Issues: Multiemployer Plans

Multiemployer plans are defined benefit plans that are maintained by two or more employers and are collectively bargained.  Most multiemployer plans are required to have an equal number of employer and union representatives on the Board of Trustees.  Due to this unique arrangement, multiemployer plans are often subject to different or additional rules from single employer plans.  All defined benefit plans, including multiemployer plans, are required to meet minimum funding standards under the Internal Revenue Code. Multiemployer plans, however, are subject to different rules from a single employer plan. If a multiemployer plan falls into a funding deficiency status, it must pay an excise tax and participating employers could be required to make additional contributions in the amount of the insufficiency. A significant number of multiemployer plans are in danger of failing to meet the minimum funding standards due to a number of factors including the current economic situation and a shrinking participant base.

In 1980, Congress enacted the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) to redesign the termination insurance plan for multiemployer plans. Before the enactment of MPPAA, termination insurance for multiemployer plans was discretionary. Under MPPAA, multiemployer plan contributions to the PBGC are lower than for single employer plans. However, PBGC coverage of multiemployer plans is extremely limited. The PBGC will cover a multiemployer plan only if the plan is completely insolvent and there are no remaining assets in the plan. Moreover, the maximum benefit levels are less than one-third of what they are for single-employer plans. MPPAA also implemented withdrawal liability which requires a withdrawing employer to pay its proportionate share of unfunded vested benefits determined as of the date of withdrawal. Even though it is a proportional liability, because it includes liabilities associated with participating employers who became insolvent, it is not be a true measure of the liabilities accrued by the employees of only that employer.

There are over 1500 multiemployer pension plans covering approximately 9.8 million workers. While only 10% of defined benefit plans are multiemployer plans, these plans cover 25% of all participants in defined benefit plans. The Pension Coalition seeks permanent reform of the multiemployer funding system that will contribute to the continuing viability of these plans.

• Funding Reforms for Multiemployer Pension Plans
• US Chamber - Multiemployer Plan Funding Issue Brief - Adobe PDF file.