Actuarial Profession’s Resources on U.S. Multiemployer Pension Plans
Multiemployer pension plans in the U.S. cover workers of two or more employers that have formally agreed with a union to create the plan. Multiemployer plans are covered by the Employee Retirement Income Security Act (ERISA) under a very different set of rules than single employer (corporate) plans.
Most multiemployer pension plans in the U.S. are financially viable. However, as of late 2020, roughly 10% of the plans are expected to exhaust their assets within 20 years, before having paid all participants the benefits they have earned. Under ERISA, when multiemployer plans exhaust their assets, it is known as “becoming insolvent.” Many of those plans are at risk of becoming insolvent within fewer than 10 years.
When a multiemployer plan becomes insolvent, the Pension Benefit Guaranty Corporation (PBGC), a federal agency whose purpose is to protect private-sector pensions, loans the plan the money needed to pay benefits, up to the limits defined by ERISA. A few very large plans are at risk of becoming insolvent. As a result, the PBGC projects that its multiemployer program has a “very high likelihood” of running out of money in FY 2026 (ending September 30, 2026), and that insolvency by the end of FY 2027 is “near certainty.” ( Pension Benefit Guaranty Corporation, FY 2019 PBGC Projections Report)
Both the U.S. Senate and the U.S. House of Representatives have introduced various legislative approaches to solving this pending crisis. To date none of the bills have been passed by both houses of congress.
There is concern that this pension crisis will affect hundreds of thousands of retirees, employees and employers. The SOA has developed a repository of information to serve as a resource on this topic.
The SOA has published in recent years a number of research papers relevant to multiemployer pension plan issues:
- U.S. Multiemployer Pension Plan Pending Insolvencies, May 2018. Analysis of the plans that are likely to exhaust their assets within 20 years, without having satisfied benefits due to participants. Quantification of the number of plans, participants and employers and amounts of benefits and liabilities involved.
- U.S. Multiemployer Pension Plan Withdrawal Liability Basics and Collectibility, August 2018. A “plain language” explanation of how withdrawal liabilities are computed, why they might be less than the unfunded liability that a withdrawing employer leaves behind, and why the fully assessed withdrawal liability may not be collected.
- Contribution Analysis for U.S. Multiemployer Pension Plans. A longitudinal study starting with 1999 that assesses whether plan contributions met federal minimum requirements, as well as whether the contributions were sufficient to reduce unfunded liabilities after paying for current benefit accruals. Reports were published annually 2016 through 2019.
- PBC and PBCR: Two Stress Metrics for U.S. Multiemployer Pension Plans. A longitudinal study starting with 1999 that tracks two metrics developed by SOA staff researchers that measure financial stress imposed on MEPPs by the combination of unfunded liabilities and declining numbers of active participants. Reports were published annually from 2015 through 2019.Employer Withdrawal Activity in U.S. Multiemployer Pension Plans. A longitudinal study starting with 1999 that summarizes the number of plans and participants affected by employer withdrawals, as well as the assessed withdrawal liabilities as a portion of plan liabilities. Reports were published annually 2016 through 2019.
Additional Resource from the SOA:
- An interview with Cary Franklin, a consulting actuary who works with multiemployer plans, October 2020,SOA Retirement Section News.
The American Academy of Actuaries (Academy)—the actuarial organization that assists public policymakers with objective, actuarial expertise and advice on risk and financial security—has released several issue briefs on this subject:
- Selection of Actuarial Assumptions for Multiemployer Plans, July 2020
- Determining Withdrawal Liability for Multiemployer Pension Plans, April 2020
- Loan Programs for Underfunded Multiemployer Plans, May 2018
- Overview of Multiemployer Pension System Issues, June 2017
- Honoring the PBGC Guarantee for Multiemployer Plans Requires Difficult Choices, October 2016
Public Policy Commentary
The Academy has formally commented on the multiemployer plan issue through various forums:
- The Academy’s senior pension fellow testified on April 18, 2018, “The History and Structure of the Multiemployer Pension System,” at a hearing before the 2018 Joint Select Committee on Solvency of Multiemployer Pension Plans, a committee of four Republican and four Democrat senators, and four Republican and four Democrat representatives.
- Pension Council Comments to U.S. House on Pension Provisions of HEROES Act, May 15, 2020
- Committee Comments to U.S. Senate on Multiemployer Pension Recapitalization and Reform Plan, December 23, 2019
- Follow-up Letter to Joint Select Committee on Solvency of Multiemployer Pension Plans, September 26, 2018
- Ted Goldman, Senior Pension Fellow, testified on The History and structure of the Multiemployer Pension System at the April 18, 2018, hearing of the 2018 Joint Select Committee on Solvency of Multiemployer Pension Plans, a committee of four Republican senators and four Democrat senators, and four Republican and four Democrat representatives.
- Letter to Joint Select Committee on Solvency of Multiemployer Pension Plans, March 12, 2018
- Committee Notes from Meeting with Treasury, Labor and PBGC, February 23, 2018. This meeting supplemented the first meeting between these parties on this topic, which was held on Feb. 22, 2017.
- Multiemployer Committee Capitol Hill Briefing Multiemployer Pension Plans: Potential Paths Forward, June 27, 2017
- Committee Notes from Meeting with Treasury, Labor, and PBGC, February 22, 2017
- Comments to Senate Finance Committee on Multiemployer Plan Issues, March 16, 2016
- Comments to Internal Revenue Service on Proposed Regulations on Suspension of Benefits under the Multiemployer Pension Reform Act of 2014, August 18, 2015
- Comments in response to Request for Information on Suspension of Benefits under the Multiemployer Pension Reform Act of 2014, April 6, 2015
- Comments in response to Request for Information on Partitions of Eligible Multiemployer Plans and Facilitated Mergers, April 6, 2015