out of resources to keep them afloat. PBGC estimates that 130 multiemployer plans covering 1.3 million Americans are on track to run out of money in the next 20 years.
Meanwhile, the PBGC, the federal agency in charge of managing these sorts of bankruptcies, is on track to run out of funds by FY 2025. The agency is almost certain to be out of funds by FY 2026 at the latest.
Reform is desperately needed, but current Congressional proposals offer little hope for the future. H.R. 397 is a bailout with almost no preconditions attached, allowing for loans provided to be subject to alternate repayment plans or even forgiveness. Additionally, it fails to create an environment where the PBGC encourages responsible pension management as a requirement for its assistance.
The PBGC, and specifically its multiemployer plans, is in a bad position. Congress needs to act on reform, but it also needs to take the time to think through a reform plan that will not leave taxpayers on the hook for irresponsible pension plan management on the part of businesses.