The Central States Pension Fund is warning the 400,000 retirees and workers it covers that it will be insolvent by the start of 2025 and is urging them to push Congress to pass legislation to protect their benefits.
This warning and call to action came from Thomas Nyhan, the fund’s executive director, on a conference call with members last week. The fund, with more than 1,500 contributing employers, provides pension benefits for Teamsters as well as retirees in a variety of other industries.
Nyhan’s warning is a reminder of the need for Washington to address looming pension difficulties that have long been ignored -- and that will likely put more pressure on the federal budget in the years ahead.
“Without your voice, there will be no legislation, and the fund will become insolvent,” Nyhan said in the call last week.
But it is not clear where all of the money to fix the problems might come from. Taxpayers should not simply be expected to shoulder the entire burden at the expense of other federal priorities.
After all, many other private pension funds face difficulties, even after years of economic recovery and rising stock prices. So do many state and local government pension plans.
In addition, the federal government must put Social Security and Medicare on sustainable paths even as the population ages and medical costs rise. Meanwhile, the federal debt is already rising rapidly.
Two years ago the Treasury Department rejected a restructuring plan for the Central States Pension Fund that would have cuts benefits for thousands of retirees. While many beneficiaries were relieved at this decision, The Concord Coalition noted at the time that the financial problems facing the fund would still need to be addressed.
The fund’s situation is particularly worrisome because it is so large that its failure could severely impact the Pension Benefit Guaranty Corporation (PBGC), the federal agency that helps protect private pension benefits.
The agency has two safety-net insurance programs: the Single-Employer Program that covers individual employers, and the Multiemployer Program that covers pension plans created by two or more employers and a union.
The Central State Pension Fund is in the Multiemployer Program, which is in worse shape.
“The financial status of the Single-Employer Program continues to improve,” W. Thomas Reeder, PBGC director, said in the agency's 2017 annual report last fall. “However, the Multiemployer Program faces very serious challenges and is likely to run out of money by the end of Fiscal Year 2025.”
The Government Accountability Office (GAO) has warned for years about the PBGC’s insurance programs. The GAO did so again in its 2017 High-Risk Report, which spotlights particularly troubling problem areas in the federal government.
“PBGC’s financial future remains uncertain, due in part to a long-term decline in the number of traditional defined benefit plans and the collective financial risk of the many underfunded pension plans that PBGC insures,” the GAO said. It also noted that PBGC had estimated its exposure to future losses for underfunded plans at nearly $243 billion.
The GAO has offered a series of recommendations to Congress, including development of a strategy for funding PBGC claims “over the long term.”
The GAO also calls for “additional structural reforms to reinforce and stabilize the multi-employer system that balance the needs and potential sacrifices of contributing employers, participants and the federal government.”
In a bipartisan budget deal in February, Congress finally moved to start focusing on this problem. The agreement called for a bipartisan committee to look for solutions to the problems facing multiemployer pension plans and develop proposed legislation by the end of November -- after this year’s elections, of course.
Well, better late than never. But further procrastination will only make the problems more difficult to solve.
The committee would do well to follow GAO’s suggestion for a balanced approach that spreads the burden of putting critical retirement-income programs on sustainable paths.