Private Pensions:

Changes Needed to Better Protect Multiemployer Pension Benefits

GAO-11-79: Published: Oct 18, 2010. Publicly Released: Nov 16, 2010.

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Thirty years ago Congress enacted protections to ensure that participants in multiemployer pension plans received their promised benefits. These defined benefit plans are created by collective bargaining agreements covering more than one employer. Today, these plans provide pension coverage to over 10.4 million participants in approximately 1,500 multiemployer plans insured by the Pension Benefit Guaranty Corporation (PBGC). In this report, GAO examines (1) the current status of nation's multiemployer plans; (2) steps PBGC takes to monitor the health of these plans; (3) the structure of multiemployer plans in other countries; and (4) statutory and regulatory changes that could help plans provide participants with the benefits they are due. To address these questions, GAO analyzed government and industry data and interviewed government officials, pension experts and plan practitioners in the United States, the Netherlands, Denmark, United Kingdom, and Canada.

Most multiemployer plans report large funding shortfalls and face an uncertain future. U.S. multiemployer plans have not been fully funded in aggregate since 2000 and the recent economic recession had a severely negative impact on the funded status of multiemployer plans. Annual data from the Internal Revenue Service (IRS) show that the proportion of multiemployer plans less than 80 percent funded rose from 23 percent of plans in 2008 to 68 percent of plans in 2009. While some plans may be able to improve their funded status as the economy improves, many plans will continue to face demographic challenges that threaten their long-term financial outlook--including an aging workforce and few opportunities to attract new employers and workers into plans. PBGC monitors the health of multiemployer plans, but can provide little assistance to troubled plans until they become insolvent, at which point PBGC provides loans to allow insolvent plans to continue paying participant benefits at the guaranteed level (currently $12,870 per year for 30 years of employment). PBGC receives more current information on plan status, but uses older plan data to determine which plans are at the greatest risk of insolvency, because these data are audited, comprehensive, and PBGC's monitoring system was designed for them. The private pension systems in the countries GAO studied face short-term and long-term challenges similar to those that U.S. multiemployer plans currently face, including plan funding deficiencies and an aging workforce. The plans in these countries are subject to a range of funding, reporting, and regulatory requirements that require plans to interact frequently with pension regulators. Multiemployer plans in these countries have a number of tools available to improve and maintain their funded status, such as increasing contributions and reducing the rate of benefit accruals. The statutory and regulatory framework for multiemployer plans is not structured to assist plans on an ongoing basis and promotes little interaction among the federal agencies responsible for monitoring and assisting plans and safeguarding participant benefits. The lack of timely and accurate information and interagency collaboration hampers efforts to monitor and assist plans, and to enforce plan requirements. The recent economic downturn revealed that these plans, like most pension plans, are vulnerable to rapid changes in their funded status. Plans in the worst condition may find that the options of increasing employer contributions or reducing benefits are insufficient to address their underfunding and demographic challenges. For these plans, the effects of the economic downturn, declines in collective bargaining, the withdrawal of contributing employers, and an aging workforce will likely increase their risk of insolvency. Without additional options to address plan underfunding or to attract new employers to contribute to plans, plans may be more likely to require financial assistance from PBGC. Additional claims would further strain PBGC's insurance program that, already in deficit, it can ill afford. GAO is asking Congress to consider ways to eliminate duplicative reporting requirements and establish a shared database. GAO is also recommending that PBGC, IRS, and Labor work together to improve data collection and monitoring efforts. In commenting on a draft of this report, the agencies generally agreed to improve their coordination efforts.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Matters for Congressional Consideration

    Matter: To provide greater transparency of the current status of multiemployer plans, assist federal monitoring efforts, and help plans address their funding deficiencies, Congress may wish to consider requiring IRS, EBSA, and PBGC to establish a shared database containing all information received from multiemployer plans.

    Status: Open

    Comments: The Congress has not taken any action to date.

    Matter: To provide greater transparency of the current status of multiemployer plans, assist federal monitoring efforts, and help plans address their funding deficiencies, Congress may wish to consider consolidating the annual funding notices and the PPA notices of critical or endangered status to eliminate duplicative reporting requirements.

    Status: Open

    Comments: The Congress has not taken any action to date.

    Recommendations for Executive Action

    Recommendation: To improve the quality of information and oversight of multiemployer plans, the EBSA, IRS, and PBGC should amend existing interagency memoranda of understanding to address, among other things, the agencies' plans for sharing information they collect on multiemployer plans on an ongoing basis. Specifically, the agencies should address how they will share data: (1) To identify the universe of multiemployer plans. (2) To reconcile similar information received by each agency. (3) To identify possible reporting compliance issues and take appropriate enforcement action. The agencies should revisit this agreement periodically to determine whether modifications are required to ensure that each agency is able to carry out its responsibilities.

    Agency Affected: Department of the Treasury: Internal Revenue Service

    Status: Open

    Comments: In 2011, Treasury indicated that IRS had memoranda of understanding to share taxpayer information with Labor and PBGC under certain circumstances. It noted that IRS and Labor had established a formal information-sharing agreement, under which IRS would provide the actuarial certification lists in the format requested by DOL for a 1-year period, with the expectation that Labor would renew its request for this information in its annual requests for information on multiemployer plans. Also, Treasury indicated that PBGC had provided IRS with an updated list of all multiemployer plans that had been compiled using the most recent PBGC premium payment records.

    Recommendation: To improve the quality of information and oversight of multiemployer plans, the EBSA, IRS, and PBGC should amend existing interagency memoranda of understanding to address, among other things, the agencies' plans for sharing information they collect on multiemployer plans on an ongoing basis. Specifically, the agencies should address how they will share data: (1) To identify the universe of multiemployer plans. (2) To reconcile similar information received by each agency. (3) To identify possible reporting compliance issues and take appropriate enforcement action. The agencies should revisit this agreement periodically to determine whether modifications are required to ensure that each agency is able to carry out its responsibilities.

    Agency Affected: Pension Benefit Guaranty Corporation

    Status: Closed - Implemented

    Comments: In January 2011, PBGC indicated that it would coordinate with IRS and EBSA to consider necessary amendments to existing memoranda of understanding to identify the specific types of information and timeframes for sharing information between agencies. In its 2013 update, PBGC identified numerous steps it took to share multiemployer plan information with IRS and EBSA, including providing lists of the universe of multiemployer plans, terminated and/or insolvent multiemployer plans, lists of plans filing critical and endangered status notices, and plans that failed to provide annual funding notices. In addition, in 2012, IRS reported that it continues to receive and share data on multiemployer defined benefit actuarial certifications with both EBSA and PBGC.

    Recommendation: To implement better and more effective oversight practices, the Director of the PBGC should develop a more proactive approach to monitoring multiemployer plans, such as assigning case managers to work with the plans that pose the greatest risk to the agency and provide non-financial assistance to troubled plans on an ongoing basis.

    Agency Affected: Pension Benefit Guaranty Corporation

    Status: Closed - Implemented

    Comments: In January 2011, PBGC indicated that its multiemployer specialists continued to provide technical assistance to help multiemployer plan administrators improve their funding status and other issues. The agency further noted that it cannot compel plans to seek assistance or adopt any of the potential remedial measures available under ERISA. In response to our recommendation, PBGC reported in a May 2013 letter to GAO that it had taken numerous actions since 2011 to implement better and more effective oversight practices including: (1) re-assigning four attorneys to work primarily on multiemployer plan matters in a position similar to a case manager; (2) awarding an audit services contract to allow PBGC staff time to develop nonfinancial assistance to plans; (3) initiating proactive efforts to identify plans that would benefit from PBGC technical assistance and informal guidance; (4) contacting troubled multiemployer plans to obtain data on the plan?s financial situation and to create avenues to engage PBGC staff in dialog about options to improve plan health and the financial assistance process; and (5) authorizing five additional positions to administer and oversee financial assistance extended to troubled multiemployer plans.

    Recommendation: To improve the quality of information and oversight of multiemployer plans, the EBSA, IRS, and PBGC should amend existing interagency memoranda of understanding to address, among other things, the agencies' plans for sharing information they collect on multiemployer plans on an ongoing basis. Specifically, the agencies should address how they will share data: (1) To identify the universe of multiemployer plans. (2) To reconcile similar information received by each agency. (3) To identify possible reporting compliance issues and take appropriate enforcement action. The agencies should revisit this agreement periodically to determine whether modifications are required to ensure that each agency is able to carry out its responsibilities.

    Agency Affected: Department of Labor: Employee Benefits Security Administration

    Status: Closed - Implemented

    Comments: In January 2011, Labor indicated that it would continue to work with IRS and PBGC to determine the best approach for more effective information sharing on multiemployer plans. It noted that EBSA's Office of Chief Accountant and IRS's Employee Plans Examinations had taken steps to establish a procedure to allow IRS to provide EBSA a list of actuarial certifications of funded status for multiemployer plans. In its 2013 update, PBGC identified numerous steps it took to share multiemployer plan information with IRS and EBSA, including providing lists of the universe of multiemployer plans, terminated and/or insolvent multiemployer plans, lists of plans filing critical and endangered status notices, and plans that failed to provide annual funding notices. In addition, in 2012, IRS reported that it continues to receive and share data on multiemployer defined benefit actuarial certifications with both EBSA and PBGC.

    Recommendation: To collect more useful information from plans, the Secretary of the Treasury should direct the IRS to develop a standardized electronic form for annual certifications that requires plans to submit their funded percentage.

    Agency Affected: Department of the Treasury

    Status: Open

    Comments: In 2011, Treasury indicated that IRS's Employee Plans Compliance Unit viewed the development of a standardized electronic form as desirable and feasible within a reasonably short time frame. In its 2013 update, IRS indicated that the idea of the electronic form had been discussed and met no objection. However, to date, such a form has not been implemented for plan sponsors to use.

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