Multiemployer Pensions

Multiemployer pension plans are retirement plans negotiated by a union with a group of employers typically in the same industry. Collective bargaining contracts say how much the employers must contribute to the plans for their employees. The plans are run by trustees selected by the union and the employers. The trustees typically determine the amounts that the plans will pay in lifetime monthly benefits. Those covered by these plans are truck drivers, musicians, bricklayers, ironworkers, bakery workers and laborers, among many others.

For more information, read this Introduction to Multiemployer Plans fact sheet from the Pension Benefit Guaranty Corporation (PBGC), the federal agency that insures most private pension plans.

There are more than 10 million workers and retirees in 1,400 multiemployer plans. The majority of multiemployer pension plans, covering most multiemployer plan participants, are adequately funded, but some plans are projected to run out of money.

According to projections by the federal pension insurance agency, the Pension Benefit Guaranty Corporation, approximately 125 plans covering 1.4 million workers and retirees, could run out of money within the next 20 years. The PBGC estimates that roughly one-third of the affected participants are in two large plans in the trucking and mining industries.

There are a variety of reasons for funding shortfalls in certain multiemployer pension plans. Changes in the economy have resulted in a dramatic decline in union jobs, leaving many plans with many more retirees than active workers. This, together with company bankruptcies and withdrawals from plans, has caused a significant decrease in employer contributions to plans. In addition, investment losses in 2001 and again in the 2008 stock market collapse greatly reduced the amount of money in plans.

When a multiemployer pension plan no longer has enough money to pay benefits in a particular year, the plan is considered to be insolvent. At that point, two things happen: (1) the Pension Benefit Guaranty Corporation begins making loans to the plan so that it can continue paying pensions; and (2) the benefits paid by the plan are reduced to levels guaranteed by the PBGC.

PBGC guarantees for multiemployer plans are calculated by multiplying specified dollar amounts by the number of years participants have worked under a plan. If a plan runs out of money and benefits are reduced to the PBGC levels, the reductions can be substantial. To understand how much your benefit would be if it were reduced to the PBGC guarantee level, read this PBGC Multiemployer Insurance Program Fact Sheet

Congress passed the Multiemployer Pension Reform Act of 2014 (MPRA) in order to prevent financially troubled multiemployer plans from running out of money. The law allowed certain underfunded plans to cut the hard-earned benefits of retirees as much as 70 percent. This was unprecedented and undermined a fundamental protection of the federal private pension law.

Since the passage of MPRA, more than a dozen plans have applied to the Department of the Treasury and been approved to cut benefits. (The Treasury Department is the agency authorized under the law to determine if cuts are warranted.) Tens of thousands of retirees have had their benefits cut from plans as diverse as the Teamsters Local 805, the Ironworkers plans in Baltimore and Cleveland, and the Southwest Ohio Regional Council of Carpenters Plan. We have heard from people who tell us they are going to have to sell their houses, go without needed medicine and many have seen their health deteriorate because of the stress. More than one million other retirees stand to also lose out if something is not done to stop the cuts.

There is need for comprehensive legislation to fix severely underfunded multiemployer plans and save the benefits of workers and retirees who toiled in jobs for years in order to earn lifetime, guaranteed pensions.

Thanks to the extraordinary efforts of pensioners throughout the country, key members of Congress are working hard to develop alternatives to MPRA cuts. On July 25, 2019, the U.S. House of Representatives passed the Rehabilitation for Multiemployer Plans Act (H.R. 397) by a vote of 264-169. This bill, also known as the Butch Lewis Act, was introduced by Congressman Richard Neal (D-MA). It would protect the benefits retirees and workers have earned by providing loans and other assistance to troubled pension plans. It was introduced into the Senate as S.2254 with 26 original co-sponsors.

Learn more about PRC’s Pension Promises Initiative.