Multiemployer defined benefit (DB) pension plans are created by collective bargaining agreements between labor unions and two or more employers, and generally operate under the joint trusteeship of unions and employers. Such plans typically exist in industries with many small employers who may be unable to support an individual DB plan, or where seasonal or irregular employment results in high labor mobility between employers. Industries where multiemployer plans are prevalent include trucking, construction, retail, and mining and manufacturing. Like single- employer DB plans, multiemployer DB plans pay retirees a defined benefit after retirement. Under the Employee Retirement Income Security Act of 1974 (ERISA), as amended, the benefits of multiemployer plans are insured by PBGC. As shown in table 1, PBGC’s multiemployer fund is financed by insurance premiums paid by plans, with each multiemployer plan paying an annual premium of $12 per participant to PBGC as of 2013. In return, PBGC provides financial assistance in the form of loans to plans that become insolvent, that is, plans that do not have sufficient assets to pay pension benefits at the PBGC guaranteed level for a full plan year. Although such financial assistance is referred to as a “loan,” and is by law required to be repaid, in practice such loans have almost never been repaid, as plans generally do not emerge from insolvency. Before PBGC will provide the loans, participants’ retirement benefits must be reduced to a level specified in law. Even after insolvency, the plan remains an independent entity managed by its board of trustees. This contrasts with the agency’s single-employer program under which PBGC does not provide assistance to ongoing plans, but instead takes over terminated underfunded plans as a trustee, and pays benefits directly to participants. Congress included provisions directed at imposing greater financial discipline on multiemployer plans in the Pension Protection Act of 2006 (PPA). Specifically, as outlined in table 2, this law includes new provisions designed to compel multiemployer plans in poor financial shape to take action to improve their financial condition over the long term. The law established two categories of troubled plans—endangered status (commonly referred to as “yellow zone,” and which includes an additional subcategory of “seriously endangered”) and a more seriously troubled critical status (commonly referred to as “red zone”). PPA further requires plans in these categories to develop strategies that include contribution increases, benefit reductions, or both, designed to improve their financial condition in coming years. Multiemployer plans in endangered status are to document these strategies in a funding improvement plan, and multiemployer plans in critical status plans are to do so in a rehabilitation plan. The plan trustees can offer the bargaining parties multiple schedules from which to choose, but one of these must be designated as the “default schedule,” which is to be imposed if the bargaining parties do not select one of the schedules within a specified timeframe. Once plan trustees have adopted a funding improvement or rehabilitation plan, bargaining parties are to select one of the available benefit and/or contribution schedules through the collective bargaining process. The multiemployer plan is then required to report on progress made in implementing its funding improvement or rehabilitation plan. Because of the greater severity of critical status plans’ funding condition, such plans have an important exception to ERISA’s anti-cutback rule in that they may reduce or eliminate certain so-called “adjustable benefits” such as early retirement benefits or subsidies, certain post-retirement death benefits, and disability benefits for plan participants who have not yet retired. For example, if a critical status plan were to adopt a rehabilitation plan that proposed to eliminate an early retirement benefit, appropriate notice was provided, and the reduction agreed to in collective bargaining, then participants not yet retired would no longer be able to receive that early retirement benefit. PPA funding requirements took effect in 2008 just as the nation was entering a severe economic crisis. The dramatic decline in the value of stocks and other financial assets in 2008 and the accompanying recession broadly weakened multiemployer plans’ financial health. In response, Congress enacted the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) which contained provisions designed to help pension plans and participants by providing funding relief to help them navigate the difficult economic environment. For example, WRERA relief measures allowed multiemployer plans to temporarily freeze their funding status at the prior year’s level, and extend the timeframe for plans’ funding improvement or rehabilitation plans from 10 to 13 years. In addition, Congress enacted the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PRA), which provides additional funding relief measures for multiemployer plans as long as a plan meets certain solvency requirements. Generally, PRA allows a plan to amortize the investment losses from the 2008 market collapse over 29 years rather than 15 years, and to recognize such losses in the actuarial value of assets over 10 years instead of 5 years, so that the negative effects of the market decline on asset values are spread out over a longer period. Overall, since 2009, multiemployer plans have experienced improvements in funding status, but a sizeable portion of plans are still critical or endangered. According to plan-reported data—current through 2011—from the IRS (see fig. 1), while the funding status of plans has not returned to 2008 levels, the percentage of plans in critical status declined from 34 percent in 2009 to 24 percent in 2011. Similarly, the percentage of plans in endangered status also declined, and to a greater extent, from 34 percent in 2009 to 16 percent in 2011. However, based on the 2011 data from the IRS, despite these improvements, 40 percent of plans still have not emerged from critical or endangered status. The large majority of the most severely underfunded multiemployer plans—those in critical status—have, according to a 2011 survey, both increased required employer contributions and reduced participant benefits in an effort to improve plans’ financial positions. Plan officials explained that these changes have had or are expected to have a range of effects, and in some cases may severely affect employers and participants. While most critical status plans expect to recover from their current funding difficulties, about 25 percent do not and instead seek to delay eventual insolvency. A 2011 survey of 107 critical status multiemployer plans conducted by the Segal Company shows that the large majority developed rehabilitation plans that included a combination of both contribution increases and benefit reductions to be implemented in the coming years. Further, plans proposed to take these measures regardless of whether the bargaining parties adopt the preferred schedule or the default schedule. As figure 2 illustrates, of the preferred schedules of 107 critical plans surveyed, 81 included both contribution increases and benefits cuts, while 14 proposed contribution increases only, and 7 included benefit reductions only. Most default schedules also include both increased contributions and reduced benefits, but compared to the preferred schedules, a much larger percentage chose to reduce benefits only. The reason for this difference is not clear, but Segal Company officials noted that because prompt adoption of an acceptable schedule is desirable, some plans may take special steps to make the default plan especially unappealing. Most plans—95 out of 107—developed preferred schedules that called for contribution increases and, while the range of these increases varied widely among plans, some were quite high. As figure 3 shows, most plans proposed increases of 10 percent or more in the first year of the collective bargaining agreement, and a little over a quarter of plans proposed increases of 20 percent or more. The median first-year contribution increase was 12.5 percent. Overall, the range of first-year increases was quite broad however, ranging from less than 1 percent to 225 percent. These data tell only a partial story, however, because rehabilitation plans may mandate a series of contribution increases in subsequent years. Of the eight critical status plans we contacted, the rehabilitation plans of seven increased contribution rates, and six of these specified a series of contribution increases over subsequent years. For example, one plan proposed contribution increases of 10 percent compounded annually over 10 years, so that at the end of this period, a contribution rate of $2.00 per hour, for example, would have been increased to $5.25 per hour, or by 162 percent. Thirty-two plans developed rehabilitation plans that reduced the rate of future benefit accruals. As figure 4 illustrates, 15 of these plans reduced future benefit accruals by 40 percent or more, and another 12 plans reduced future benefit accruals 20-40 percent. The median reduction for all 32 plans was 38 percent. As with contribution increases, the survey data on reductions to benefit accrual rates paint only a partial picture. Reductions in the benefit accrual rate are more common among troubled multiemployer plans than these data show because such reductions were often made prior to the rehabilitation plan. For example, findings from the Segal Company’s survey show that, of the plans that expected to exit critical status within the specified timeframes, about one-third had cut future accrual rates before preparation of the rehabilitation plan, either directly or by a plan amendment that excluded recent contribution increases from the benefit formula. Also, a large majority of plans—88 out of 107—reduced one or more types of the adjustable benefits as outlined by the PPA. Typically, these reductions applied to both vested but inactive and active participants, but some plans applied them to only one or the other. Officials of seven of the eight critical status plans we contacted increased contributions rates, and several of these plans indicated that contribution increases could be absorbed without undue stress to the plan. For example, one plan representing maintenance workers proposed to increase the weekly employer contribution rate for each worker from $82.75 per employee in 2011 to $130.75 per employee in 2023, a 58 percent increase over 12 years. While this makes some significant demands on employers, they are nonetheless in agreement, and the reaction of both employers and participants to the rehabilitation plan has been constructive.