Averting the Multiemployer Pension Solvency Crisis

40 Pages Posted: 3 May 2019

See all articles by Charles Blahous

Charles Blahous

Mercatus Center at George Mason University

Date Written: October 19, 2018


The Pension Benefit Guaranty Corporation (PBGC) multiemployer pension insurance program faces projected insolvency, driven by systemic underfunding of multiemployer pension plans. To address this brewing crisis, Congress has established a joint select committee to develop multiemployer pension reforms. Primary causes of the crisis include lax funding rules and inaccurate valuations of pension assets and liabilities. Explanations frequently offered for underfunding, such as financial market downturns and the declining proportion of active workers, fail to account for the relative weakness of multiemployer pension finances. Reforms should establish accurate asset and liability measurements, safeguards against further deterioration of underfunded plans, improved incentives for plan trustees, stronger funding requirements, and risk-based premiums. Legislators may wish to consider authorizing the PBGC to relieve plans of so-called orphan liabilities, subject to strict requirements that any relief must reduce projected claims on pension insurance. Lawmakers must be firm in declaring that no taxpayer funds will be used to bail out multiemployer pensions.

Keywords: multiemployer pensions, PBGC, Pension Benefit Guaranty Corporation, pension insurance, joint select committee, liability discounting, orphan liabilities, bailout, pension funding, underfunding, union pensions, PBGC premiums

JEL Classification: G23, J32

Suggested Citation

Blahous, Charles, Averting the Multiemployer Pension Solvency Crisis (October 19, 2018). Mercatus Research Paper , Available at SSRN: https://ssrn.com/abstract=3381914 or http://dx.doi.org/10.2139/ssrn.3381914

Charles Blahous (Contact Author)

Mercatus Center at George Mason University ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States

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