Statement of

THE HONORABLE GORDON HARTOGENSIS

DIRECTOR 

PENSION BENEFIT GUARANTY CORPORATION 

before the 

SENATE COMMITTEE ON FINANCE

December 11, 2019

Chairman Grassley, Ranking Member Wyden, and Members of the Committee:

Thank you for the opportunity to appear before you today. The crisis facing the Pension Benefit 

Guaranty Corporation’s (PBGC or the Corporation) Multiemployer Program threatens the 

retirement security of millions of American workers, retirees, and their families.

I appreciate the work you have done to highlight this issue and hope to work with this 

Committee and other policymakers to find an acceptable solution. Without reforms, our 

Multiemployer Program — the backstop that is the last resort for retirees when a plan fails — is 

very likely to become insolvent by the end of 2025, which would leave participants and 

beneficiaries with significantly less than the level of benefits currently guaranteed by PBGC. The 

alarm bells are ringing, and legislative changes are necessary to protect retirees, prevent collapse 

of the multiemployer pension system, keep the Multiemployer Program solvent for the long 

term, and prevent recurrence of this crisis. As more time passes, the crisis will grow larger, more 

plans will deplete their assets, more retirees will lose benefits, and the cost of any fix will grow. 

PROTECTING PENSIONS

PBGC recently marked its 45th anniversary. Since 1974, PBGC has played a vital role in 

protecting the retirement security of millions of American workers and retirees. First, as a 

guarantor, the Corporation provides insurance coverage for the retirement benefits of over 35 

million workers and retirees who participate in private-sector defined benefit pension plans. 

Second, the Corporation provides retirement security for about 1.5 million participants and 

beneficiaries in more than 4,900 plans that have failed since PBGC was established.
2

Congress established PBGC as part of the Employee Retirement Income Security Act of 1974

(ERISA). By law, the Corporation is financed from premiums and, in the case of the SingleEmployer Program, assets from failed plans. PBGC is administered by a Director and has a 

three-member Board of Directors — consisting of the Secretary of Labor, who is the Board 

Chair, and the Secretaries of the Treasury and Commerce.

PBGC operates two separate insurance programs: one for single-employer plans (the SingleEmployer Program) and one for multiemployer plans that are collectively bargained with more 

than one employer (the Multiemployer Program). While each program is designed to protect 

participants’ pension benefits when plans fail, the programs differ significantly in the level of 

benefits guaranteed, how the guarantee is provided, the event that triggers payment of the 

guarantee, and premiums paid by the insured plans.

The two programs are legally separate and operationally and financially independent. By law, 

assets of one program may not be used to pay obligations of the other.

Program liabilities exceeded program assets for fifteen years or longer in both of our two 

insurance programs until FY 2018 (see Figure 1). While the financial condition of the SingleEmployer Program has been improving, the Multiemployer Program’s financial condition has 

worsened, and the program is on a path to insolvency by the end of FY 2025.

-$70

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1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Single-Employer Program Multiemployer Program

Figure 1 

PBGC Single-Employer and Multiemployer Insurance Programs

Net Positions FY 1995-2019

($ in billions)

Source: PBGC Data Tables/Annual Report
3

The Single-Employer Program emerged from a net negative position in FY 2018 and just 

completed its fourth consecutive year of improving financial results. Due in large part to 

Congressional action to increase employer premiums in the program, as of the end of FY 2019,

the Single-Employer Program had liabilities of $119.4 billion and assets of $128.1 billion, 

resulting in an $8.7 billion positive net position, an improvement over a $2.4 billion positive net 

position at the end of FY 2018. While the financial condition of the Single-Employer Program is 

improving, there are still risks, like the significant amounts of underfunding in single-employer 

plans.

In sharp contrast to the positive net position of the Single-Employer Program, the Multiemployer 

Program ended FY 2019 with liabilities of $68 billion and assets of only $2.9 billion, resulting in 

a deficit of about $65.2 billion. The Multiemployer Program is projected to fail in just a few 

years.

The multiemployer pension crisis is the result of serious structural flaws in the financing of both 

multiemployer plans and PBGC’s Multiemployer Program, which insures these plans.

Multiemployer plan funding rules permit the use of overly optimistic actuarial assumptions to 

determine plan liabilities and allow too much time to pay down the underfunding. Tightening 

these funding rules would lead to higher asset accumulations, which in turn will help plans to 

weather adverse financial, economic, and demographic challenges. 

PBGC’s Multiemployer Program is undercapitalized, with premium rates set by law that are far 

too low for it to provide even the modest guarantees under current law, which are significantly 

lower than the guarantees for single-employer plans.

1

These structural flaws threaten pensions in multiemployer plans that are seriously underfunded 

today, and they set the stage for similar crises in the future.

I will first discuss multiemployer plans and the structural flaws that have put over a million

workers and retirees at risk of pension losses due to future insolvency of their plans.

MULTIEMPLOYER PLANS

A multiemployer plan is a pension plan to which more than one employer is required to 

contribute and which is maintained through one or more collective bargaining agreements

between the contributing employers and one or more employee organizations or unions. The 

employers are usually in the same or related industries. These plans provide benefits for people 

in industries such as transportation, construction, mining, and hospitality. They are jointly 

administered and governed by an independent board of trustees, with an equal number of labor 

and management representatives.

1 For example, the maximum guaranteed benefit for a multiemployer plan retiree with 30 years of service is $12,870 

annually. In contrast, the maximum guaranteed benefit for a retiree at age 65 in a single-employer plan that fails in 

2020 is $69,750 annually. The guarantee is lower for those who retire early or when there is a benefit for a survivor.
4

Multiemployer plans have provided retirement benefits to millions of American workers for 

more than half a century. Today, there are roughly 1,400 multiemployer plans that provide 

retirement security to about 10.8 million participants and their families. 

These plans cover participants in every state and range in size from small local plans with a 

hundred or fewer participants to large national plans covering hundreds of thousands of 

participants. Businesses of all sizes, including hundreds of thousands of small businesses,

participate in multiemployer plans.

From the perspective of workers, multiemployer plans provide pension portability, allowing 

them to accumulate benefits earned for service with different employers throughout their careers.

From the perspective of employers — especially small employers — a multiemployer plan could 

provide efficiencies of scale compared to a single-employer plan: less administrative burden and 

cost, more diversified and less costly investment opportunities, and pooled longevity risk, which

helps reduce costs. Unfortunately, these theoretical advantages have been more than offset by 

structural flaws in how the plans have been operated and financed.

Funding rules for multiemployer plans — which differ considerably from the rules for singleemployer plans —have resulted in valuations of liabilities that significantly understate the actual 

cost of plan benefits. Pension funding requirements should lead to benefit security, because 

retirees understandably expect their pensions will be paid as promised and not be subject to risk. 

But those expectations are not reflected in today’s permissive multiemployer funding rules. That 

is especially dangerous in the multiemployer context, where the guarantee is significantly lower 

than the guarantee for other defined benefit plans. In addition, multiemployer plans are afforded 

too much time to pay down underfunding. The rules allow underfunding that results from benefit 

improvements or adverse experience (such as investment returns or employer contributions that 

were lower than anticipated) to be paid for over a 15-year period (rather than the 7-year period 

used for single-employer plans).

This extended period of time makes it difficult or even impossible for some plans to make up for 

the actuarial losses, including the loss of contributions that results from competition, declines in 

demand for products or services, and technological changes. These same factors also caused 

some companies to go out of business, leaving behind the unfunded benefits of their inactive and 

retired workers (sometimes referred to as orphan liabilities) for other contributing employers to 

inherit.

A significant percentage of multiemployer plans have been unable to attain financial stability 

after the 2009 financial crisis, despite a strong economy bolstered by the Tax Cuts and Jobs Act. 

As plans struggle to improve funded status, contributing employers that remain in these plans are 

often faced with the difficult choice between continuing to participate in the plan (with the 

prospect of being required to increase their contributions) or withdrawing from the plan and 

incurring withdrawal liability.
5

About 125 plans, some very large, covering 1.4 million participants, are now in Critical and 

Declining status,

2 which means that plan insolvency is projected to occur within 20 years or 

less.3 The underfunding in all Critical and Declining plans totals about $100 billion when 

measured on a market basis.4

These plans will not be able to provide promised benefits without help from the Multiemployer 

Program. But the Multiemployer Program, as currently financed, cannot be the safety net it 

purports to be and on which millions of workers, retirees, and families depend. 

MULTIEMPLOYER PROGRAM

PBGC’s Multiemployer Program provides financial assistance5to insolvent multiemployer plans 

so that they can pay benefits at PBGC guaranteed levels.6 The Multiemployer Program is funded 

by premiums paid by the plans, but this program will also run out of money in a few years, 

jeopardizing retirement security of workers in failing plans as well as plans currently receiving 

financial assistance from PBGC. 

In the coming years, the demand for financial assistance from PBGC will increase as more and 

larger multiemployer plans run out of money and need help to provide benefits at the guarantee 

level set by law. 

The assets and income of PBGC’s Multiemployer Program are only a small fraction of the 

amounts PBGC will need to support the guaranteed benefits of participants in plans expected to 

become insolvent during the next decade.

 

At the end of FY 2019, PBGC was liable for $2.8 billion for plans already receiving financial 

assistance, as well as $65.2 billion booked as “probable” obligations for plans that are expected 

to become insolvent in the next ten years or are terminated but not yet insolvent. The ten largest 

plans classified as probable obligations account for $53.6 billion of the $65.2 billion total 

probable obligations. In addition to the $68.0 billion booked as a liability in our financial 

statements, there is $10.9 billion in liabilities for future financial assistance to ongoing 

multiemployer plans projected to become insolvent in the next 10 to 20 years; these plans, which 

are not booked as liabilities, are classified as “reasonably possible” future obligations.

As plans become insolvent, the Multiemployer Program’s assets will be exhausted, and only 

premium income will be available to pay financial assistance.

2

 Based on Form 5500 information and the Critical and Declining Notices filed as of December 2018.

3

 Under ERISA § 305(b)(6), which was added by the Multiemployer Pension Reform Act of 2014 (MPRA), 

a plan is in critical and declining funded status for a plan year if the plan’s actuary determines that the plan meets 

certain conditions indicating significant underfunding, and it is projected to become insolvent during the current 

plan year or any of the 14 succeeding plan years (19 succeeding plan years if the plan has a ratio of inactive 

participants to active participants that is greater than two to one or if the funded percentage of the plan is less than 

80%). 

4 According to PBGC analysis of 2017 Form 5500 data, critical and declining plans have $106.7 billion in unfunded 

current liability.

5

 Financial assistance also covers reasonable administrative expenses.

6

 PBGC financial assistance is technically a loan to the insolvent plan. But because the plans have already run out of 

money, repayment of financial assistance loans is highly unlikely. To date, only one loan has been repaid, and that 

loan was made in the circumstance of a plan having a temporary financial need rather than a permanent one.
6

That means plan participants will see a substantial reduction in the benefits they receive — mere 

pennies on the dollar. The backstop that hardworking men and women had been depending on 

for a secure retirement — and to help support themselves and their families — simply won’t be 

there.

Let me be as clear as I can. Unless Congress acts, participants in insolvent plans will 

receive next to nothing. A typical retiree with 30 years of accrued benefits would receive 

only about $100 a month.

The Multiemployer Program is estimated to have a 99 percent likelihood of insolvency by the 

end of FY 2025 and a100 percent likelihood in FY 2026. The likelihood of insolvency does not 

vary greatly with the expected future use of suspension and partitions under the Multiemployer 

Pension Reform Act of 2014 (MPRA) (see Figure 2 below). The projections assume a zero 

percent likelihood that the largest critical and declining plan will suspend benefits, a 30 percent 

likelihood that other plans will apply for suspension alone, and a 10 percent likelihood that other 

plans will apply for both suspension and partition. These percentages reflect our best estimates 

based on experience to date under MPRA.

7 No scenario in our modeling shows the 

Multiemployer Program remaining solvent beyond FY 2026 under current law.

Figure 2

7

 The “best estimate” of MPRA utilization in the FY 2014 Projections Report was a 100 percent likelihood that the 

Central States Pension Fund, the largest critical and declining plan will suspend benefits, a 60 percent likelihood that 

other plans will apply for suspension alone, and a 20 percent likelihood that other plans will apply for both 

suspension and partition. The report also contained an “alternative” that halved these assumptions. The FY 2015 

Projections Report (issued June 6, 2016) used revised assumptions to reflect that (1) the Central States Pension 

Fund’s application for benefit suspension was rejected (May 6, 2016) and the plan announced that it would not 

reapply and (2) the rate of applications from other plans had been less than initially expected. Those revised 

assumptions are reviewed every year and remained in effect for the FY 2018 Projections Report.

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2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038

Billions of Dollars

PBGC Assets, Average Assistance Payments and Premiums 

by Fiscal Year

(Projected in Nominal $ Amounts)

Assets at Start of Year Financial Assistance Partition Assistance Premiums
7

PBGC’s FY 2018 Projections Report shows a projected FY 2028 year-end mean deficit of about 

$90 billion (in nominal dollars) in the Multiemployer Program, even if some additional plans use 

benefit suspensions and partitions as allowed under the MPRA to avoid insolvency (see Figure 3 

below).

Figure 3

The dire state of the Multiemployer Program reflects both the structural flaws in the funding 

rules for multiemployer plans and PBGC premiums that have been too low for decades and do 

not take into account the risk posed by individual plans. As a result, multiemployer premiums 

fall short of the financial needs of the program and offer no incentive to improve plan funding

(see Figure 2).

In contrast to the Single-Employer Program, which assesses a variable-rate premium based on 

plan underfunding in addition to a flat-rate per-participant premium, multiemployer plans pay 

only a flat-rate per participant premium. 

For plan years beginning in 2020, per year single-employer plan sponsors will pay a flat-rate 

premium of $83 per participant and a variable-rate premium of $45 per $1,000 of plan 

underfunding, capped at $561 per participant; all rates for future years are indexed. By contrast, 

the flat-rate multiemployer premium for plan years beginning in 2020 is $30 per participant per 

year and is indexed for future years. As the green line in Figure 2 shows, premium income under 

current law will pay only a small fraction of the financial assistance needed for insolvent plans to 

pay benefits at PBGC-guaranteed levels. 

CONSEQUENCES OF MULTIEMPLOYER PROGRAM INSOLVENCY

Insolvency of PBGC’s Multiemployer Program will dramatically reduce the already relatively 

low guarantee for multiemployer plan participants. Under current law, when Multiemployer 

Program assets are exhausted, the only money available to provide financial assistance for 

benefit payments will be incoming multiemployer premiums. 

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2009 2012 2015 2018 2021 2024 2027

Billions of Dollars

Multiemployer Program Net Position

Historical Experience 2009-2018 and Nominal 2019-2028 Projections

Actual

(historic dollars)

Projected "High/Low" Range Projected Mean
8

The Multiemployer Program will soon be spending more in financial assistance than it receives 

in premium income. The Multiemployer Program’s resources will represent only a small fraction 

of the amount required to pay benefits at current guarantee levels. Under the program’s 

authorizing legislation,

8 PBGC would submit to Congress, in advance of Multiemployer Program 

insolvency, schedules of premium increases needed to provide current guarantees and reduced 

guarantees that would be necessary in the absence of a premium increase. Such reduced 

guarantees would result in participants in failed multiemployer plans receiving a very small 

fraction of the current guarantee level, no matter when their plan became insolvent.

FINDING A PATH FORWARD

PBGC works with troubled multiemployer plans and their sponsors who come to us seeking to 

prevent plan insolvency. But the tools the Corporation has to address the multiemployer crisis 

are limited, and legislation is needed to prevent the looming insolvency of PBGC’s 

Multiemployer Program. Both Congress and the Administration have recognized this fact.

Joint Select Committee 

In 2018, Congress created the Joint Select Committee on Solvency of Multiemployer Pension 

Plans to develop recommendations to address the problems in the multiemployer pension system. 

While the Committee did not issue recommendations before its term expired on November 30, 

2018, it succeeded in creating a broader understanding of the issues and potential reforms. I

would like to thank the members of that Committee for the work they did as part of that effort. 

President’s FY 2020 Budget Proposal

The President’s FY 2020 Budget includes a proposal to shore up PBGC’s Multiemployer 

Program. The Budget proposes adding a variable-rate premium on unfunded benefits, similar to 

the Single-Employer Program, with provision for waivers to avoid accelerating insolvency in the 

most troubled plans. The proposal also includes an exit premium on companies that withdraw 

from multiemployer plans. It is estimated to raise an additional $18 billion over the ten-year 

budget window.

The Administration’s Framework for Reform

The Administration stands ready to work with Congress on a long-term solution that 

appropriately balances the interests of all those affected by the multiemployer pension system —

from retirees, workers, employers, and unions to plans and taxpayers. That solution should raise 

the federal pension guarantee limit to improve retirement security, fix the defects in the system to 

prevent the crisis from recurring, give PBGC the tools to mitigate risks, and limit the burden on 

taxpayers. The proposal from Chairmen Grassley and Lamar Alexander appears to share these 

goals, and the Administration looks forward to learning more about this proposal.

The Administration believes a solution should simultaneously accomplish several goals: protect 

retirees and prevent the collapse of the multiemployer pension system, save the federal backstop, 

and prevent a future crisis. 

8 ERISA § 4022A(f)(2).
9

• Protect Retirees and Prevent Collapse: Expanding PBGC’s current ability to partition 

multiemployer pension plans would provide needed financial assistance to distressed 

plans. PBGC financial assistance could subsidize a plan’s benefit payments so the plan 

could remain solvent. This relief would be accompanied by conditions and reforms to 

limit the burden on taxpayers and to ensure that plans are governed responsibly to protect 

retirees’ benefits.

• Save the Federal Backstop: Any responsible solution requires new sources of revenue for 

PBGC, and the greater share of the cost should be borne by those who promised 

underfunded pension benefits and those protected by the Corporation’s guarantee. A 

solution will require compromise by all parties concerned with the troubled 

multiemployer pension plan system and more accurately charge insurance premiums 

based on risk.

• Prevent Future Crisis: A responsible proposal must come with strong protections to 

prevent a repeat of this crisis — including policies to hold plans accountable, provide 

proactive authorities to PBGC, improve transparency and disclosure, and remove legal 

and regulatory barriers to promote innovation in the retirement system. Additionally, 

reforms should establish guardrails to ensure plan benefits are funded as they are earned, 

including regulating plan assumptions regarding investment returns and levels of industry 

economic activity. 

Together, these commonsense reforms will help provide a lasting solution that protects retirees, 

prevents the collapse of pension plans, secures the future of PBGC, and avoids future crises in 

the multiemployer system. This is the lens through which the Administration will evaluate 

proposed solutions.

Current Legislative Proposals

While a number of legislative proposals have emerged to address the multiemployer pension 

crisis, those that have been seriously considered by Congress have either been insufficient or not 

comprehensive.

In July, the House of Representatives passed H.R. 397, the Rehabilitation for Multiemployer 

Pensions Act. This legislation would provide taxpayer-funded loans and PBGC financial 

assistance in an attempt to prevent the insolvency of troubled plans. It would also establish a new 

agency at Treasury to administer this loan program and provide general revenues to PBGC to 

fund financial assistance.

H.R. 397 may be well-intended, but it is not the solution taxpayers, workers, and retirees need. 

The Congressional Budget Office (CBO) estimated that the bill’s loan and financial assistance 

provisions would cost approximately $68 billion, including the long-term cost of the loan 

program and the first 10 years of new PBGC financial assistance. Furthermore, the bill is 

unlikely to solve the fundamental problem. In a September letter to Senator Mike Enzi, CBO 

predicted that a quarter of the plans would be unable to repay their loans and most of the 

remaining plans would go broke within 10 years after the loan period. 
10

Unfortunately, this legislation contains no reforms that would protect workers, retirees, and 

taxpayers from more plan failures and more bailouts.

Another proposal is S. 2788, the Bipartisan American Miners Act. This legislation, introduced 

just last month, would help protect the retirement security of more than 90,000 miners and their 

families who participate in the failing United Mine Workers of America 1974 Pension Plan, 

which has nearly no remaining contributing employers outside of bankruptcy. However, passage 

of this legislation would not materially alter the timing of PBGC’s expected insolvency or 

provide assistance to other multiemployer plans. 

The Start of a Solution

The “Multiemployer Pension Recapitalization and Reform Plan” takes a commonsense, 

pragmatic, and forward-thinking approach to comprehensive reform. As Chairmen Grassley and 

Alexander outlined when they released the plan in November, the proposal is built on five major 

components: stabilize plans in immediate danger of failure; secure workers’ and retirees’ 

benefits; strengthen PBGC’s ability to backstop the multiemployer system; put the system on a 

stable long-term path; and ensure fiscal responsibility. These components are closely aligned 

with the Administration’s principles for reform, and a closer look at the Grassley-Alexander 

plan’s proposal reveals a number of specific reforms worth noting. 

For one, it would provide a stronger guarantee for participants and create a better financial base 

for the future. It would expand PBGC’s current partition authority, which will allow the 

Corporation to better help plans in declining status. Additionally, the proposal would 

substantially increase PBGC’s maximum benefit guarantee for multiemployer plans, which is 

currently lower than the guarantee for the significantly healthier Single-Employer Program. 

That means that, if a plan becomes insolvent, retirees can receive significantly more in 

guaranteed pension benefits than the law currently allows — and orders of magnitude more than 

if the Multiemployer Program itself runs out of money.

The Grassley-Alexander proposal also addresses a critical question: how to pay for these 

reforms. The proposal would establish a new premium structure that would make it possible for 

the Corporation to financially assist troubled plans, generating the revenue needed to improve 

our overall financial position. It also introduces a new stakeholder co-payment, which means 

there will be a shared responsibility for these costs. While cash flows for any given year are 

difficult to project, on an aggregate basis, PBGC estimates the proposal should provide enough 

income to pay the costs of partition and the higher guarantee into the late 2030s.

Finally, the proposal includes a number of measures that will help create a sustainable 

multiemployer pension system for years to come, such as providing workers and employers a 

new, attractive retirement plan option. It also includes reforms to improve funding and liability 

measurement rules, strengthen the zone-status rules to make them more effective, and enhance 

and clarify the withdrawal liability rules. Importantly, the proposal also includes reforms to 

improve plan management, ensure greater accountability, and give PBGC more authority to 

supervise multiemployer plans. These reforms will help protect taxpayers from the consequences 

of continuing plan failures.
11

The Administration views the “Multiemployer Pension Recapitalization and Reform Plan” as a 

welcome starting point for a serious conversation about reforms to the multiemployer pension 

system. We believe it has the potential to serve as the base for a long-term solution to the 

multiemployer pension crisis. It also includes concepts and proposals that may require further 

analysis and adjustment to ensure it ultimately becomes effective, bipartisan legislation.

CONCLUSION

The PBGC’s Multiemployer Program and many multiemployer plans are headed toward 

collapse. Our projections show insolvency of PBGC’s Multiemployer Program by the end of the 

fiscal year ending September 30, 2025.

If the PBGC’s Multiemployer Program is allowed to become insolvent, the only money available 

to provide guaranteed benefits will be incoming premiums. Only a small fraction of the current 

guarantee will then be funded. The result will be catastrophic for many people — current and 

former workers, small business owners, retirees, beneficiaries, and their families. 

It’s clear that legislative action is necessary; it’s important that policymakers come to an 

agreement on the right solution, and that they do so soon. 

I appreciate the leadership of Chairman Grassley, Ranking Member Wyden, and the Members of 

this Committee in addressing the challenges faced by multiemployer plans and the PBGC 

Multiemployer Program. 

Chairman Grassley and Chairman Alexander’s proposal contains the beginnings of a solution 

that is balanced, will keep the Multiemployer Program solvent, deliver meaningful benefit 

protection to workers and retirees, and put multiemployer plans on a course toward funding 

improvements over the long term. I am eager to work with you, other Members of Congress, and 

stakeholders to safeguard pension benefits and to ensure that PBGC’s guarantee is one that 

workers and retirees can count on in the future. 

I am happy to answer any questions.