The U.S. Pension Benefit Guaranty Corp. (PBGC) paid out $16.6 million to more than 4,200 Arkansas retirees in failed retirement plans in 2014 as the program’s insolvency has now been delayed for three years.
According to recent PBGC projections at the end of September, the risk of program’s pending doom has decreased over the near term due primarily to the new premium revenues anticipated under the Multi-employer Pension Reform Act of 2014 (MPRA), a controversial rescue plan enacted by Congress that allows some of the nation’s largest pension funds to cut back on retirement benefits.
“This year’s projections show that the multiemployer program’s risk of running out of money has decreased since the prior report,” PGBC said in its September projection. “However, it is still more likely than not that the program’s assets will be depleted in 2025. Furthermore, the risk of insolvency increases over time, reaching 92% by 2034.”
The projected insolvency date for the insurance program for multiemployer pension plans, which cover more than 10 million Americans, has now been delayed by three years to 2025, rather than the earlier forecast in the fund’s 2014 annual report of 2022. This year’s report projects that the multiemployer program’s 2014 deficit of $42.4 billion will decrease to, on average, $28 billion by fiscal 2024.
Projections for the PBGC’s insurance program for single-employer plans, which cover about 31 million people, show the program’s financial condition continues to improve and conclude that it is unlikely to run out of funds in the next 10 years. Under current estimates, the program’s actual 2014 deficit of $19.3 billion would shrink to, on average, $4.9 billion by 2014. Still, PBGC said it has modeled 5,000 simulations for the 2014 projections report, and none showed that the program would be unable to pay the benefits it owes in 2025.
Set up as a federal agency created by the Employee Retirement Income Security Act of 1974 (ERISA) to protect pension benefits in private-sector defined benefit plans, the fund has dwindled in recent years as a growing number of private pension plans are projected to become insolvent in the coming years.
Absent substantial reform, the PBGC will be unable to pay promised benefits to the retirees of the failed pension plans that it insures. If Congress does not alter the rules governing multiemployer pensions and the PBGC’s multiemployer program, millions of workers could lose most or all of their pension benefits or federal taxpayers could be forced to bailout private, union pensions.
Under the recent reform act legislation, about 100 large pension plans will be allowed to reduce benefits to retirees with approval from the Department of Treasury. The Central States Pension Fund, the nation’s largest multiemployer fund that represents hundreds of union workers across the Midwest, is awaiting a decision to cut benefits to some of its 400,000 retiree members in half. Fort Smith-based ArcBest Corp., a transportation and logistics holding company, participates in the Central States Pension Fund.
Despite the impending insolvency of the fund, the PBGC still has millions of dollars in unclaimed retirement benefits to the tune of about $6,500 per claim. The PBGC website shows there are 235 Arkansas residents with unclaimed retirement benefits from government-backed single or multiemployer retirement funds across the state.