It is no secret that many multiemployer pension plans are struggling – paying out substantially more in benefits to retirees than the income they are receiving. Without legislative action, many are expected to go bankrupt in the next 5 to 15 years, leaving current retirees and active employees without the retirement income they expected. To understand where we go from here, let’s first explore the history of multiemployer plans, then look at potential avenues for reform.

How did we get here?

The Employee Retirement Income Security Act of 1974 created new fiduciary standards for trustees of multiemployer benefit plans and regulated the vesting and funding of benefits. ERISA also guaranteed certain participant benefits not funded by plan assets upon the termination of a plan.

Furthermore, under ERISA, employers that contributed to multiemployer funds had only limited liability for unfunded benefits. If a fund could not recover assets from employers, the Pension Benefit Guarantee Corporation would step in and finance the payments from annual premiums paid by plans.

Only four years later, it became obvious that those steps would not be sufficient to maintain a viable pension system. Accordingly, in 1980, Congress passed the Multiemployer Pension Protection Amendments Act. The MPPAA limited the circumstances under which the PBGC would step in and pay guaranteed benefits and raised the premium rate to generate revenues. Additionally, the MPPAA instituted the possibility of withdrawal liability if (assuming certain circumstances were met), an employer ceased making or substantially reduced its contributions to a multiemployer benefit plan.

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