The Pension Benefit Guaranty Corporation (PBGC) has released its Fiscal Year (FY) 2020 Annual Report, which notes, among other things, that the expected insolvency date of the agency’s multiemployer insurance program has been delayed from FY 2025 to sometime in FY 2026.
Meanwhile, the single-employer insurance program is improving, driven primarily by investment income and premium income.
The multiemployer program remains severely underfunded, with liabilities of $66.9 billion but only $3.1 billion in assets as of September 30. This resulted in a deficit, or negative net position, of $63.7 billion, compared with $65.2 billion a year earlier. The decrease in the program’s deficit is primarily due to the enactment of the Bipartisan American Miners Act of 2019, which is expected to help the United Mine Workers of America 1974 Pension Plan avoid insolvency. This development resulted in a delay in the multiemployer program’s projected insolvency from sometime in FY 2025 to sometime in FY 2026.
During FY 2020, the agency provided $173 million in financial assistance to 95 multiemployer plans, up from the previous year’s payments of $160 million to 89 plans.
PBGC data shows that about 125 multiemployer plans are in so-called “critical and declining” financial status. Such plans report that they will become insolvent over the next two decades. Several very large union plans—including the United Mine Workers Pension Fund and the Central States Pension Fund—predict they will become insolvent within just the next few years.
The lack of a legislative solution belies what appears to be serious will on both sides of the political spectrum to address the multiemployer pension funding crisis. As is often the case with federal legislation, though there is professed agreement about the size and pressing nature of the problem, consensus about a solution remains elusive.
PBGC Director Gordon Hartogensis noted in a message accompanying the FY 2020 Annual Report that the agency continued to protect benefits for multiemployer plan participants. “In FY 2020, PBGC approved the first facilitated merger under the Multiemployer Pension Reform Act of 2014, providing financial assistance to help preserve the solvency of the merged plan and protecting retiree benefits in a way that will not impair PBGC’s ability to meet its existing financial assistance obligations to other multiemployer plans,” he said.
The single-employer program had assets of $143.5 billion and liabilities of $128 billion as of September 30. The positive net position of $15.5 billion reflects an improvement of $6.8 billion during FY 2020. However, the program’s exposure increased to $176.2 billion in underfunding in pension plans sponsored by financially weak companies that could potentially become claims to PBGC.
During FY 2020, the agency paid $6.1 billion in benefits to more than 984,000 retirees in single-employer plans. PBGC also assumed responsibility for the benefit payments of an additional 56,405 workers and retirees in 69 single-employer plans that were trusteed during FY 2020.
“This year’s report illustrates that PBGC’s two insurance programs are in dramatically different financial positions,” Hartogensis said. “It remains clear that legislative reform is necessary to avert insolvency of the multiemployer program, and PBGC continues to provide technical support to policymakers, stakeholders and plan sponsors.”