The Taft Hartley Act of 1947 established terms for negotiating employee benefits in collectively bargained multiemployer plans and placed certain restrictions on the operation of these plans, including the placement of plan assets in a trust. For example, the law required a collectively bargained plan and its assets to be managed by a joint board of trustees equally representative of management and labor. It further required plan assets to be placed in a trust fund, legally distinct from the union and the employers, for the sole and exclusive benefit of the plan beneficiaries. In 1974, Congress passed ERISA to protect the interests of participants and beneficiaries covered by private sector employee benefit plans. Title IV of ERISA created PBGC as a U. S. government corporation to provide plan termination insurance for certain defined benefit pension plans that are unable to pay promised benefits. PBGC operates two distinct pension insurance programs, one for multiemployer plans and one for single- employer plans. These programs have separate insurance funds as well as different insurance coverage rules and benefit guarantees. The multiemployer insurance program and PBGC’s day-to-day operations are financed by annual premiums paid by the plans and by investment returns on PBGC’s assets. In turn, PBGC guarantees benefits, within prescribed limits, when a multiemployer plan is insolvent and unable to pay the basic PBGC-guaranteed benefits when due for the plan year. In 1980, Congress sought to protect worker pensions in multiemployer plans by enacting the Multiemployer Pension Plan Amendments Act (MPPAA). Among other things, MPPAA (1) strengthened funding requirements to help ensure plans accumulate enough assets to pay for promised benefits, and (2) made employers, unless relieved by special provisions, liable for their share of unfunded plan benefits when they withdraw from a multiemployer plan. The amount owed by a withdrawing employer is based upon a proportional share of a plan’s unfunded vested benefits. Liabilities that cannot be collected from a withdrawing employer, for example, one in bankruptcy, are to be “rolled over” and eventually funded by the plan’s remaining employers. These changes were made to discourage employer withdrawals from a plan. The Pension Protection Act of 2006 (PPA) established new funding and disclosure requirements for multiemployer plans. (See table 1.) PPA requires trustees of plans certified in endangered or critical status to take specific actions to improve the plans’ financial status, such as developing schedules to increase contributions or reduce benefits. Plans certified as endangered must adopt a funding improvement plan, which outlines steps the plan will take to increase the plan’s funded status over a 10-year period or, in some cases, longer. Plans certified as critical must adopt a rehabilitation plan, which outlines actions, to enable the plan to cease to be in critical status by the end of a 10-year rehabilitation period and may include reductions in plan expenditures (including plan mergers and consolidations), reductions in future benefit accruals or increases in contributions, if agreed to by the bargaining parties, or any combination of such actions. To assist plans in critical status, PPA amended ERISA to allow these plans to reduce or eliminate adjustable benefits, such as early retirement benefits, post-retirement death benefits, and disability benefits. In addition, critical status plans are generally exempt from the excise taxes that IRS can assess on plans with funding deficiencies. The funding requirements of PPA took effect just as the nation entered a severe economic recession in December 2007. As a result, Congress enacted the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) to provide multiemployer plans with temporary relief from some PPA requirements by allowing multiemployer plans to temporarily freeze their funded status at the previous year’s level. The freeze allows plans to delay creation of, or updates to, an existing funding improvement plan or rehabilitation plan, or postpone other steps required under PPA. WRERA also requires plans to send a notice to all participants and beneficiaries, bargaining parties, PBGC, and the Department of Labor indicating that the election to freeze the status of a plan does not mean that the funded status of the plan has improved. WRERA also provided for a 3-year extension of a plan’s funding improvement or rehabilitation period. Although both single-employer and multiemployer plans are subject to the rules outlined in Title IV of ERISA, there are several important differences between the plan types that affect the structure and stability of each type of plan. (See table 2.) The overall number of multiemployer plans insured by PBGC has decreased steadily since the 1980s as a result of plan mergers and terminations. At the same time, the aggregate number of participants— including active and inactive—has continued to rise. (See fig. 1.) The number of participants in multiemployer plans also varies by industry. While PBGC covers workers in all major industrial sectors, the construction trades consistently account for over one-third of all covered multiemployer plan participants, totaling 36 percent in 2008. Other industries, including transportation and manufacturing, account for a smaller portion of participants, roughly 15 percent in 2007. (See fig. 2.) Multiple data sources that we examined indicate that most multiemployer plans experienced steep declines in their funded status in recent years. According to PBGC, multiemployer plans in aggregate have not been fully funded—at 100 percent or above level—since 2000 and their net funded status has declined significantly through 2007, the last date for which PBGC data are available. While plans are considered “safe” if their funded status is at least 80 percent, the aggregate funded status—the percentage of benefits covered by plan assets—of multiemployer plans insured by PBGC declined from 105 percent in 2000 to 69 percent in 2007. (See fig. 3.) The funded status of multiemployer plans insured by PBGC varies significantly by industry sector within which the plan operates. According to PBGC data, while all industries generally follow the same trend in funded status, plans in the transportation industry have since 2000 reported a consistently lower funded status than other industries. For example, in 2007, the aggregate funded status for plans in the transportation industry was 63 percent in contrast to the overall average of 69 percent. Furthermore, in 2000, the last year that the aggregate funded status of all multiemployer plans was over 100 percent, the funded status of multiemployer plans in the retail trade and services industries was about 30 percent higher than the funded status of plans in the transportation industry. (See fig. 4.) The extent of underfunding in multiemployer plans also varies by industry with the construction and transportation industries accounting for 71 percent of the underfunding of all PBGC-insured multiemployer plans in 2007. Since 2007, the last year for which data are available, aggregate plan funded status has declined further as a result of investment market declines. While the rapid drop in funded status, like the economic conditions that caused it, was severe, experts said that its effect on plans was similar to what happened to plans during the market correction of 2000 to 2002. For example, experts said that some plans, learning from the downturn from 2000 to 2002, took remedial steps in the following years, such as increasing contributions, and likely fared better in the recent recession. In contrast, other plans did not change course after the 2000 to 2002 downturn in the hope that market returns would erase their deficits and are now the plans in the most critical financial condition. Although funded status was in a general decline since 2000, the economic recession that began in December 2007 had a negative impact on the funded status of multiemployer plans, according to a number of data sources. Annual actuarial certification data from IRS show that the proportion of multiemployer plans reporting in endangered or critical zone status rose significantly, from 23 percent of plans in 2008 to 68 percent of plans in 2009. (See table 3.) Data from PBGC, although incomplete, show a similar downward trend in plan funded status. According to the annual funding notices that PBGC received in the 2009 plan year, nearly all of the 484 plans that filed reported a decrease in funded status from 2008 to 2009. Similarly, PBGC received more notices of critical or endangered status from plans, from 266 plans in 2008 to 624 plans in 2009. Recent industry surveys of multiemployer plans found similar declines in funded status. For example, two industry groups surveying their multiemployer plan membership in 2009 found the same result: 80 percent of plans reported being in critical or endangered zone status, a reversal from 2008 when 80 percent of plans reported being in safe status. Similarly, another industry survey of nearly 400 plans found that the proportion of plans in the endangered or critical zone status increased from 24 percent in 2008 to 80 percent in 2009. While these surveys are not comprehensive, they provide further evidence of the negative impact that the economic downturn had on multiemployer plans. Although it did not affect their underlying funded status, many plans took advantage of the one-time freeze allowed under WRERA. According to IRS data, 745 plans elected to freeze their funded status in either 2008 or 2009, including 373 plans in critical status, 351 in endangered status, and 21 plans in safe status. According to experts, some plans took advantage of the freeze option for a variety of reasons. Plans wanted to give the markets a chance to rebound in order to recoup plan assets lost in the downturn. Others may have chosen the freeze due to timing of collective bargaining agreements, not wanting to take steps to address funding deficiencies until a new agreement was reached. Still other plans elected the freeze to avoid having to revisit or revise ongoing rehabilitation plans. However, experts also noted that the WRERA freeze option was not helpful for all plans. Specifically, some plans chose not to freeze in endangered status, preferring to go straight to critical status to give them more options to address their funding deficiencies.