Testimony of

THE HONORABLE W. THOMAS REEDER 

DIRECTOR 

PENSION BENEFIT GUARANTY CORPORATION 

before the 

JOINT SELECT COMMITTEE ON SOLVENCY

OF MULTIEMPLOYER PENSION PLANS

Hearing on 

“THE STRUCTURE AND FINANCIAL OUTLOOK OF 

THE PENSION BENEFIT GUARANTY CORPORATION” 

May 17, 2018

Chairmen Hatch and Brown, and Members of the Committee. Thank you for the opportunity to 

appear before you today to discuss the Pension Benefit Guaranty Corporation (PBGC) and the 

challenges it faces in protecting pensions of American workers. We are grateful to the members 

of the Committee for undertaking this important work.

PROTECTING PENSIONS

Every American worker should have the opportunity to earn a secure retirement. A vital part of 

retirement security for nearly 40 million private-sector workers, retirees, and beneficiaries comes 

from traditional defined benefit pension plans. For decades they have been an efficient vehicle 

for a secure retirement. Traditional defined benefit plans provide lifetime retirement income that 

does not depend on a participant’s investment choices or the market price of annuities when the 

participant retires.

PBGC’s mission is to protect the lifetime retirement income that comes from private-sector

pension plans when employers are unable to make contributions to the plans sufficient to fund 

the promised benefits. Today, about 1.5 million current and future retirees and beneficiaries

depend on PBGC for pensions they earned for years of work but may have lost without PBGC.

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

(ERISA). By law, PBGC is financed from premiums and, in the case of the Single-Employer 

Program, assets from failed plans. PBGC is administered by a Director. PBGC has a threemember Board of Directors consisting of the Secretary of Labor, who is Board Chair, and the 

Secretaries of the Treasury and Commerce. 
2

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

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

participants’ pension benefits when plans fail, they 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 insured plans. By law, the two programs are financially separate. Assets of 

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

Both programs have been in a deficit position for fifteen years or longer, meaning that, for each 

of our two insurance programs, assets are less than liabilities. While the financial condition of 

the Single-Employer Program has been improving, the Multiemployer Program’s financial 

condition has been deteriorating rapidly and without action the changes required to remedy the 

deficit become more difficult (see Figure 1). 

As of September 30, 2017, the Single-Employer Program had liabilities of $117.1 billion and 

assets of $106.2 billion, resulting in a $10.9 billion deficit, down from a $20.6 billion deficit at 

the end of FY 2016. Continued improvement in the Single-Employer Program is projected but 

not a certainty.0F

1

In sharp contrast, the Multiemployer Program had liabilities of $67.3 billion and assets of only 

$2.3 billion, resulting in a deficit of about $65 billion. The Multiemployer Program is projected 

 1 PBGC uses stochastic modeling that produces a probability distribution of potential outcomes for the future 

financial condition of PBGC’s two insurance programs. The FY 2016 Projections Report continues to show a wide 

range of potential outcomes. 

-$70

-$60

-$50

-$40

-$30

-$20

-$10

$0

$10

$20

200020012002200320042005200620072008200920102011201220132014201520162017

Single-Employer Multiemployer

Figure 1 

PBGC Single-Employer and Multiemployer Insurance Programs

Net Positions FY 2000-2017

($ in billions)
3

to fail in just a few years, and without action the changes required to remedy the deficit become 

increasingly difficult.

MULTIEMPLOYER PROGRAM

PBGC’s Multiemployer Program provides financial assistance to multiemployer plans that have 

run out of money so that they can pay benefits at PBGC guaranteed levels.1F

2

 The program is 

funded by premiums paid by the plans. Our 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 

need.

PBGC’s FY 2016 Projections Report shows a projected FY 2026 year-end mean deficit of about 

$78 billion (in nominal dollars) in the Multiemployer Program, even assuming that some plans 

use benefit suspensions and partitions as allowed under the Multiemployer Pension Reform Act 

of 2014 (MPRA) to avoid insolvency (see Figure 2 below).

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. Projections show that the Program is

more likely than not to become insolvent by the end of FY 2025, absent changes in law (see 

Figure 3 below).

 2 Financial assistance also covers reasonable administrative expenses.

 Historical Average Projected “High-Low” Range, with MPRA

With MPRA - Mean

 Projected “High-Low” Range, without MPRA

 Without MPRA - Mean 

Figure 2 

Multiemployer Program Net Position

($ in billions)

Reflecting Assumed MPRA Suspensions / Partitions

Historical Experience 2007-2016 and Nominal 2017-2026 Projections
4

As insolvency of the insurance program grows closer, the changes required to prevent insolvency 

become more disruptive. 

MULTIEMPLOYER PLANS

A multiemployer plan is a pension plan maintained through a collective bargaining agreement 

between employers and a union. The employers are usually in the same or related industries. 

Multiemployer plans provide benefits for people in industries such as transportation, 

construction, mining and hospitality. 

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

more than half a century. Today, America’s 1,400 multiemployer plans provide retirement 

security to more than 10 million participants and their families. 

There are multiemployer plans and participants in every state. Multiemployer plans 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 – doing business in every state – participate in multiemployer plans. 

Multiemployer plans provide pension portability, allowing workers to accumulate benefits 

earned for service with different employers throughout their careers. They pool longevity risk, 

which provides much lower-cost annuities than those available in the individual market, and they 

spread the risk of any individual employer’s failure across many firms. 

Benefits to Employers

Among the advantages of this type of plan is that assets are pooled among employers in a single 

consolidated trust. Efficiencies of scale broaden and diversify investment opportunities and 

lessen the administrative and investment costs of operating a separate single-employer plan. 

Investment professionals manage the plans’ assets, helping to reduce risks for contributing 

employers, employees, and retirees. 

Figure 3
5

Importance to Small Businesses

Multiemployer plans enable employers to provide retirement benefits to their employees without 

imposing administrative burdens on any individual employer. Employers generally need only to 

remit contributions set by collective bargaining and are relieved from the responsibilities of 

operating a plan, which are handled by an independent joint board of trustees, consisting of equal 

representatives from labor and management. Consequently, these plans have historically offered 

employers, especially small businesses, an affordable way to provide pensions to their 

employees, without the administrative burdens.

FUNDED STATUS OF MULTIEMPLOYER PLANS

Multiemployer plans overall are less well funded than single-employer plans. The disparity 

between the funded status of single-employer plans and multiemployer plans has existed for 

many years (see Figure 4). 

Plan Zone Status

The Pension Protection Act of 2006 categorized multiemployer plans based on funded status, 

compliance with minimum funding standards, and time until likely insolvency: Endangered 

Status, (commonly referred to as “Yellow Zone”), Seriously Endangered Status (“Orange 

Zone”), and Critical Status (“Red Zone”). The Multiemployer Pension Reform Act of 2014 

(MPRA) created a subcategory of Red Zone plans -- Critical and Declining; these plans project 

that they will run out of money within 15 to 20 years. Plans that do not fall within these 

categories are categorized as Not in Distress (“Green Zone”). Table 1 summarizes the criteria 

for each zone status. 

77%

116% 103%

88%

105%

77%

62%

41% 41%

49%

43%

123% 

162% 

123% 

106% 

144% 

101% 

89% 

72% 

74% 

87% 

79% 

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

Average funded level

System Funding -- Estimated Market Basis

Multiemployer System Funding Single-Employer System Funding

Figure 4
6

Table 1

Summary of Plan Zone Status Criteria

Not in Distress (Green Zone) - Not Yellow, Orange, or Red Zone

Endangered (Yellow Zone) - Plan is less than 80% funded or a funding 

deficiency is projected within 7 years 

Seriously Endangered (Orange Zone) - Plan is less than 80% funded and a funding 

deficiency is projected within 7 years

Critical (Red Zone) - Various alternative criteria indicating severe 

funding or liquidity issues—generally less 

than 65% funded ratio, insolvency projected 

within 5-7 years, or a funding deficiency is 

projected within 4-10 years

Critical and Declining (Red Zone

subset)

- Plan is projected to become insolvent within 

15 years (20 years if the plan is less than 80% 

funded or there is less than one active for 

each inactive participant)

The majority of multiemployer plan participants are in Green Zone plans. A significant minority 

of multiemployer plans – about 130 plans, some very large – covering 1.3 million participants, 

are in Critical and Declining Status (see Figure 5). The underfunding in Critical and Declining

plans totals about $100 billion on a market basis.

Causes of Multiemployer Plan Underfunding

Lower funding levels in multiemployer plans in part reflect the less stringent funding rules that 

have always applied to multiemployer plans. For many years, multiemployer plans were widely 

Figure 5 

Multiemployer Participants by Plan Zone Status 

0 1 2 3 4 5 6 7 8 9 10

Millions of Participants

Critical and Declining

Zone Status

Not in Distress Endangered/Seriously Endangered Critical 
7

considered to be inherently more financially stable than single-employer plans because they rely 

on contributions from many employers, unlike single-employer plans that generally rely on one 

employer. If an employer failed, others were there to make contributions to fund the promised 

benefits. Perhaps because risks were pooled in this way, the law allowed plans to take more time 

to pay down underfunding created by benefit improvements or adverse experience, such as 

investment returns that were lower than anticipated or industry declines.

Many other factors – financial, economic, and demographic – also have contributed to 

underfunding in multiemployer plans and the financial distress of some multiemployer plans. 

Before the decade of the 2000s, defined benefit plans, including multiemployer plans, earned 

historically high rates of return, which kept plans well-funded without large employer 

contributions. High investment returns financed benefit improvements, such as increased benefit 

accrual rates, past service credit, new or increased early retirement subsidies, and disability 

pensions.2F

3

 These new obligations elevated plan liabilities in the late 1990s in a way that was 

difficult to reduce later.

The significant market losses in the early 2000s and especially in the 2008 market crisis and 

Great Recession took a huge toll. Average funded ratios (market value of assets divided by 

liabilities discounted using a standardized PBGC interest factor that reflects group annuity 

prices) exceeded 90% in the 1990s, then dropped to the mid-60% range in the mid-2000s and fell 

below 50% after the 2008 market crisis.

Even before the 2008 market crisis, Congress recognized the seriousness of multiemployer plan 

underfunding and enacted the Pension Protection Act of 2006 (PPA). Under PPA, plans 

classified as Critical Status (Red Zone) generally must establish a Rehabilitation Plan detailing 

how they intend to emerge from Critical Status (generally within 10-13 years), through actions 

such as increasing contributions and reducing or eliminating future accruals or adjustable 

benefits. If they are not projected to emerge from Critical Status during the rehabilitation period 

after exhausting all reasonable measures, they must develop an alternative scenario that allows 

them to emerge at a later time or to otherwise forestall possible insolvency. 

A significant number of plans were not able to recover, including some very large plans covering 

thousands of participants and in a few cases hundreds of thousands. As the financial markets and 

the economy improved, many plans became better funded, and the percentage of participants in 

plans that were Not in Distress (Green Zone plans) increased markedly. But the percentage of 

participants in Critical Status plans declined only slightly, reflecting the stagnant or shrinking 

contribution base and high percentages of retirees that characterize struggling plans (see Figure 

6). About one-third of the participants in Critical Status plans are in Critical and Declining 

Status plans.

 3 Because of maximum deductible limits, some plans increased benefits during this period to avoid losing deductible 

treatment of employer contributions for federal income tax purposes, which also contributed to longer-term cost. 

These limits were raised in the Pension Protection Act of 2006.
8

Factors such as declines in unionized employment, competitive pressures from non-unionized 

businesses, and declines in demand for products or services, caused some companies to go out of 

business. They left behind the unfunded benefits of their inactive and retired workers 

(sometimes referred to as orphan liabilities). 

Today, the ratio of active to inactive participants is at its lowest point ever. Among 

multiemployer plans in the aggregate, fewer than four out of every ten covered participants are 

actively employed by a participating employer.3F

4

 In addition, contributions by downsized 

companies that remained in business declined. 

As underfunding in these plans deepens, remaining employers are faced with a difficult choice: 

higher contributions if they stay; higher payments for their allocated share of plan underfunding

withdrawal liability if they leave (withdrawal liability). And if they do leave, the plan will be at 

greater risk of failure.

Contagion

Some have asked whether the failure of a multiemployer plan could cause failure of other 

multiemployer plans in which the affected employers also participate (“contagion”). This 

situation would most likely occur as a consequence of the insolvency of a very large plan. We 

have not yet experienced the failure of a very large plan, so it is too early to test the contagion 

theory, but it seems plausible. Some also have asked whether failure of an employer that 

contributes to more than one multiemployer plan could lead to failure of multiple plans (another 

type of contagion). This would most likely occur as a consequence of the failure of a company 

that is a dominant employer in multiple plans. Here also the theory seems plausible. We are 

aware of at least one instance where bankruptcy of a major contributor to multiple plans put 

financial stresses on those plans.

 4 Active participants account for about 35 percent, separated vested participants about 35 percent, and retired 

participants about 30 percent.

0

10

20

30

40

50

60

70

2009 2010 2011 2012 2013 2014 2015

% of Participants

PARTICIPANT ZONE STATUS PERCENT OVER TIME, 

ONGOING PLANS WITH ZONE STATUS

Figure 6

_I_ _Not in Distress _ I_ _Critical _i_i_Endangered _i_i_Seriously Endangered
9

Severity of the Problem

PBGC’s Financial Statements4F

5 reflect the serious underfunding in multiemployer plans that are 

in financial distress. Our Projections Report5F

6 shows how this underfunding is likely to result in a 

growing deficit and, more important, the inability of the Multiemployer Program to provide the 

financial assistance to cover guaranteed benefits.

In FY 2017, PBGC paid $141 million in financial assistance to 72 insolvent multiemployer 

pension plans, covering the benefits of over 63,000 retirees with another 30,000 people entitled 

to benefits once they retire. 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. 

As of September 30, 2017, the Multiemployer Program had assets of $2.3 billion to cover $67.3 

billion in liabilities in 187 plans. The liabilities6F

7 consist of:

• $2.7 billion for the 72 plans currently receiving financial assistance (about 93,000 

participants)

• $2.0 billion for 68 plans that have terminated but have not yet started receiving financial 

assistance payments from PBGC (about 78,000 participants). Terminated multiemployer 

plans no longer have employers making regular contributions for covered work, though 

some plans continue to receive withdrawal liability payments from withdrawn employers

• $62.7 billion for 47 plans that are ongoing (i.e., have not terminated), but PBGC expects 

they will exhaust plan assets and need financial assistance within 10 years (about 

1,160,000 participants).7F

8

 

The last two categories—terminated plans and ongoing plans expected to need financial 

assistance within 10 years—are classified as “probable” obligations of the Multiemployer 

Program.

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 in 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 noted earlier, our most recent projections show that, absent a change in law, the mean 2026 

deficit is about $78 billion (in nominal dollars), and Multiemployer Program assets are likely to 

be exhausted in 2025.8F

9

 5 PBGC FY 2017 Annual Report: https://www.pbgc.gov/sites/default/files/pbgc-annual-report-2017.pdf 6 PBGC FY 2016 Projections Report: https://www.pbgc.gov/sites/default/files/fy-2016-projections-report-finalsigned.pdf

7 The liabilities add to $65.4 billion rather than $67.3 billion due to rounding. 8 The liability for ongoing plans includes a small probable bulk reserve of $1.1 billion.

9 PBGC FY 2016 Projections Report: https://www.pbgc.gov/sites/default/files/fy-2016-projections-report-finalsigned.pdf
10

HELPING PLANS AVOID INSOLVENCY: PREVIOUS LEGISLATIVE EFFORTS

Congress enacted two pieces of legislation to address underfunding in multiemployer plans: the 

Pension Protection Act of 2006 (PPA), discussed earlier, and more recently, the Multiemployer 

Pension Reform Act of 2014 (MPRA).

MPRA defined a subcategory of Critical Status plans that are “Critical and Declining.” These 

are Critical Status plans whose actuaries project that plan insolvency will occur within the 

current plan year or any of the 14 succeeding plan years (or in certain situations, within 19 

succeeding plan years). 

MPRA gives the trustees of Critical and Declining plans additional options to address the risk of 

insolvency. Under MPRA, Critical and Declining plans may take steps to improve long-term 

solvency by reducing benefit promises to participants and beneficiaries if they meet certain 

requirements, including application to and approval by the Department of the Treasury9F

10. 

MPRA permits participants’ benefits to be reduced to 110 percent of the PBGC guaranteed 

amount, subject to statutory protections that prohibit or limit reductions for participants who are 

disabled or elderly. These statutory protections from MPRA benefit cuts for the disabled and 

elderly do not extend to insolvent plans that receive financial assistance from PBGC. 

MPRA also changes PBGC’s ability to provide early financial assistance to plans, either by 

assuming part of the plan’s liabilities via a plan partition or by providing assistance to facilitate a 

merger. To receive partition assistance, the plan must take all reasonable measures to avoid 

insolvency including the maximum benefit reductions allowed by MPRA (i.e., reduction to 

110% of the PBGC guarantee, with the MPRA protections for the disabled and elderly), if 

applicable. 

Mergers can stabilize or increase the base of contributing employers, combine plans’ assets for 

more efficient investing, and reduce plans’ administrative costs. Under MPRA, PBGC is 

authorized to help plans merge with other multiemployer plans. Plans may request technical 

assistance, and Critical and Declining plans may also apply for financial assistance to facilitate a 

merger, if necessary to avoid plan insolvency. Importantly, a partition, or any facilitated merger, 

must reduce PBGC’s expected long-term loss and cannot impair its ability to provide financial 

assistance to meet existing obligations to other plans.

To date, nineteen troubled plans have applied for benefit reductions, with five also seeking 

financial assistance from PBGC in the form of a partition to remain solvent. One joint 

application for a suspension and partition, and three applications to reduce benefits (without 

partition), have received all the required approvals and authorizations to proceed. One 

suspension-only application has been approved, with authorization to implement the suspension 

dependent on a participant vote. Two joint suspension-partition applications and four

suspension-only applications are under review.

MPRA can help some Critical and Declining plans but cannot help all of them. In some cases, 

underfunding is so large relative to future cash inflows that benefit suspensions and partition 

cannot keep the plan solvent long-term.

 10 Prior to MPRA, reduction of benefits already accrued was generally prohibited by the “anti-cutback rule.”
11

The United Furniture Workers Pension Plan A is an example of a plan that is helped by MPRA. 

The Road Carriers Local 707 Pension Fund is an example of a plan for which MPRA could not 

work because of the plan’s severe underfunding and inadequate projected cash inflows. 

Outcomes for both plans are described below.

United Furniture Workers Pension Plan A

The United Furniture Workers Pension Plan A (“UFW Fund”), based in Nashville, Tennessee, is 

using MPRA to avoid plan insolvency. In August 2017, PBGC approved the partition of the plan

in conjunction with approval by Treasury of benefit suspension under MPRA. This was the first 

MPRA partition approved by PBGC. With this early financial assistance from PBGC, along 

with required benefit reductions, the UFW Fund is projected to avoid insolvency and pay 

benefits above the guarantee level to nearly 10,000 participants and beneficiaries over the long 

term. Under the law, benefits of approximately 7,100 participants and beneficiaries were not 

reduced, because MPRA includes statutory limitations that protect against cuts for certain 

participants and beneficiaries based on age, disability status (as defined by the plan), and whether 

benefits are not more than 10% greater than PBGC guarantees would provide. The remaining 

approximately 2,800 participants will see future benefit reductions to 110% of the PBGC 

guaranteed amount, averaging a 12.7 percent cut in benefits. 

Road Carriers Local 707 Pension Fund

The Road Carriers Local 707 Pension Fund (“707 Fund”), which is based in Hempstead, New 

York and covers nearly 5,000 participants, was unable to use MPRA to avoid insolvency. The 

707 Fund applied for a MPRA benefit suspension and a PBGC partition in order to preserve 

benefit payments above PBGC guarantee levels. But projected future contributions and other 

income were insufficient to avoid insolvency, even with the maximum benefit reductions 

allowed under MPRA and a PBGC partition. 

As a result, the 707 Fund became insolvent early in 2017, and PBGC began providing financial 

assistance to the plan to cover benefits at PBGC guaranteed levels.10F

11 For nearly one-half of all 

5,000 participants in the plan, the guarantee covers less than 50 percent of the benefits earned.

The red area in Figure 7 below shows the benefit losses for the 707 Fund’s 3,000 retired 

participants as a result of the plan insolvency (approximately one-third experienced benefit cuts 

of over 50 percent). The green area shows what PBGC will pay as long as we have sufficient 

assets to pay the current guarantee. 

The benefit losses will result in hardship for many of the plan’s participants and beneficiaries. 

There also will be economic effects that go beyond these individuals and their families. They 

will have less money to spend in the local economy and they will pay less in federal and state 

income taxes. In some cases, they will need to rely on social programs to provide basic needs 

that they previously had paid for with their earned pension benefits. 

 11 News Release: PBGC Provides Financial Assistance to Road Carriers Local 707 Pension Fund - Participants’ 

Benefits Payments Cut to PBGC Guaranteed Levels. https://www.pbgc.gov/news/press/releases/pr17-02
12

Where MPRA is a viable option, the degree to which plans will attempt to extend solvency 

through requests for benefit reductions and early financial assistance remains unknown. 

Outlook for PBGC Multiemployer Program

In modeling projected insolvency dates and deficits for the Multiemployer Program, PBGC 

looked at scenarios where some plans use MPRA benefit suspensions or early financial 

assistance and where no plans used such MPRA tools. The mean year for Multiemployer 

Program insolvency was FY 2025 in both scenarios. The mean FY 2026 deficit in nominal 

dollars differed only slightly by scenario—$77.8 billion with MPRA and $78.8 billion without 

use of MPRA. 

CONSEQUENCES OF MULTIEMPLOYER PROGRAM INSOLVENCY

Insolvency of the 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. Multiemployer premium income in FY 

2017 was under $300 million, and the annual premium rate, $28 per participant for 2017 and 

2018 plan years, will increase only by indexing. 

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

in premium income. Funds in the Multiemployer Program will represent only a small fraction of 

the amount required for current guarantee levels. Under the program’s authorizing legislation,11F

12

PBGC would submit to Congress, in advance of Multiemployer Program insolvency, a schedule 

of reduced basic-benefit guarantees which would be necessary in the absence of a premium 

increase. Such reduced guarantees would result in participants in failed multiemployer plans,

 12 ERISA section 4022A(f)(2).

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 2,800

Non-Guaranteed Annual Benefit

Annual Benefit Preserved by Guarantee

RETIRED PARTICIPANTS

ANNUAL BENEFIT

Figure 7

CUT BACKS to MULTIEMPLOYER GUARANTEE LIMIT at PLAN INSOLVENCY

Road Carriers Local 707 Pension Fund 
13

receiving a very small fraction– an eighth or less, on average – of the current guarantee level, no 

matter when their plan became insolvent.

Even if the Multiemployer Program were adequately funded, a remaining challenge to benefit 

security is the guarantee for multiemployer plans. Multiemployer guarantees are much lower 

than single-employer guarantees. The multiemployer guarantee has not increased since 2001 and 

is not indexed for inflation. For example, the maximum guaranteed benefit for a retiree with 30 

years of service is $12,870 annually. In contrast the maximum guaranteed benefit for a retiree in 

a single-employer plan is $65,045 annually. The Single-Employer guarantee is indexed for 

inflation. The single-employer guarantee typically protects full benefits of approximately 85 

percent of participants in terminated plans. While the multiemployer guarantee has provided 

similar protection in the past, lack of indexing has eroded severely the value of the guarantee.

NEED FOR LEGISLATION

We work with troubled multiemployer plans and their sponsors who come to us seeking to 

prevent plan insolvency. We provide advice and assist them in whatever way we can. But the 

tools PBGC has to address the multiemployer crisis are very limited. We have been working 

with stakeholders and policy makers to find new ideas for shoring up the program.

Legislation is needed to address the looming insolvency of PBGC’s Multiemployer Program and 

again make the PBGC guarantee something American workers and retirees, and their families,

can count on. A number of proposals have been put forward. Some are designed to help plans 

avoid insolvency and thus help PBGC indirectly. Others are designed to help PBGC avoid 

insolvency. 

The President’s FY 2019 Budget includes a proposal to shore up the PBGC’s Multiemployer 

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

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

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

from multiemployer plans. The proposal is estimated to raise an additional $16 billion over the 

ten-year budget window and is expected to be sufficient to fund the Multiemployer program for 

the next 20 years. However, additional actions may be necessary to address all the problems 

facing the broader multiemployer plan system.

CONCLUSION

While the Single-Employer Program is improving, the Multiemployer Program is headed toward

insolvency – more likely than not by the end of 2025. 

If the PBGC 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, 

very modest guarantee will then be funded. The result will be catastrophic for many people—

current and former workers, retirees, beneficiaries, and their families. These losses have 

consequences beyond the immediate parties, increasing demands on social programs. Employers 

are also concerned and are pushing for action to prevent further damage in the system.

As more time passes, it is increasingly difficult to craft a solution that can be viewed as fair, or 

that is even viable. 
14

I appreciate the leadership of the members of this Committee in addressing the challenges faced 

by multiemployer plans and the PBGC Multiemployer Program. I look forward to continuing to 

work with you 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.