The headline above appeared last week in Pensions & Investmants (P&I). As we’ve been reporting for nearly one year the solvency of many multiemployer plans is very much in jeopardy. We’re glad to see that the Society of Actuaries (SOA) confirms our belief that the problem facing these critical and declining plans are real. It certainly is for the millions of Americans who may face a sharp reduction in the benefits that they paid into and were promised at the beginning of their employment.
Although the headline suggests a 20-year timeframe, a significant portion of these plans could be insolvent within 10 years. In fact, it is estimated that 21 plans will go kaput by 2023, while another 48 could evaporate by 2028. What we also know is that some of the plans facing more immediate uncertainty are the largest plans, including Central States Teamsters.
Based on various discount rates used to calculate the potential liability of this unfolding funding crisis the projected liability could be $57 billion (using a 6% ROA discount rate) to $107.4 billion when applying a 2.9% Treasury rate. These numbers mirror those that were calculated by members of the Butch Lewis Act team that recently presented to House and Senate staff members.
As a result of this unfolding crisis, Congress has established a Joint Select Committee to tackle this issue before it becomes a moot point. As we’ve reported in previous blog posts the committee has begun meeting with various industry experts. Select committee co-Chairman Sherrod Brown, D-Ohio, said Thursday that the panel will hold hearings until July, and then “we will have to start the process of negotiating a bipartisan solution to the crisis.” They are striving to have a “solution” established by a self-imposed deadline of November 30th. Obviously, we hope that the Butch Lewis Act will be the foundation for the legislation that eventually evolves from the Committee’s effort.