1.) 3.) 4.) Many Multiemployer Plans Reported Large Funding Shortfalls during the Recent Economic Downturn

Although funded status was in a general decline since 2000, the economic  recession that began in December 2007 had a negative impact on the  funded status of multiemployer plans, according to a number of data  sources. Annual actuarial certification data from IRS show that the  proportion of multiemployer plans reporting in endangered or critical zone  status rose significantly, from 23 percent of plans in 2008 to 68 percent of  plans in 2009. Plans Face Long-standing Demographic Challenges and an Uncertain Future

Multiemployer plans continue to face demographic challenges that  threaten their long-term financial outlook—including an aging workforce  and few opportunities to attract new employers and workers into plans. PBGC Monitors the Health of Multiemployer Plans, but Does Not Assist Troubled Plans on an Ongoing Basis

		Data That PBGC Uses Are Outdated

While PBGC officials told us that they could benefit from having more  current data than are available on the Form 5500, they prefer using Form  5500 data on multiemployer plans because these older data are the most  comprehensive, the agency’s monitoring system is designed for it, the data  are audited, and most private plans are required by law to file the form on  an annual basis. Like all multiemployer plans, the partitioned participants are subjected to  ERISA’s multiemployer guaranteed benefit limits. Pension Structures in Other Countries Provide Multiemployer Plans with Options to Improve Funding

The private pension systems in the countries we studied—the Netherlands,  Denmark, the United Kingdom, and Canada—support industrywide,  employer-based pension plans that share some common attributes with  U.S. multiemployer plan structure. Monitoring

These countries all monitored multiemployer plans for compliance and to  determine plan funding and solvency risk. Some of the countries allow plans to  increase contributions and reduce the rate of benefit accruals. Current Multiemployer Framework Faces Challenges in Assisting Plans in Need

The statutory and regulatory framework guiding multiemployer plans is  not structured to assist troubled plans, limits the actions agencies can  take, and promotes little interaction among federal agencies that bear joint  responsibility for monitoring and assisting these plans and their  participants. Through collective bargaining, employers and employees worked  to maintain their pension benefits despite changing economic climates and  financial challenges. In the short term, the majority of plans will have to make  difficult decisions to improve their funding and protect against future  declines. While some plans may  be able to improve their funded status as the economy improves, plans in  the worst condition may find that the current options of increasing  employer contributions or reducing benefit accruals are insufficient to  overcome the funding and demographic challenges they face. For these  plans, the combination of the effects of the economic downturn, the  decline in collective bargaining, the withdrawal of contributing employers,  and an aging workforce has likely accelerated their path to insolvency. Without additional options to address their underfunding, or new  employers joining the plans to replenish the contributions, many plans  may find themselves at greater risk of insolvency and more likely to need  PBGC financial assistance sooner rather than later. Such a situation would  put additional stress on PBGC’s insurance program that, already in deficit,  it can ill afford. For example, the countries that we studied had pension regulators  that interacted with plans on a frequent basis, collected timely and  detailed plan information, provided a range of tools to plans to address  plan underfunding and made information on the funded status of plans  available to the public. Matters for Congressional Consideration

To provide greater transparency of the current status of multiemployer  plans, assist federal monitoring efforts, and help plans address their  funding deficiencies, Congress should consider:    consolidating the annual funding notices and the PPA notices of critical or  endangered status to eliminate duplicative reporting requirements; and  requiring IRS, EBSA, and PBGC to establish a shared database containing  all information received from multiemployer plans. EBSA and  PBGC also provided technical comments, which we incorporated in this  report, as appropriate. (2) What steps  does PBGC take to monitor the health of these plans? To identify what statutory and regulatory changes, if any, are needed to  help plans continue to provide participants with the benefits due to them,  we reviewed pension literature and interviewed a variety of experts on  multiemployer plans, including officials from EBSA, IRS, and PBGC;  pension experts; and practitioners representing a range of industries and  plan sizes.
Why GAO Did This Study

Thirty years ago Congress enacted protections to ensure that participants in multiemployer pension plans received their promised benefits. These defined benefit plans are created by collective bargaining agreements covering more than one employer. Today, these plans provide pension coverage to over 10.4 million participants in approximately 1,500 multiemployer plans insured by the Pension Benefit Guaranty Corporation (PBGC). In this report, GAO examines (1) the current status of nation's multiemployer plans; (2) steps PBGC takes to monitor the health of these plans; (3) the structure of multiemployer plans in other countries; and (4) statutory and regulatory changes that could help plans provide participants with the benefits they are due. To address these questions, GAO analyzed government and industry data and interviewed government officials, pension experts and plan practitioners in the United States, the Netherlands, Denmark, United Kingdom, and Canada.

What GAO Found

Most multiemployer plans report large funding shortfalls and face an uncertain future. U.S. multiemployer plans have not been fully funded in aggregate since 2000 and the recent economic recession had a severely negative impact on the funded status of multiemployer plans. Annual data from the Internal Revenue Service (IRS) show that the proportion of multiemployer plans less than 80 percent funded rose from 23 percent of plans in 2008 to 68 percent of plans in 2009. While some plans may be able to improve their funded status as the economy improves, many plans will continue to face demographic challenges that threaten their long-term financial outlook--including an aging workforce and few opportunities to attract new employers and workers into plans. PBGC monitors the health of multiemployer plans, but can provide little assistance to troubled plans until they become insolvent, at which point PBGC provides loans to allow insolvent plans to continue paying participant benefits at the guaranteed level (currently $12,870 per year for 30 years of employment). PBGC receives more current information on plan status, but uses older plan data to determine which plans are at the greatest risk of insolvency, because these data are audited, comprehensive, and PBGC's monitoring system was designed for them. The private pension systems in the countries GAO studied face short-term and long-term challenges similar to those that U.S. multiemployer plans currently face, including plan funding deficiencies and an aging workforce. The plans in these countries are subject to a range of funding, reporting, and regulatory requirements that require plans to interact frequently with pension regulators. Multiemployer plans in these countries have a number of tools available to improve and maintain their funded status, such as increasing contributions and reducing the rate of benefit accruals. The statutory and regulatory framework for multiemployer plans is not structured to assist plans on an ongoing basis and promotes little interaction among the federal agencies responsible for monitoring and assisting plans and safeguarding participant benefits. The lack of timely and accurate information and interagency collaboration hampers efforts to monitor and assist plans, and to enforce plan requirements. The recent economic downturn revealed that these plans, like most pension plans, are vulnerable to rapid changes in their funded status. Plans in the worst condition may find that the options of increasing employer contributions or reducing benefits are insufficient to address their underfunding and demographic challenges. For these plans, the effects of the economic downturn, declines in collective bargaining, the withdrawal of contributing employers, and an aging workforce will likely increase their risk of insolvency. Without additional options to address plan underfunding or to attract new employers to contribute to plans, plans may be more likely to require financial assistance from PBGC. Additional claims would further strain PBGC's insurance program that, already in deficit, it can ill afford. GAO is asking Congress to consider ways to eliminate duplicative reporting requirements and establish a shared database. GAO is also recommending that PBGC, IRS, and Labor work together to improve data collection and monitoring efforts. In commenting on a draft of this report, the agencies generally agreed to improve their coordination efforts.