South Bend / Mishawaka, IN – The Employer Retirement Income Security Plan of 1974 (ERISA), was amended in 1980 by the Multiemployer Pension Plan Amendments Act (MPPAA). The purpose of the MPPAA was to protect the financial stability of (union) multiemployer pension plans by keeping employers as participants in those plans (withdrawal liability).
To further protect these plans, the Pension Benefit Guaranty Corporation (PBGC) was set up by ERISA to guarantee the pensions of more than 44 million American workers (primarily union members). However, the PBGC, like the multiemployer plans, are in financial chaos.
The PBGC reported in November 2013 that its deficit had “ballooned” to approximately $36 billion during its 2013 fiscal year, far exceeding its 2011 fiscal deficit of a record $26 billion. The PBGC attributed its large 2013 deficit to the “declining condition” of multiemployer (pension) plans and “inadequate” resources. The agency stated, “the failure of these plans will drain PBGC’s multiemployer program of its assets, leaving PBGC unable to pay guaranteed benefits.” This in turn is more likely than not to cause these programs to run out of funds in 8-10 years. A disturbing prognosis for an already troubling situation.
Source: Law 360, July 15, 2014
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