Earlier this year, Congress threw a lifeline to troubled multiemployer pension plans. But the rescue effort is getting tangled in regulations that may ultimately sink many of the retirement plans, pension experts say.
The Pension Benefit Guaranty Corp., which insures defined-benefit pension plans, issued rules early this month outlining a new multiemployer-plan financial-assistance program mandated by the American Rescue Plan passed in March. The law allows certain underfunded multiemployer plans to apply for taxpayer-funded financial assistance that carries no repayment obligations and can help stabilize wobbly funding and reinstate benefits previously slashed. The new PBGC rules, however, make it highly probable that plans accepting the assistance will be insolvent within 30 years, pension consultants, lawyers and other experts say, and leave younger workers with little incentive to participate in these plans.
The PBGC was “too draconian” in its approach to calculating the amount of financial assistance, says Russell Kamp, managing director at investment management firm Ryan ALM. Generally, “it doesn’t allow for these plans to survive beyond 2051 — if they even get there.”
“The American Rescue Plan provides funding to severely underfunded pension plans that will ensure that over 3 million of America’s workers, retirees, and their families receive the pension benefits they earned through many years of hard work,” PBGC director Gordon Hartogensis said in announcing the new rules. The new financial-assistance program is expected to funnel about $94 billion to more than 200 eligible multiemployer plans, according to the PBGC. The agency is accepting public comments on the interim final rule through Aug. 11.
About 1,400 multiemployer pension plans, which are created through agreements between unions and two or more employers, cover more than 10 million participants, commonly in industries such as construction, trucking, manufacturing, and retail.
Dwindling unionization in some industries and employer withdrawals from multiemployer pension plans have for years contributed to these plans’ financial woes. And if one employer in a plan goes bankrupt, the remaining employers may get stuck with unfunded benefit obligations. A 2014 law gave certain underfunded pension plans the ability to cut retiree benefits. Since then, 18 such plans have received U.S. Treasury Department approval to cut benefits under that law, the Multiemployer Pension Reform Act, resulting in sharp income reductions for some retirees.
In plans receiving the new financial assistance, those previous benefits will be reinstated. But many plans may think twice before taking the assistance, pension experts say.
One concern: The PBGC’s interpretation of the American Rescue Plan’s requirement that the amount of financial assistance should be enough to pay all benefits due through 2051. Under the PBGC’s rule, the amount of assistance will equal the difference between the plan’s obligations over the next 30 years (including benefits and administrative expenses) and its resources, including current assets, contributions over the next 30 years, the earnings on those amounts, and anticipated “withdrawal liability” payments made by employers exiting the plan. Given that interpretation, after 30 years “you’ve used up every single asset you have between now and 2051,” Kamp says, including contributions that were intended to pay benefits beyond 2051. That calculation of financial assistance, he says, “is the absolute least you could come up with” under the law.
PBGC believes that the “plain meaning” of the law is that all plan resources and obligations should be taken into account, the agency said in introducing the new rules.
The PBGC’s approach may reflect a desire to rein in taxpayers’ tab for the program, pension experts say. The federally funded financial assistance program also helps improve the shaky financial condition of PBGC’s multiemployer insurance program, which is funded by premiums paid by plans. As of late last year, the insurance program was facing insolvency in fiscal 2026.
Another concern about the new financial-assistance program is baked into the language of the law, pension experts say. The interest rate used in calculating the amount of financial assistance is substantially higher than the expected rate of return on the available investment options for that pot of money, experts say, creating a funding shortfall. “That’s pushing you into bankruptcy earlier,” says Gene Kalwarski, CEO of actuarial consulting firm Cheiron.
To make up for the shortfall, plans may be tempted to invest their other assets more aggressively, pension experts say. “This is an invitation to imprudent stewardship of plan resources,” says one expert who asked not to be named while continuing to review the regulations. “If you want your plan to last, you’re going to have to take a lot of risks.”
The PBGC rules leave younger multiemployer plan participants — and the unions that represent them — in a tough spot, experts say. “If you’re a younger employee in one of these plans right now, you should be questioning whether you want to continue to participate,” Kamp says, because the plan may go bust by the time you retire. When a multiemployer plan fails, the PBGC guarantees benefits up to certain limits, but those limits are often substantially lower than the benefits retirees would have received had the plan remained healthy.
While PBGC may still revise the regulations based on public comments, some observers doubt the final result will measure up to lawmakers’ intent in enacting the financial assistance program. Senate Majority Leader Chuck Schumer said in early March that he’d be closely watching implementation of the new program to ensure that plans receiving assistance “are not placed in a worse long-term funding position than they are today or are projected to be into the future.” The program, the New York Democrat said, “is intended to be a long-term solution for these ailing plans, a solution that protects retiree benefits as well as the health of the plans themselves.” Schumer’s office did not respond to a request for comment.