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Multiemployer Pension Plans: A summary

A multiemployer pension plan is scheduled under the Employee Retirement Income Security Act (ERISA) as a collectively bargained plan maintained by several employer, usually from the same or related industries, as well as a labor union. Efforts tend to be referred to as "Taft-Hartley" plans.

Multiemployer pension plans are common in industries dominated by small business owners with fewer than 50 employees. Construction, trucking, retail food, garment manufacturing, entertainment (film, television and theater), and mining will be the industries representing the largest number of multiemployer plans.

Leading U.S. Multiemployer Pension Funds

Roughly 1,510 active multiemployer defined benefit pension plans covering 10.One million participants, based on the Pension Benefit Guaranty Corporation (PBGC). Some of the largest multiemployer plans include:

• 1199SEIU Medical Employees Pension Fund 
• Western Conference of Teamsters Monthly pension 
• Central States, Southeast and Southwest Areas Pension Funds 
• Central Pension Fund from the IUOE & Participating Employers 
• National Electrical Benefit Fund 
• I.A.M. National Monthly pension

Financial Health of Multiemployer Plans

The Pension Benefit Guaranty Corporation (PBGC) expresses worry about future funding levels for multiemployer plans. Based on the PBGC's 2011 Annual Report,

Before year, as a result of additional failures, the financial deficit individuals multiemployer program increased sharply, from $1.4 billion a year ago to $2.8 billion since September 30, 2011. The harder challenge, however, emanates from those plans who have not yet failed: our estimate of our own reasonably possible obligations (obligations to participants), described within our financial statements, increased to $23 billion.

Although some of such current deficit calculations are be subject to revision, the numbers will nevertheless remain high.

The PBGC expects the volume of insolvent multiemployer plans to over double in the next five years.

Financial Disclosure Requirements for Multiemployer Pension Funds

The Financial Accounting Standards Board (FASB) released Accounting Standards Update No. 2011-09, "Disclosures about a Employer's Participation within a Multiemployer Plan," to cope with a widespread concern that insufficient data was publicly published for investors to evaluate the financial health of multiemployer plans.

The primary provisions of the FASB disclosure requirements include identification of the following:

1. The significant multiemployer plans in which a company participates, including the plan names and identifying number;

2. The amount of an employer's participation in the significant multiemployer plans, including the employer's contributions designed to the plans plus an indication of whether or not the employer's contributions represent more than 5 % with the total contributions designed to the master plan by all contributing employers;

3. The financial health with the significant multiemployer plans, including an indication from the funded status, whether funding improvement plans are pending or implemented, and perhaps the plan has imposed surcharges around the contributions on the plan; and

4. The nature of the employer commitments on the plan, including when the collective-bargaining agreements that need contributions on the significant plans are set to expire and whether those agreements require minimum contributions to be made on the plans.

Public entities became subject to the plans for fiscal years ending after December 15, 2011, while non-public entities must comply for fiscal years ending after December 15, 2012.

As transparency on pension costs increases, multiemployer plan sponsors take action to strengthen their. The Kroger Co. announced in late 2011 that four in the United Food and Commercial Workers (UFCW) multiemployer pension funds covering greater than 65,000 Kroger associates from 14 UFCW local unions planned to merge in a consolidated fund effective January 1, 2012. The modern arrangement is expected to reduce Kroger's annual pension contribution expense.

Orphan Retirees Place Pressure on Funding Levels

A distinctive feature of multiemployer plans is that as employers terminate plan participation through bankruptcy or perhaps moving away from business, the rest of the employers stay with the financial responsibility to continue funding benefits. Unlike the protection owned by bankrupt corporations with the PBGC, multiemployer plans will not have the same safety net. The PBGC are only able to act regarding a multiemployer plan after insolvency.

According to Congressional testimony of the Central States Southeast and Southwest Areas Pension Fund, by way of example, only four in the 50 largest employers that taken part in the Central States Fund in 1980 remained in operation since 2010. Over 600 participating trucking companies declared bankruptcy between 1980 and 2010, while a huge number of others failed without filing formal bankruptcy.

Multiemployer plan participants who worked for firms that shall no longer be in operation are classified as "orphan retirees." As this number grows larger due to the poor economy, finances with the remaining plan sponsors become stressed as a result of unsustainable benefit obligations.

The Multiemployer Retirement living Amendments Act of 1980 necessary that [http://www.die-altersvorsorgepflicht.de betriebliche altersvorsorge pflicht] employers within a multiemployer plan who stop making contributions be forced to pay a withdrawal liability. UPS, by way of example, paid a $6.1 billion withdrawal liability in cash on the Central States multiemployer fund in 2007 to become relieved of their funding obligations.

Many struggling multiemployer sponsors cannot afford this kind of withdrawal payment. One unintended response to the 1980 legislation is always that fewer new employers joined or formed multiemployer plans.

Multiemployer Plan Partitions

Congress anticipated the orphan retiree problem, and provided that the PBGC may order a "partition" for the employees of multiemployer plan sponsor that has experienced bankruptcy. This method is politically sensitive, however, and actually is infrequently used. Qualified partitions with less restrictive triggers have been considered, but worry about siphoning off gains advantage from other already underfunded government programs makes passage unlikely.