Multiemployer Plans Differ from Single- Employer Plans

It would be useful at this point to describe several differences between  multiemployer and single-employer plans. Multiemployer plans are  established pursuant to collectively bargained agreements negotiated  between labor unions representing employees and two or more employers  and are generally jointly administered by trustees from both labor and  management. Single-employer plans are administered by one employer  and may or may not be collectively bargained. Multiemployer plans  typically cover groups of workers in such industries as construction, retail  food sales, and trucking, with construction representing 38 percent of all  participants. In contrast, 47 percent of single-employer plan participants  are in manufacturing. Multiemployer plans provide participants limited  benefit portability in that they allow workers the continued accrual of  defined benefit pension rights when they change jobs, if their new  employer is also a sponsor of the same plan. This arrangement can be  particularly advantageous in industries like construction, where job  change within a single occupation is frequent over the course of a career.  Single-employer plans are established and maintained by only one  employer and do not normally offer benefit portability. Multiemployer  plans also differ from so called multiple-employer plans that are not  generally established through collective bargaining agreements and where  many plans maintain separate accounts for each employer. The Teachers  Insurance Annuity Association and College Retirement Equities fund  (TIAA-CREF) is an example of a large multiple-employer plan organized  around the education and research professions. TIAA-CREF offers a  defined benefit contribution plan, in which contributions are accumulated  over a career and paid out at retirement, often as an annuity.
Below are some features that illustrate some key differences between  single-employer and multiemployer plans:    Contributions· In general, the same ERISA funding rules apply to both  single- and multiemployer defined benefit pension plans. While ERISA and  IRC minimum funding standards permit plan sponsors some flexibility in  the timing of pension contributions, individual employers in  multiemployer plans cannot as easily adjust their plan contributions. For  multiemployer plans, contribution levels are usually negotiated through  the collective bargaining process and are fixed for the term of the  collective bargaining agreement, typically 2 to 3 years. Employer  contributions to many multiemployer plans are typically made on a set  dollar amount per hour of covered work, and thus to the number of active  plan participants. With other things being equal, the reduced employment  of active participants will result in lower contributions and reduced plan  funding.
Withdrawal liability· Congress enacted the Multiemployer Pension Plan  Amendments Act (MPPAA) of 1980 to protect the pensions of participants  in multiemployer plans by establishing a separate PBGC multiemployer  plan insurance program and by requiring any employer wanting to  withdraw from a multiemployer plan to be liable for its share of the plan’s  unfunded liability. The law contains a formula for determining the amount  an employer withdrawing from a multiemployer plan is required to  contribute, known as “withdrawal liability.” This amount is based upon a  proportional share of the plans’ unfunded vested benefits. Furthermore, if  a participating employer becomes bankrupt, MPPAA requires that the  remaining employers in the plan assume the additional funding  responsibility for the benefits of the bankrupt employer’s plan  participants. For single-employer plans, the sponsoring employer is liable  only for the unfunded portion of its own plan or its current liability in a  bankruptcy (distress termination).
Different premiums and benefit guarantee levels· PBGC operates two  distinct insurance programs, one for multiemployer plans and one for  single-employer plans, which have separate insurance funds, different  benefit guarantee rules, and different insurance coverage rules. The two  insurance programs and PBGC’s operations are financed through  premiums paid annually by plan sponsors, investment returns on PBGC  assets, assets acquired from terminated single employer plans, and  recoveries from employers responsible for underfunded terminated single  employer plans. Premium revenue totaled about $973 million in 2003, of  which $948 million was paid into the single-employer program and   $25 million paid to the multiemployer program. Single-employer plans pay  PBGC an annual flat-rate premium of $19 per participant per year for  pension insurance coverage. Plans that are underfunded generally also  have to pay PBGC an additional annual variable rate premium of $9 per  $1,000 of underfunding for the additional exposure they create for the  insurance program. In contrast, the only premium for multiemployer plans  is a flat $2.60 per participant per year. PBGC guarantees benefits for  multiemployer pensioners at a much lower dollar amount than for single- employer pensioners: about $13,000 for 30 years of service for the former  compared with about $44,000 annually per retiree at age 65 for the latter.
Financial assistance and the insurable event· PBGC’s “insurable event”  for its multiemployer program is plan insolvency. A multiemployer plan is  insolvent when its available resources are not sufficient to pay the level of  benefits at PBGC’s multiemployer guaranteed level for 1 year. In contrast,  the insurable event for the single-employer program is generally the  termination of the plan. In addition, unlike its role in the single-employer  program where PBGC trustees weak plans and pays benefits directly to  participants, PBGC does not take over the administration of  multiemployer plans but instead, provides financial assistance in the form  of loans when plans become insolvent. A multiemployer plan need not be  terminated to qualify for PBGC loans, but it must be insolvent and is  allowed to reduce or suspend payment of that portion of the benefit that  exceeds the PBGC guarantee level. If the plan recovers from insolvency, it  must begin repaying the loan on reasonable terms in accordance with  regulations. Such financial assistance is infrequent; for example, PBGC has  made loans totaling $167 million to 33 multiemployer plans since 1980  compared with 296 trusteed terminations of single-employer plans and  PBGC benefit payments of over $4 billion in 2002-2003 alone.
The net effect of these different features is that there is a different  distribution of financial risk among, employers, participants and PBGC  under the multiemployer program, compared with PBGC’s single-employer  program. Multiemployer member employers and participants bear far  more financial risk, and PBGC, and implicitly the taxpayer, bear far less  risk, under the multiemployer program. In addition, PBGC officials  explained that the features of the multiemployer regulatory framework  have also led to a lower frequency of financial assistance. They note that  greater financial risks faced by employers and the lower guaranteed  benefits assured participants create incentives for employers, participants,  and their collective bargaining representatives to avoid insolvency and to  collaborate in trying to find solutions to a plan’s financial difficulties.

	The Financial Stability of Multiemployer Plans Has Likely Weakened Recently, while Long- Term Declines in the Number of Plans and Participants Continue

While multiemployer plan funding has exhibited considerable stability  over the past two decades, available data suggest that many plans have  recently experienced significant funding declines. Since 1980, aggregate  multiemployer plan funding has been stable, with the majority of plans  funded above 90 percent of total liabilities and average funding at   105 percent in 2000. Recently, however, it appears that a combination of  stock market declines coupled with low interest rates and poor economic  conditions has reduced the assets and increased the liabilities of many  multiemployer plans. In PBGC’s 2003 annual report, the agency estimated  that total underfunding of underfunded multiemployer plans reached   $100 billion by year-end, from $21 billion in 2000, and that its  multiemployer program had recorded a year-end 2003 net deficit of   $261 million, the first deficit in more than 20 years. While most  multiemployer plans continue to provide benefits at unreduced levels, the  agency has also increased its forecast of the number of plans that will  likely need financial assistance, from 56 plans in 2001 to 62 plans in 2003.  Private survey data are consistent with this trend, with one survey by an  actuarial consulting firm showing the percentage of fully funded client  plans declining from 83 percent in 2001 to 67 percent in 2002. In addition,  long-standing declines in the number of plans and worker participation  continue. The number of insured multiemployer plans has dropped by a  quarter since 1980 to fewer than 1,700 plans in 2003, according to the latest  data available. Although in 2001, multiemployer plans in the aggregate  covered 4.7 million active participants, representing about a fifth of all  active defined benefit plan participants, this number has dropped by   1.4 million since 1980.

		Multiemployer Plan Funding Remained Stable during the 1980s and 1990s

Aggregate funding for multiemployer pension plans remained stable  during the 1980s and 1990s. By 2000, the majority of multiemployer plans  reported assets exceeding 90 percent of total liabilities, with the average  plan funded at 105 percent of liabilities. As shown in figure 1, the  aggregate net funding of multiemployer plans grew from a deficit of about  $12 billion in 1980 to a surplus of nearly $17 billion in 2000. From 1980 to  2000, multiemployer plan assets grew at an annual average rate of   11.7 percent, to about $330 billion, exceeding the average 10.5 percent  annual percentage growth rate of single-employer plan assets. During the  same time period, liabilities for multiemployer and single-employer  pensions grew at an average annual rate of about 10.2 percent and   9.9 percent respectively.
A number of factors appear to have contributed to the funding stability of  multiemployer plans, including:  Investment strategy · Historically, multiemployer plans appear to have  invested more conservatively than their single-employer counterparts.  Although comprehensive data are not available, some pension experts  have suggested that defined benefit plans in the aggregate are more than  60 percent invested in equities, which are associated with greater risk and  volatility than many fixed-income securities. Experts have stated that, in  contrast, equity holdings generally constitute 55 percent or less of the  assets of most multiemployer plans.
Contribution rates · Unlike funds for single-employer plans,  multiemployer plan funds receive steady contributions from employers  because those amounts generally have been set through multiyear  collective bargaining contracts. Participating employers, therefore, have  less flexibility to vary their contributions in response to changes in firm  performance, economic conditions, and other factors. This regular  contribution income is in addition to any investment return and helps  multiemployer plans offset any declines in investment returns.
Risk pooling · The pooling of risk inherent in multiemployer pension plans  may also have buffered them against financial shocks and recessions,  since the gains and losses of the plans are less immediately affected by the  economic performance of individual employer plan sponsors.  Multiemployer pension plans typically continue to operate long after any  individual employer goes out of business because the remaining employers  in the plan are jointly liable for funding the benefits of all vested  participants.
Greater average plan size · The stability of multiemployer plans may also  partly reflect their size. Large plans (1,000 or more participants) constitute  a greater proportion of multiemployer plans than of single-employer plans.  (See figs. 2 and 3.) While 55 percent of multiemployer plans are large, only  13 percent of single-employer plans are large and 73 percent of single- employer plans have had fewer than 250 participants, as shown in   figure 2. However, distribution of participants by plan size for  multiemployer and single-employer plans is more comparable, with over  90 percent of both multiemployer and single-employer participants in large  plans, as shown in figure 3.

		Data Suggest the Funded Status of Multiemployer Plans Has Declined Since 2000

Although data limitations preclude any comprehensive assessment,  available evidence suggests that since 2000, many multiemployer plans  have experienced significant reductions in their funded status. PBGC  estimated in its 2003 annual report that aggregate deficit of underfunded  multiemployer plans had reached $100 billion by year-end, up from a   $21 billion deficit at the start of 2000. In addition, PBGC reported a net  accumulated deficit for its own multiemployer program of $261 million for  fiscal year 2003, the first deficit since 1981 and its largest ever. (See fig. 4.)  While most multiemployer plans continue to provide benefits at unreduced  levels, PBGC has also reported that the deficit was primarily caused by  new and substantial “probable losses,” increasing the number of plans it  classifies as likely requiring financial assistance in the near future from   58 plans with expected liabilities of $775 million in 2002 to 62 plans with  expected liabilities of $1.25 billion in 2003.
Private survey data and anecdotal evidence are consistent with this  assessment of multiemployer funding losses. One survey by an actuarial  consulting firm showed that the percentage of its multiemployer client  plans that were fully funded declined from 83 percent in 2001 to 67 percent  in 2002. Other, more anecdotal evidence suggests increased difficulties  for multiemployer plans. For example, discussions with plan  administrators have indicated that there has been an increase in the  number of plans with financial difficulties in recent years, with some plans  reducing or temporarily freezing the future accruals of participants. In  addition, IRS officials recently reported an increase in the number of  multiemployer plans (less than 1 percent of all multiemployer plans)  requesting tax-specific waivers that would provide plans relief from  current funding shortfall requirements.
As with single-employer plans, falling interest rates coincident with stock  market declines and generally weak economic conditions have  contributed to the funding difficulties of multiemployer plans. The decline  in interest rates in recent years has increased the present value of pension  plan liabilities for DB plans in general, because the cost of providing future  promised benefits increases when computed using a lower interest rate. At  the same time, declining stock markets decreased the value of any equities  held in multiemployer plan portfolios to meet those obligations. Finally,  because multiemployer plan contributions are usually based on the  number of hours worked by active participants, any reduction in their  participant employment will reduce employer contributions to the plan.

		Multiemployer Plans Experiencing Long-Term Declines in Plan Formation and Worker Participation

Despite their relative financial stability, the multiemployer system has  experienced a steady decline in the number of plans and in the number of  active participants over the past 2 decades. In 1980, there were 2,244 plans,  and by 2003 the number had fallen to 1,623, a decline of about 27 percent.  While a portion of the decline in the number of plans can be explained by  consolidations through mergers, few new plans have been formed - only   5, in fact, since 1992. Meanwhile, the number of active multiemployer plan  participants has declined in both relative and absolute terms. By 2001, only  about 4.1 percent of the private sector workforce was composed of active  participants in multiemployer pension plans, down from 7.7 percent in  1980 (see fig. 5), with the total number of active participants decreasing  from about 6.1 million to about 4.7 million.
Finally, as the number of active participants has declined, the number of  retirees increased – from about 1.4 million to 2.8 million, and this increase  had led to a decline in the ratio of active (working) participants to retirees  in multiemployer plans. By 2001, there were about 1.7 active participants  for every retiree, compared with 4.3 in 1980. (See fig. 6.) While the trend is  also evident among single-employer plans, the decline in the ratio of active  workers to retirees affects multiemployer funding more directly because  employer contributions are tied to active employment. The higher benefit  payouts required for greater numbers of retirees, living longer, and the  reduced employer contributions resulting from fewer active workers  combines to put pressure on the funding of multiemployer plans.

	A Number of Factors Challenge the Long- Term Prospects of the Multiemployer Defined Benefit System

A number of factors pose challenges to the long-term prospects of the  multiemployer pension plan system. Some of these factors are specific to  the features and nature of multiemployer plans, including a regulatory  framework that some employers may perceive as financially riskier and  less flexible than those covering other types of pension plans. For  example, compared with a single-employer plan, an employer covered by a  multiemployer plan cannot easily adjust annual plan contributions in  response to the firm’s own financial circumstances. This is because  contribution rates are often fixed for periods of time by the provisions of  the collective bargaining agreement. Collective bargaining itself, a  necessary aspect of the multiemployer plan model and another factor  affecting plans’ prospects, has also been in long-term decline, suggesting  fewer future opportunities for new plans to be created or existing ones to  expand. As of 2003, union membership, a proxy for collective bargaining  coverage, accounted for less than 9 percent of the private sector labor  force and has been steadily declining since 1953. Experts have identified  other challenges to the future prospects of defined benefit plans generally,  including multiemployer plans. These include the growing trend among  employers to choose defined contribution plans over DB plans, including  multiemployer plans; the continued growing life expectancy of American  workers, resulting in participants spending more years in retirement, thus  increasing pension benefit costs; and increases in employer-provided  health insurance costs, which are increasing employers’ compensation  costs generally, including pensions.

		Certain Features of the Current Regulatory Framework and the Decline of Collective Bargaining May Discourage Future Plan Growth

Some factors raise questions about the long-term viability of  multiemployer plans are specific to certain features of multiemployer  plans themselves, including features of the regulatory framework that  some employers may well perceive as less flexible and financially riskier  than the features of other types of pension plans. For example, an  employer covered by a multiemployer pension plan typically does not have  the funding flexibility of a comparable employer sponsoring a single- employer plan. In many instances, the employer covered by the  multiemployer plan cannot as easily adjust annual plan contributions in  response to the firm’s own financial circumstances. Employers that value  such flexibility might be less inclined to participate in a multiemployer  plan. Employers in multiemployer plans may also face greater financial  risks than those in other forms of pension plans. For example, an  employer sponsor of a multiemployer plan that wishes to withdraw from  the plan is liable for its share of pension plan benefits not covered by plan  assets upon withdrawal from the plan, rather than when the plan  terminates, as with a single-employer plan. Employers in plans with  unfunded vested benefits face an immediate withdrawal liability that can  be costly. In addition, employers in fully funded plans also face the  potential of costly withdrawal liability if the plan becomes underfunded in  the future through the actions of other sponsors participating in the  multiemployer plan. Thus, an employer’s pension liabilities become a  function not only of the employer’s own performance but also the financial  health of other plan sponsors in the multiemployer plan. These additional  sources of potential liability can be difficult to predict, increasing  employers’ level of uncertainty and risk. Some employers may hesitate to  accept such risks if they can sponsor other plans that do not have them,  such as 401(k)-type defined contribution plans.
The future growth of multiemployer plans is also predicated on the future  of collective bargaining. Collective bargaining is an inherent feature of the  multiemployer plan model. Collective bargaining, however, has been  declining in the United States since the early 1950s. Currently, union  membership, a proxy for collective bargaining coverage, accounts for less  than 9 percent of the private sector labor force. In 1980, union  membership accounted for about 19 percent of the entire national  workforce and about 27 percent of the civilian workforce in 1953.

		Multiemployer Plans Are Limited by the Same Factors Affecting All Defined Benefit Plans

Pension experts have suggested a variety of challenges faced by today’s  defined benefit pension plans, including multiemployer plans. These  include the continued general shift away from DB plans to defined  contribution (DC) plans, and the increased longevity of the U.S.  population, which translates into a lengthier and more costly retirement.  In addition, the continued escalation of employer health insurance costs  has placed pressure on the compensation costs of employers, including  pensions.
Employers have tended to move away from DB plans and toward DC plans  since the mid-1980s. The total number of PBGC-insured defined benefit  plans, including single employer plans, declined from 97,683 in 1980 to  31,135 in 2002. (See fig. 7.) The number of DC plans sponsored by private  employers nearly doubled from 340,805 in 1980 to 673,626 in 1998. Along  with this continuing trend toward sponsoring DC plans, there has also  been a shift in the mix of plans that private sector workers participate in.  Labor reports that the percentage of private sector workers who  participated in a primary DB plan has decreased from 38 percent in 1980 to  21 percent by 1998, while the percentage of such workers who  participated in a primary DC plan has increased from 8 percent to   27 percent during this same period. Moreover, these same data show that  by 1998, the majority of active participants (workers participating in their  employer’s plan) were in DC plans, whereas nearly 20 years earlier the  majority of participants had been in DB plans. Experts have suggested a  variety of explanations for this shift, including the greater risk borne by  employers with DB plans, greater administrative costs and more onerous  regulatory requirements, and that employees more easily understand and  favor DC plans. These experts have also noted considerable employee  demand for plans that state benefits in the form of an account balance and  emphasize portability of benefits, such as is offered by 401(k)-type defined  contribution pension plans.
The increased life expectancy of workers also has important implications  for defined benefit plan funding, including multiemployer plans. The  average life expectancy of males at birth has increased from 66.6 in 1960 to  74.3 in 2000, with females at birth experiencing a rise of 6.6 years from   73.1 to 79.7 over the same period. As general life expectancy has increased  in the United States, there has also been an increase in the number of  years spent in retirement. PBGC has noted that improvements in life  expectancy have extended the average amount of time spent by workers in  retirement from 11.5 years in 1950 to 18 years for the average male worker  as of 2002. This increased duration of retirement has required employers  with defined benefit plans to increase their contributions to match this  increase in benefit liabilities. This problem is exacerbated for those  multiemployer plans with a shrinking pool of active workers because plan  contributions are generally paid on a per work-hour basis, contributing to  the funding strain we discussed earlier.
Increasing health insurance costs are another factor affecting the long- term prospects of pensions, including multiemployer pensions. Recent  increases in employer-provided health insurance costs are accounting for  a rising share of total compensation, increasing pressure on employers’  ability to maintain wages and other benefits, including pensions. Bureau of  Labor Statistics data show that the cost of employer-provided health  insurance has risen steadily in recent years, growing from 5.4 percent of  total compensation in 1999 to 6.5 percent as of the third quarter of 2003. A  private survey of employers found that employer-sponsored health  insurance costs rose about 14 percent between the spring of 2002 and the  spring of 2003, the third consecutive year of double-digit acceleration and  the highest premium increase since 1990. Plan administrators and  employer and union representatives that we talked with identified the  rising costs of employer-provided health insurance as a key problem  facing plans, as employers are increasingly forced to choose between  maintaining current levels of pension and medical benefits.

	Conclusions

Although available evidence suggests that multiemployer plans are not  experiencing anywhere near the magnitude of the problems that have  recently afflicted the single-employer plans, there is cause for concern.  The declines in interest rates and equities markets, and weak economic  conditions in the early 2000s, have increased the financial stress on both  individual multiemployer plans and the multiemployer framework  generally. Most significant is PBGC’s estimate of $100 billion in unfunded  multiemployer plan liabilities that are being borne collectively by  employers and plan participants.
At this time, PBGC and, potentially, the taxpayer do not face the same  level of exposure from this liability with multiemployer plans that they do  with single-employer plans. This is because, as PBGC officials have noted,  the current regulatory framework governing multiemployer plans  redistributes financial risk toward employers and workers and away from  the government. Employers face withdrawal and other liabilities that can  be significant. In addition, should a multiemployer plan become insolvent,  workers face the prospect of receiving far lower guaranteed benefits than  workers receive under PBGC’s single-employer program guaranteed limits.  Together, not only do these features limit the exposure for PBGC, they  create important incentives for all interested parties to resolve difficult  financial situations that could otherwise result in plan insolvency.
Because the multiemployer plans’ structure balances risk in a manner that  fosters constructive collaboration among interested parties, proposals to  address multiemployer plans’ funding stress should be carefully designed  and considered for their long-term consequences. For example, proposals  to shift plan liabilities to PBGC by making it easier for employers to exit  multiemployer plans could help a few employers or participants but erode  the existing incentives that encourage interested parties to independently  face up to their financial challenges. In particular, placing additional  liabilities on PBGC could ultimately have serious consequences for the  taxpayer, given that with only about $25 million in annual income, a trust  fund of less than $1 billion, and a current deficit of $261 million, PBGC’s  multiemployer program has very limited resources to handle a major plan  insolvency that could run into billions of dollars.
The current congressional efforts to provide funding relief are at least in  part in response to the difficult conditions experienced by many plans in  recent years. However, these efforts are also occurring in the context of  the broader long-term decline in private sector defined benefit plans,  including multiemployer plans, and the attendant rise of defined  contribution plans, with their emphasis on greater individual responsibility  for providing for a secure retirement. Such a transition could lead to  greater individual control and reward for prudent investment and  planning. However, if managed poorly, it could lead to adverse  distributional effects for some workers and retirees, including a greater  risk of a poverty-level income in retirement. Under this transition view, the  more fundamental issues concern how to minimize the potentially serious,  negative effects of the transition while balancing risks and costs for  employers, workers, and retirees, and for the public as a whole. These  important policy concerns make Congress’s current focus on pension  reform both timely and appropriate.
This concludes my prepared statement. I am happy to answer any  questions that the subcommittee may have.

	GAO Contact and Staff Acknowledgments

For further questions on this testimony, please contact me at (202)   512-7215. Individuals making key contributions to this testimony include  Joseph Applebaum, Tim Fairbanks, Charles Jeszeck, Gene Kuehneman,  Raun Lazier, and Roger J. Thomas.
This is a work of the U.S. government and is not subject to copyright protection in the  United States. It may be reproduced and distributed in its entirety without further  permission from GAO. However, because this work may contain copyrighted images or  other material, permission from the copyright holder may be necessary if you wish to  reproduce this material separately.

Summary:
Why GAO Did This Study

Multiemployer defined benefit pension plans, which are created by collective bargaining agreements covering more than one employer and generally operated under the joint trusteeship of labor and management, provide coverage to over 9.7 million of the 44 million participants insured by the Pension Benefit Guaranty Corporation (PBGC). The recent termination of several large single-employer plans--plans sponsored by individual firms--has led to millions of dollars in benefit losses for thousands of workers and left PBGC, their public insurer, an $11.2 billion deficit as of September 30, 2003. The serious difficulties experienced by these single-employer plans have prompted questions about the health of multiemployer plans. This testimony provides information on differences between single employer and multiemployer pension plans, recent trends in the funding of multiemployer pension plans and worker participation in those plans, and factors that may pose challenges to the future prospects of multiemployer plans. GAO will soon release a separate report on multiemployer pension issues.

What GAO Found

The framework governing multiemployer plans generally places greater financial risk on employers and participants and less on PBGC than does PBGC's single-employer program. For example, in the event of employer bankruptcy, the remaining employers in the multiemployer plan assume additional funding responsibility. Further, PBGC's guaranteed participant benefit is much lower for multiemployer participants, and PBGC does not provide financial assistance until the multiemployer plan is insolvent. Following two decades of relative financial stability, many multiemployer plans appear to have suffered recent funding losses, while long-term declines in participation and plan formation continue. At the close of the 1990s, the majority of multiemployer plans reported assets exceeding 90 percent of total liabilities. Since then, stock market declines, coupled with low interest rates and poor economic conditions, have reduced assets and increased liabilities for many plans. In its 2003 annual report, PBGC estimated that underfunded multiemployer plans now face an aggregate unfunded liability of $100 billion, up from $21 billion in 2000. PBGC also reported an accumulated net deficit of $261 million for its multiemployer program in 2003, the first since 1981. Meanwhile, since 1980, there has been a steady decline in the number of plans, from over 2,200 plans to fewer than 1,700, and a 1.4 million decline in the number of active workers in plans. The long-term prospects of the multiemployer system face a number of challenges. Some are inherent in the multiemployer design and regulatory framework, such as the greater perceived financial risk and reduced flexibility for employers, compared with other plan types. The long-term decline of collective bargaining also results in fewer participants and employers available to expand or create new plans. Other factors that pose challenges include the growing trend among employers to choose defined contribution plans; the increasing life expectancy of workers, which raises the cost of defined benefit plans; and continuing increases in employer health insurance costs, which compete with pensions for employer funding.