The Pension Benefit Guaranty Corporation, the federal agency that oversees multiemployer benefit plans, issued its annual Projection Report earlier this month. And, the outlook is bleak. The agency is estimating that its insurance program will be insolvent in 2025 unless Congress provides substantial funding.
The PBGC oversees multiemployer plans that cover approximately 10 million employees. Of the multiemployer plans covered by the PBGC, about 58% are unionized, while the remaining 42% are non-union employers. About 40 % of those covered multiemployer plans are engaged in the construction industry.
The most alarming statistic noted by the PBGC is that there are about 125 multiemployer plans, which cover about 1.4 million employees, that are in critical and declining condition, and will run out of funds in the next two decades. Of those 125 plans, 35 are engaged in the construction industry. If the multiemployer plans run out of money, the PBGC steps in to provide benefits to employees. But, if the PBGC runs out of money, there will be little to no money left to pay covered employees.
While this news is bleak, it is not new. The PBGC has been blowing this horn for years. The concern for construction industry employers should be whether they are tied to a plan that is severely underfunded. If you are, and you decide to leave the plan or if the union decides to leave you, your withdrawal liability could be significant, if not crippling. As we have recommended in the past, you should ask about your pension plan’s financial condition, your potential withdrawal liability and review your agreements with your union to determine when withdrawal liability may be triggered.
As always, you would be well served to engage the services of an experienced attorney to help with this assessment.