Dark days seen for multiemployer pension plans

Many of the nation's multiemployer pension plans are massively underfunded with little likelihood that funding will improve anytime soon, according to an analysis released Wednesday.

New York-based Moody's Investors Service Inc.'s analysis of 124 multiemployer plans, which cover about 60% of the 10.4 million people enrolled in the nation's nearly 1,400 multiemployer plans, found that the plans had $337 billion in unfunded liabilities in 2014, up from $284 billion in 2013 and double the $164 billion in 2008.

In all, the plans were just 47% funded in 2014, down from 48% in 2013 and 56% in 2008.

And it's unlikely that funding will improve soon, according to the analysis.

“Given anemic stock market and fixed income returns in 2015, coupled with falling discount rates, we believe MEPP funding levels will be lower in 2015 than 2014, perhaps significantly so,” the report said.

Recognizing that poorly funded multiemployer plans could fail, taking the Pension Benefit Guaranty Corp., which guarantees a portion of plan participants' promised but unfunded benefits, with it, Congress passed legislation that permits underfunded plans to cut participants' benefits with Treasury Department approval.

But just five plans have sought such permission. Two were rejected, including one by the huge Central States, Southwest and Southwest Areas Pension Plan, which was just 33% funded in 2014, with $53.73 billion in liabilities and $17.86 billion in assets. Applications by three other plans seeking to cut benefits are pending.

Earlier, executives of the Central States plan, said they would seek help from federal lawmakers to prevent the collapse of the plan, which has more than 400,000 participants.

The PBGC's multiemployer insurance plan, the Moody's report notes, itself is hugely underfunded with $54 billion in liabilities and $2 billion in assets.

The outlook for PBGC insurance fund is bleak. The MEPP fund “is in critical condition” and the “PBGC expects “the fund will become insolvent within the next 10 years,” the report said.

So far, there has been limited congressional interest in coming up with ways to prevent the collapse, observers note.