Under current law, PBGC backs a modest portion ofmultiemployer plan benefits. For instance, a union employee in theCentral States Plan with 20 years of service is only guaranteed$8,580 from the PBGC. (Photo: Shutterstock)

The massive deficit in the Pension Benefit Guaranty Corp.'smultiemployer insurance program exploded by$11.3 billion in fiscal year 2019, reaching a record deficit of$65.2 billion.

The moribund program that insures the pensions of 1,400collectively bargained defined benefit pensions plans covering10.8 million workers and retirees is projectedto be insolvent by 2025.

The more than 20 percent increase in the deficit is owed todecreases in the interest rate used to assess future liabilities ofindividual plans headed to insolvency. Eleven new plans were addedto PBGC's list of probable insolvencies in 2019; four multiemployerplans became insolvent in 2019.

The multiemployer program collected $296 million in premiums,and earned $442 million in investment gains.

All told, the program's liabilities are $68 billion. Its cashreserve is $2.9 billion.

1.5 million workers and retirees will see dramatic benefitclawbacks

In 2019, 89 multiemployer plans received $160 million inassistance.

That number is expected to grow in the next six years. In 2019,52 pension plans filed critical and declining status notices withthe Labor Department and PBGC. Those plans are expected to beinsolvent in the next 20 years.

The largest plan among them, the Teamsters Central States Plan,is projected to be insolvent in 2025.

The Central States Plan is less than 40 percent funded. In 2016it had about 385,000 participants, about 84 percent of whom wereinactive retirees.

The insolvency of the Central States Plan will amount to thestraw that breaks the PBGC's back. Under current law, PBGC backs amodest portion of multiemployer plan benefits.

For instance, a union employee in the Central StatesPlan who has 20 years of service is only guaranteed $8,580from the PBGC.

But even that modest amount will be greatly reduced when PBGC'scash reserves are exhausted in 2025. About 1.5 million workers andretirees are projected to see their benefits dramaticallyreduced.

About $65 billion will be required to cover plans on PBGC'sprobable insolvency list. The 10 largest plans account for $53.6billion in liabilities.

Trump Administration ready to work with Congress

"The alarm bells are ringing, and legislative changes arenecessary," said PBGC Director Gordon Hartogensis of theagency's multiemployer program, in a statement.

"The Administration stands ready to work with Congress toprotect retirees in multiemployer plans, prevent the collapse ofthe multiemployer pension system, save the PBGC backstop, andprevent this crisis from recurring in the future," he added.

Last year, a Congressional Joint Select Committee created by theBipartisan Budget Act of 2018 failed to advance legislation torescue collectively bargained plans and PBGC.

The Rehabilitation for Multiemployer Pensions Actof 2019, a re-branded version of legislation the Joint SelectCommittee failed to advance, passed the House of Representatives inJuly by a 264 to 169 margin. All House Democrats backed the bill,along with 29 Republicans.

The bill would establish the Pension RehabilitationAdministration within the Treasury Department, which would issueloans to PBGC's probable plans over 30 years. It prohibits benefitclawbacks, and includes a provision that would relieve plans oftheir obligation to pay the loans back. Cost estimates of thepackage were as low as $36 billion, and as high as $68 billion.

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