Multiemployer plans are distinct from single- employer plans, which are established and maintained by only one  employer and where the plans may or may not be collectively bargained. The Financial Stability of Multiemployer Plans Has Likely Weakened Recently, While Long- term Declines in the Number of Plans and Participants Continue

While multiemployer plan funding has exhibited considerable stability  over the past 2 decades, available data suggest that many plans have  recently experienced significant funding declines. Recently, however, it appears that a combination of  stock market declines coupled with low interest rates and poor economic  conditions have reduced the assets and increased the liabilities of many  multiemployer plans. The number of insured multiemployer plans has  dropped by a quarter since 1980 to fewer than 1,700 plans in 2003, the  latest data available. By 2000, the majority of multiemployer plans  reported assets exceeding 90 percent of total liabilities, with the average  plan funded at 105 percent of liabilities. 2 and 3.) In addition, PBGC reported  its own multiemployer insurance program deficit of $261 million for fiscal  year 2003, the first deficit since 1981 and its largest ever. Multiemployer Plans Are Experiencing Long-term Declines in Plan Formation and Worker Participation

Over the past 2 decades, the multiemployer system has experienced a  steady decline in the number of plans and in the number of active  participants. PBGC Monitors Multiemployer Plans for Financial Problems, Provides Technical and Financial Assistance, and Guarantees a Minimum Level of Benefits

PBGC’s role regarding multiemployer plans includes monitoring plans for  financial problems, providing technical and financial assistance to  troubled plans, and guaranteeing a minimum level of benefits to  participants in insolvent plans. For example, PBGC annually reviews the  financial condition of multiemployer plans to identify those that may have  potential financial problems in the near future. PBGC officials believe that  the low frequency of PBGC financial assistance to multiemployer plans is  likely due to specific features of the multiemployer insurance regulatory  framework: (1) the employers sponsoring the plan share the risk for  providing benefits to all participants in the plan and (2) benefit guarantees  are set at a lower level for the multiemployer insurance program  compared with the guarantees provided by the single-employer program. Plan administrators may contact PBGC’s customer service representatives  at designated offices to obtain assistance on such matters as premiums,  plan terminations, and general legal questions related to PBGC. Since 1980, the agency has provided loans to   33 plans totaling $167 million. Other things equal, there are fewer  opportunities for potential PBGC assistance to multiemployer plans than  to single-employer plans. A Number of Factors Challenge the Long- term Prospects of the Multiemployer Defined Benefit System

A number of factors pose challenges to the long-term prospects of the  multiemployer pension plan system. These include the  growing trend among employers to choose defined contribution plans over  DB plans, including multiemployer plans, the continued growing life  expectancy of American workers, resulting in participants spending more  years in retirement, thus increasing benefit costs, and increases in  employer-provided health insurance costs, which are increasing  employers’ total compensation costs generally, making them less willing or  able to increase elements of compensation, like wages or pensions. 7.)
Why GAO Did This Study

Multiemployer-defined benefit pension plans, which are created by collective bargaining agreements covering more than one employer and generally operated under the joint trusteeship of labor and management, provide coverage to over 9.7 million of the 44 million participants insured by the Pension Benefit Guaranty Corporation (PBGC). The recent termination of several large single-employer plans--plans sponsored by individual firms--has led to millions of dollars in benefit losses for thousands of workers and left PBGC, their public insurer, an $11.2 billion deficit as of September 30, 2003. The serious difficulties experienced by these single-employer plans have prompted questions about the health of multiemployer plans. This report provides the following information on multiemployer pension plans: (1) trends in funding and worker participation, (2) PBGC's role regarding the plans' financial solvency, and (3) potential challenges to the plans' long-term prospects.

What GAO Found

Following 2 decades of relative financial stability, multiemployer plans as a group appear to have suffered recent and significant funding losses, while long-term declines in participation and new plan formation continue unabated. At the close of the 1990s, the majority of multiemployer plans reported assets exceeding 90 percent of total liabilities. Recently, however, stock market declines, coupled with low interest rates and poor economic conditions, appear to have reduced assets and increased liabilities for many plans. PBGC reported an accumulated net deficit of $261 million for its multiemployer program in 2003, the first since 1981. Meanwhile, since 1980, the number of plans has declined from over 2,200 to fewer than 1,700 plans, and there has been a long-term decline in the total number of active workers. PBGC monitors those multiemployer plans, which may, in PBGC's view, present a risk of financial insolvency. PBGC also provides technical and financial assistance to troubled plans and guarantees a minimum level of benefits to participants in insolvent plans. PBGC annually reviews the financial condition of plans to determine its potential insurance liability. Although the agency does not trustee the administration of insolvent multiemployer plans as it does with single-employer plans, it does offer them technical assistance and loans. PBGC loans have been rare, with loans to only 33 plans, totaling $167 million since 1980. Several factors pose challenges to the long-term prospects of the multiemployer system. Some are inherent to the multiemployer regulatory framework, such as the greater perceived financial risk and reduced flexibility for employers compared to other plan designs, and suggest that fewer employers will find such plans attractive. Also, the long-term decline of collective bargaining results in fewer new participants to expand or create new plans. Other factors threaten all defined benefit plans, including multiemployer plans: the growing trend among employers to choose defined contribution plans; the increasing life expectancy of workers, which raises the cost of plans; and continuing increases in employer health insurance costs, which compete with pensions for employer funding.