Today, the Subcommittee on Health, Employment, Labor and Pensions, chaired by Rep. Tim Walberg (R-MI), held a hearing on “Financial Challenges Facing the Pension Benefit Guaranty Corporation: Implications for Pension Plans, Workers, and Retirees.”
Members of the Subcommittee heard from the Honorable Tom Reeder, the Director of the Pension Benefit Guaranty Corporation (PBGC). Throughout his testimony, Reeder laid out the high stakes of finding a solution to preserve the pension plans promised to millions of workers and retirees.
“The Multiemployer Program protects over 10 million workers and retirees in about 1,400 ongoing multiemployer plans … But a significant minority of multiemployer plans, some very large, and covering one million participants, are seriously underfunded and project they will run out of money within in the next 20 years,” said Reeder.
While the PBGC’s Single-Employer Program is also experiencing a deficit, it is important to note that financial conditions for this system have been improving. PBGC’s FY 2016 Projections Report shows that the program will be out of a deficit by 2022. This is an encouraging trend; however, the Multiemployer Program stands in stark contrast as financial conditions continue to worsen.
“As underfunding in these plans deepens, remaining employers are faced with a difficult choice: higher contributions if they stay; higher withdrawal liability if they leave. And if they do leave, the plan will be at greater risk of failure,” Reeder continued.
Reeder went on to discuss the significant financial challenges the Pension Benefit Guaranty Corporation faces with the impending collapse of the multiemployer pension system.
At the opening of the hearing, Chairman Walberg highlighted how in 2014, members of the Committee came together in a bipartisan fashion to attempt to save the multiemployer pension system from impending collapse.
“They put politics aside, worked with employers and labor unions, and negotiated a set of reforms to the multiemployer pension system in order to preserve benefits for millions of workers. President Obama signed this bipartisan approach into law in 2014,” Chairman Walberg said.
“While the 2014 statute was an important step, regulations written by President Obama’s Treasury Department implementing the law made it difficult if not impossible for trustees to use the tools the law contains. And so, the problems continue,” Chairman Walberg went on to say. “Congress took bipartisan action just three years ago to prevent this looming disaster … But if Congress is to consider further reforms, it’s critical that the Committee fully understand the scope of the financial challenges facing PBGC.”
“As of September 30, 2017, the Multiemployer Program had assets of $2.3 billion to cover $67.3 billion in liabilities in 187 plans,” Reeder said. “The $67.3 billion in Multiemployer Program liability is an increase from $61.0 billion in FY 2016. In addition to the $67.3 billion booked as a liability in our financial statements, there is $14 billion in underfunding that is not reflected in our financial statements in ongoing multiemployer plans projected to become insolvent in the next 10 to 20 years; these plans are classified as ‘reasonably possible’ future obligations.”
Chairman Walberg acknowledged the need to address this crippled system which impacts millions of workers and retirees.
“There are no easy answers to these problems,” said Chairman Walberg. “We owe it to workers, retirees, employers and taxpayers to put politics aside and work toward finding a fiscally responsible, bipartisan solution.”
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