Multiemployer Pension Plans: Current Status and Future Trends

70 Pages Posted: 23 Feb 2018

See all articles by Alicia H. Munnell

Alicia H. Munnell

Boston College - Center for Retirement Research

Jean-Pierre Aubry

Boston College - Center for Retirement Research

Caroline Crawford

Boston College - Center for Retirement Research

Date Written: December 2017

Abstract

Multiemployer pension plans, like other employer plans, have been challenged by two financial crises since 2000. The majority of multiemployer plans are returning to financial health, but a substantial minority face serious funding problems that are exacerbated by unique structural challenges in the multiemployer sector. These challenges include a high ratio of inactive to total participants, high rates of negative cash flow, and inadequate withdrawal penalties so that exiting companies do not cover the costs they leave behind.

The Multiemployer Pension Reform Act (MPRA) of 2014 has not proved to be a cure-all for the multiemployer crisis. As of November 2017, the U.S. Treasury Department has approved four of the 15 benefit-cut requests submitted by these plans. Of the remainder, one application remains under review, five applications have been denied, and five have been withdrawn. So, while the ultimate effectiveness of MPRA still remains to be seen, it is clear that other solutions must also be explored to alleviate the multiemployer burden.

At this stage, the majority of proposed solutions to the multiemployer challenge fall into two categories: alleviating the burden of orphaned members – workers left behind when employers exit – and providing subsidized loans – either through direct government lending or government guarantees on private sector loans. Whatever the ultimate solution, a case can be made for a package that involves contributions from employers (tailored not to sink already fragile plans), from plan participants, and from taxpayers.

Any solution to the multiemployer problem must be comprehensive, helping not only those in serious trouble today but also staving off future problems. Early action might stabilize other plans heading for trouble. One clear warning sign for plans is a negative cash flow rate in excess of negative 10 percent.

Suggested Citation

Munnell, Alicia and Aubry, Jean-Pierre and Crawford, Caroline, Multiemployer Pension Plans: Current Status and Future Trends (December 2017). Available at SSRN: https://ssrn.com/abstract=3122634 or http://dx.doi.org/10.2139/ssrn.3122634

Alicia Munnell (Contact Author)

Boston College - Center for Retirement Research ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States
617-552-1762 (Phone)

Jean-Pierre Aubry

Boston College - Center for Retirement Research ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States

Caroline Crawford

Boston College - Center for Retirement Research ( email )

Boston, MA
United States

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