Multiemployer Pension Plans Following COVID-19 Crisis


The COVID-19 crisis portends a new and troubling outlook for construction contractors and other employers participating in multiemployer pension plans.

While many multiemployer pension plans had been recovering enough from the 2007–2009 Great Recession to have their current funding levels approach or exceed their pre-Great Recession funding levels, the COVID-19 crisis threatens those recoveries and the solvency of the most financially troubled plans.

Proactive employers participating in multiemployer plans should anticipate how the plan’s potential financial downturn will affect their finances and the retirement benefits of their unionized employees and plan accordingly.

The following briefly reviews the Great Recession’s effect on multiemployer plans and provides an overview of COVID-19’s potential effect.

The Great Recession

The years following the Great Recession saw:

  1. A spike in the number of multiemployer plans projected to become insolvent and those receiving financial assistance to avoid insolvency;

  2. Contribution rate hikes imposed on contributing employers in significantly underfunded multiemployer plans pursuant to the Pension Protection Act of 2006;

  3. The growth of the “unfunded vested benefits” of many multiemployer plans directly resulting in the corresponding growth of the withdrawal liability of employers that ceased their participation in such plans (unfunded vested benefits is one measurement of underfunding and may be thought of as the difference between the present value of the pension fund’s assets and the present value of its future benefit obligations to retirees and beneficiaries);

  4. Passage of the Multiemployer Pension Reform Act of 2014, establishing a process for multiemployer plans nearing insolvency to reduce the pension benefits payable to current retirees;

  5. The rate of the premium payable to the Pension Benefit Guaranty Corp. (PBGC), the federal agency tasked with insuring the benefits payable from multiemployer plans, jumping from $8 per participant in 2007 to $30 per participant in 2020; and

  6. A projection in the PBGC’s 2019 annual report that its multiemployer insurance program would be insolvent by 2025 (and possibly sooner), leaving affected retirees not only with benefits significantly less than promised by the troubled plan, but also significantly less than the level of benefits guaranteed by the PBGC.

The COVID-19 Crisis

The trends that emerge with multiemployer pension plans during and after the COVID-19 crisis may be worse than that following the Great Recession.

Increase in Potential Withdrawal Liability

Under the Employee Retirement Income Security Act (ERISA), the federal law governing retirement plans, an employer withdrawing from an underfunded multiemployer plan is liable for the employer’s share of the plan’s unfunded vested benefits (UVB). Generally, the greater the…



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