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The multiemployer pension project resulted in a two-part Report examining historical and recent developments in pension plans, their regulation, and the rapid increase in critically declining and insolvent plans. The first part of the Report identifies the size, scope, and history of pension plans and inherent problems in their operation, while the second part of the Report analyzes alternative retirement systems and prescribes a policy recommendation benefiting worker retirement.

The Center on National Labor Policy, Inc. is a nonprofit legal foundation.  It investigated causes for the demise of these critically declining funds which revealed the lack of public understanding and myths surrounding the multiemployer pension system extending from limited restraints on trustee activity to the judicial branch’s deference to them.  The results are alarming.

Multiemployer pension plans are now characterized by employers in declining or transforming industries with a negligible or diminishing base of active workers and a substantial, expanding top tier of retirees. Defined benefit pension plans assumed a fixed actuarial assumption of an expanding economy in their sectors that did not adapt to the increase in life expectancies, international competition, and the impact of technology over the last few decades. Affected by market fluctuations, amalgamations of poor investments, and fiduciary negligence, multiemployer plans cannot earn the assumed, above average, rate of returns in the market (5.0 to 8.0 percent) to sustain their rising cost structure to meet the benefit levels retirees expect to be paid.

The population of critical and declining multi-employer pension plans contain enough financial liabilities to topple the Pension Benefit Guaranty Corporation’s (PBGC) insurance program.  In reviewing regulatory and judicial developments relating to multiemployer pension plans, they face multifaceted pitfalls poised to thrust millions of retired workers into reduced benefits and their employers into insolvency if core structural changes are not pursued. For many plans, regardless of the economic environment, they remain unsustainable.

These failures demand a critical look at measures available to transition retiree obligations to lessen the ensuing damage, especially on young workers who will lose the monetary benefit of their contributions when their insolvent plans become defunct before they retire.

In the near term, Congress in 2014 recognized the intrinsic defect in these funds and permitted a 15 percent reduction in beneficiary payments. Since then, approximately 150 multiemployer pension plans are recognized to become insolvent within the next 15 to 20 years.  One, the Central States Teamster Pension Plan with 400,000 participants will be gone in ten years.  The insurance liability from its insolvency alone may topple the PBGC.

Having identified expectations and understandings of beneficiaries, and the impact of the Employee Retirement Income Security Act of 1974 (ERISA) over the last 35 years, and root causes for the financial distress multiemployer pension plans face in first part of this Report, the second part of the Report considers alternative programs and policies.  “It is a brutal reality there can be no big sweeping save for the pension industry at large by the hand of government, lest it is dismantled.”  The Report proposes a sustainable solution for the multiemployer pension system-a cash balance hybrid contribution system.  Several large employers have already transformed their defined benefit pension plans into the hybrid contribution system-preserving the retirement benefits for its current and future workers and retirees.

A national dialogue to recognize the failure of the current multiemployer pension plan system must begin in earnest to transform the way retirement benefits are provided.  The Center on National Labor Policy, Inc. believes these Reports can form the basis to do so.