Labor unions like to promote their generous defined-benefit pensions. Yet when these benefits prove unsustainable, workers can lose their jobs and retirement savings. The kicker is that taxpayers may soon be tapped to perpetuate this double fraud.
That’s the main take-away from a new report by the Pension Benefit Guaranty Corporation (PBGC), which insures multi-employer pension plans for 10.4 million workers and retirees. The federal agency projects that its deficit for multi-employer plans will balloon to $49.6 billion by 2023 from $8.3 billion. Last year the PBGC forecasted a deficit of $26.2 billion in 2022, and its upward revision reflects the increasing likelihood that more plans will become insolvent and sooner.
Multi-employer plans are prevalent in industries like mining, manufacturing and construction where workers often shift among employers. Because unions collectively bargain benefits across multiple employers, workers don’t lose pension benefits when they change jobs. While unions cite portability as a selling point, it’s also a fatal design flaw because the plans require multiple businesses for support.