A new report released by Cherion, a Virginia consulting company, estimates 114 multi-employer pension plans are underfunded by $36 billion and are expected to go insolvent within two decades. In addition, the Pension Benefit Guaranty Corporation has announced that its program to backstop such plans will run out of money in 2025.
The Multiemployer Pension Reform Act of 2014 was designed to prevent the PBGC from running out of money by allowing businesses to negotiate pension benefit cuts in an effort to mitigate the underfunding problem. Using this mechanism, a group of New York Teamsters voted to reduce benefits by 30% beginning next month.
Kroger announced it would follow UPS in extracting itself from the Teamsters Central States, Southeast & Southwest Areas Pension Fund. The withdrawal will leave Kroger with a withdrawal liability, payable at $60 million per year for 20 years. Currently, the Teamsters Central States fund spends $2 billion more per year in benefits than it receives in contributions.