The multi-employer pension crisis in the USA is well acknowledged. Many defined benefit plans are severely underfunded and, without action, will simply run out of cash and be unable to continue to pay those pensions already in payment, let alone the future pensions of current active employees. This affects some of the plans in which Ahold-Delhaize participates. For example, the FELRA & UFCW Food Pension Fund is in such bad shape that, unless more funding is provided, it is projected to run out of assets in Q4 this year. FELRA & UFCW Food Pension Fund solvency projection disclosure Source: FELRA & UFCW Food Pension Fund 2018 financial statements Out of the seven multi-employer plans separately described by Ahold-Delhaize, three are given the regulatory classification of ‘Red (Critical and Declining)’ which means they are projected to be insolvent within 14 (or for some 19) years. It is difficult to say how this chronic underfunding may impact the participating employers in the coming years. One possibility is a significant increase in cash contributions, but one cannot rule out more drastic action affecting the scheme members. Ahold-Delhaize provides extensive disclosures about these uncertainties. Someone will lose - either employers, scheme members or the taxpayer One thing we can be sure is that someone is going to lose out. Either the participating employers meet their obligations and increase contributions, the scheme members agree (or are forced) to accept a reduction in benefits, or, possibly, the state provides a bail out. If US multi-employer plans fail then they are taken over by the state sponsored Pension Benefit Guarantee Corporation, but this results in a significant reduction in the benefits payable for scheme members. In addition, the PBGC is itself severely underfunded and is in danger of becoming insolvent without government support. In 2019 legislation was enacted to provide a state bail-out (of sorts). In effect, the bail-out involves the government lending to pension schemes to enable them to remain solvent in the short-term and, it seems, to increase their investment in risky assets so that in the longer-term they might earn their way out of trouble. In our view the so-called bail-out is misguided. It will just add further risk an already high-risk system and do little to solve the structural problems. Multi-employer plans need better funding by the sponsoring employers and de-risking through asset-liability matching; not the opposite. Changing the accounting to ensure these obligations are recognised in company balance sheets would be a good first step towards achieving this. There is much commentary available on this subject. For a couple of examples click here and here. We particularly agree with a comment in the latter article that one of the reforms needed to deal with the US multi-employer pension crisis is … “Requiring companies to recognize unfunded liabilities on their balance sheet”