Without additional legislative changes, the Pension Benefit Guaranty Corp.’s insurance program that partially guarantees advantages to multiemployer pension policy participants is likely to fail within the next decade, the PBGC stated on the day of Thursday.
By the year 2025, the likelihood that the multiemployer insurance program will go broke is more than 50 percent, while the program has a more than 90 percent likelihood of becoming insolvent by the year 2032, according to the PBGC report.
“Without changes, the multiemployer insurance program is likely to run out of money by the year 2025,” PBGC Director Thomas Reeder claimed in a statement.
The basic issue is the assets in the PBGC’s multiemployer insurance program are a fraction of its liabilities. In the year 2015, the insurance program had a whopping $52.28 billion deficit, with merely $1.92 billion in assets and $54.21 billion in liabilities.
The Obama administration though, has proposed various changes — all of which would need legislative approval — to make better the financial position of the insurance program.
Those changes involve requiring multiemployer plans, much like single-employer plans, to pay an additional premium to the PBGC based on their level of underfunding. In addition, the agency proposed that employers leaving underfunding plans pay a so-called exit premium to the agency.
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