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Report to the Chairman, Committee on Education and Labor, House of 
Representatives: 

United States Government Accountability Office:
GAO: 

October 2010: 

Private Pensions: 

Changes Needed to Better Protect Multiemployer Pension Benefits: 

GAO-11-79: 

GAO Highlights: 

Highlights of GAO-11-79, a report to the Chairman, Committee on 
Education and Labor, House of Representatives. 

Why GAO Did This Study: 

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. 

What GAO Found: 

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. 

What GAO Recommends: 

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. 

View [hyperlink, http://www.gao.gov/products/GAO-11-79] or key 
components. For more information, contact Barbara D. Bovbjerg at (202) 
512-7215 or bovbjergb@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Multiemployer Plans Reported Large Funding Shortfalls and Face an 
Uncertain Future: 

PBGC Monitors the Health of Multiemployer Plans, but Does Not Assist 
Troubled Plans on an Ongoing Basis: 

Pension Structures in Other Countries Provide Multiemployer Plans with 
Options to Improve Funding: 

Changes to U.S. Multiemployer Plan Framework Could Help to Protect 
Pension Benefits: 

Conclusions: 

Matters for Congressional Consideration: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Comments from the Department of Labor: 

Appendix III: Comments from the Department of the Treasury: 

Appendix IV: Comments from the Pension Benefit Guaranty Corporation: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: PPA Funding Zone Status and Reporting Requirements: 

Table 2: Selected Differences between Single-employer Plans and 
Multiemployer Plans: 

Table 3: Funding Zone Status of Multiemployer Plans, as Certified with 
IRS, Tax Years 2008 and 2009: 

Table 4: Classification of Plans on PBGC's Contingency List: 

Table 5: Multiemployer Plan Information Filed with PBGC: 

Table 6: Comparison of Select Economic and Demographic Characteristics 
in the Studied Countries and the United States (2008): 

Table 7: Comparison of Multiemployer Plan Structures in the Studied 
Countries and the United States: 

Table 8: Reporting Requirements for Multiemployer Plans in the Studied 
Countries: 

Table 9: Monitoring of Multiemployer Plans in the Studied Countries: 

Table 10: Recovery Periods and Tools Available to Improve Plan Funded 
Status in the Studied Countries: 

Table 11: Comparison of Multiemployer Plan Status Information Received 
by Federal Agencies, 2008 and 2009: 

Table 12: Experts' Suggestions to Improve PBGC's Assistance to Plans: 

Table 13: Experts' Suggestions to Improve the Multiemployer Framework: 

Figures: 

Figure 1: PBGC-Insured Multiemployer Plans and Participants, 1980 
through 2009: 

Figure 2: PBGC-Insured Multiemployer Plan Participants, by Industry, 
2000 through 2008: 

Figure 3: Aggregate Funded Status and Funding Level of PBGC-Insured 
Multiemployer Plans, 1980 through 2007: 

Figure 4: Funded Status of PBGC-Insured Multiemployer Plans, by 
Industry, 2000 through 2007: 

Figure 5: PBGC-Insured Multiemployer Plan Participation, by 
Participant Status, 1980 through 2007: 

Figure 6: Private Sector Union Affiliation, by Industry, 2000 through 
2009: 

Figure 7: PBGC Multiemployer Insurance Program Assets, Liabilities, 
and Net Position, Fiscal Years 1980 through 2009: 

Figure 8: PBGC-Insured Multiemployer Plans on PBGC's Contingency List, 
Fiscal Years 2000 through 2009: 

Figure 9: Multiemployer Plans Receiving PBGC's Financial Assistance 
and Amounts Received, 1981 through 2009: 

Abbreviations: 

AFN: Annual Funding Notice: 

BLS: Bureau of Labor Statistics: 

DB: defined benefit: 

EBSA: Employee Benefits Security Administration: 

EPCU: Employee Plans Compliance Unit: 

ERISA: Employee Retirement Income Security Act of 1974 IRS Internal 
Revenue Service: 

ME-PIMS: Multiemployer Pension Insurance Modeling System: 

MPPAA: Multiemployer Pension Plan Amendments Act of 1980: 

NLRA: National Labor Relations Act of 1935: 

OECD: Organization of Economic Co-operation and Development: 

PBGC: Pension Benefit Guaranty Corporation: 

PIMS: Pension Insurance Modeling System PPA Pension Protection Act of 
2006: 

WRERA: Worker, Retiree, and Employer Recovery Act of 2008: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

October 18, 2010: 

The Honorable George Miller: 
Chairman: 
Committee on Education and Labor: 
House of Representatives: 

Dear Mr. Chairman: 

Thirty years ago Congress enacted new protections for multiemployer 
pension plans to better ensure that they could fulfill their promise 
to pay benefits to plan participants in retirement. Today, these plans 
continue to constitute an important part of the nation's private 
employer pension system. For the purposes of this report, 
multiemployer plans are defined benefit (DB) plans established through 
collectively bargained pension agreements between labor unions and two 
or more employers.[Footnote 1] In 2009, there were about 1,500 
multiemployer plans covering more than 10.4 million workers and 
retirees--approximately 1 of every 4 workers and retirees in the 
United States covered by a private-sector DB plan. Multiemployer plans 
are distinct from single-employer plans, which are established and 
maintained by one employer, and multiple-employer plans, many of which 
maintain separate funding accounts for each employer. Multiemployer 
plans cover unionized workers in many industries, including trucking, 
retail food, construction, mining, and garment, and provide some 
portability of benefits. Workers in multiemployer plans can continue 
accruing pension benefits when they change jobs if their new employer 
is a contributing employer in the same plan. Such arrangements are 
particularly suited to workers in these industries, who change jobs 
frequently over the course of a career. 

The Employee Retirement Income Security Act of 1974 (ERISA) created 
the Pension Benefit Guaranty Corporation (PBGC) as a U. S. government 
corporation to provide plan termination insurance for certain single- 
and multiemployer pension plans that become unable to provide pension 
benefits. For multiemployer plans, PBGC guarantees, within prescribed 
limits, participant benefits when a covered plan becomes insolvent and 
cannot pay such benefits when due for a plan year. PBGC provides loans 
to insolvent multiemployer plans to allow them to continue paying 
benefits at the PBGC guarantee level, which in 2010, was $12,870 per 
year, based on 30 years of employment. 

In 2004, we reported that the multiemployer system, in contrast with 
private single-employer plans, operates in a framework that 
redistributes risk toward employers and participants and away from the 
government and potentially the taxpayer.[Footnote 2] This framework, 
we noted, can create important incentives for interested parties to 
resolve financial difficulties, such as plan underfunding. However, we 
also found that weak economic conditions in the early 2000s and 
declines in interest rates and equity markets had increased the 
financial stress on the overall multiemployer plan framework and each 
of its key stakeholders. We identified several challenges to the long- 
term health of these plans, including a lack of employer funding 
flexibility compared with single-employer plans and the national 
decline of collective bargaining. Earlier this year we testified that 
deterioration in economic conditions had increased stress on 
multiemployer plans, which continue to face funding shortages and 
other challenges.[Footnote 3] 

Given these ongoing concerns about multiemployer plans, this report 
addresses the following questions: 

(1) What is the current status of the nation's multiemployer pension 
plans? 

(2) What steps does PBGC take to monitor the health of these plans? 

(3) What is the structure of multiemployer plans in other countries? 

(4) What statutory and regulatory changes, if any, could help plans to 
continue to provide participants with the benefits due to them? 

To identify the current status of the nation's multiemployer pension 
plans, we analyzed data from PBGC, the Department of Labor's Employee 
Benefits Security Administration (EBSA), and the Department of the 
Treasury's Internal Revenue Service (IRS) and reviewed relevant 
industry studies. To determine the steps PBGC takes to monitor the 
health of these plans, we interviewed PBGC officials and reviewed 
PBGC's multiemployer policies and procedures. We also reviewed 
relevant federal laws and regulations. To understand the structure of 
multiemployer plans in other countries, we conducted site visits to 
four countries--the Netherlands, Denmark, United Kingdom, and Canada-- 
and we worked with U.S. State Department officials to identify and 
interview government officials and various pension experts in these 
countries. We did not conduct an independent legal analysis of foreign 
laws. To identify what changes, if any, are needed to help plans 
continue to provide participants with the benefits due them, we 
interviewed a diverse range of multiemployer plan experts and 
practitioners in the United States and abroad. We assessed the 
reliability of the data used in this report and determined that they 
were reliable for our purposes. 

We conducted this performance audit from September 2009 through 
October 2010, in accordance with generally accepted government 
auditing standards. Those standards require that we plan and perform 
the audit to obtain sufficient, appropriate evidence to provide a 
reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a 
reasonable basis for our findings and conclusions based on our audit 
objectives. Appendix I provides more detail on the scope and 
methodology used in developing this report. 

Background: 

The Taft Hartley Act of 1947 established terms for negotiating 
employee benefits in collectively bargained multiemployer plans and 
placed certain restrictions on the operation of these plans, including 
the placement of plan assets in a trust.[Footnote 4] For example, the 
law required a collectively bargained plan and its assets to be 
managed by a joint board of trustees equally representative of 
management and labor. It further required plan assets to be placed in 
a trust fund, legally distinct from the union and the employers, for 
the sole and exclusive benefit of the plan beneficiaries. In 1974, 
Congress passed ERISA to protect the interests of participants and 
beneficiaries covered by private sector employee benefit plans. 
[Footnote 5] Title IV of ERISA created PBGC as a U. S. government 
corporation to provide plan termination insurance for certain defined 
benefit pension plans that are unable to pay promised benefits. PBGC 
operates two distinct pension insurance programs, one for 
multiemployer plans and one for single-employer plans. These programs 
have separate insurance funds as well as different insurance coverage 
rules and benefit guarantees. The multiemployer insurance program and 
PBGC's day-to-day operations are financed by annual premiums paid by 
the plans and by investment returns on PBGC's assets.[Footnote 6] In 
turn, PBGC guarantees benefits, within prescribed limits, when a 
multiemployer plan is insolvent and unable to pay the basic PBGC-
guaranteed benefits when due for the plan year. 

In 1980, Congress sought to protect worker pensions in multiemployer 
plans by enacting the Multiemployer Pension Plan Amendments Act 
(MPPAA).[Footnote 7] Among other things, MPPAA (1) strengthened 
funding requirements to help ensure plans accumulate enough assets to 
pay for promised benefits, and (2) made employers, unless relieved by 
special provisions, liable for their share of unfunded plan benefits 
when they withdraw from a multiemployer plan. The amount owed by a 
withdrawing employer is based upon a proportional share of a plan's 
unfunded vested benefits.[Footnote 8] Liabilities that cannot be 
collected from a withdrawing employer, for example, one in bankruptcy, 
are to be "rolled over" and eventually funded by the plan's remaining 
employers.[Footnote 9] These changes were made to discourage employer 
withdrawals from a plan. 

The Pension Protection Act of 2006 (PPA) established new funding and 
disclosure requirements for multiemployer plans.[Footnote 10] (See 
table 1.) 

Table 1: PPA Funding Zone Status and Reporting Requirements: 

Funding zone status: Safe; 
Funded percentage: greater than or equal to 80%; 
Plan reporting requirements: 
Annual Funding Notice (AFN): [Check]; 
Annual actuarial certification of funded status: [Check]; 
Notice of endangered or critical status: [Check]; 
Funding improvement plan or rehabilitation plan: [Empty]. 

Funding zone status: Endangered; 
Funded percentage: 65-80%; 
Plan reporting requirements: 
Annual Funding Notice (AFN): [Check]; 
Annual actuarial certification of funded status: [Check]; 
Notice of endangered or critical status: [Check]; 
Funding improvement plan or rehabilitation plan: Funding improvement 
plan. 

Funding zone status: Critical; 
Funded percentage: less than 65%; 
Plan reporting requirements: 
Annual Funding Notice (AFN): [Check]; 
Annual actuarial certification of funded status: [Check]; 
Notice of endangered or critical status: [Check]; 
Funding improvement plan or rehabilitation plan: Rehabilitation plan. 

Filing requirements: 
Plan reporting requirements: 
Annual Funding Notice (AFN): Within 120 days after the close of the 
plan year; 
Annual actuarial certification of funded status: Within 90 days after 
the start of the plan year; 
Notice of endangered or critical status: Within 30 days after 
actuarial certification; 
Funding improvement plan or rehabilitation plan: Adopted within 240 
days after the deadline for actuarial certification. 

Recipients: 
Plan reporting requirements: 
Annual Funding Notice (AFN): PBGC, participants, beneficiaries, 
participating unions and contributing employers; 
Annual actuarial certification of funded status: Secretary of the 
Treasury and trustees; 
Notice of endangered or critical status: PBGC, Department of Labor, 
participants, beneficiaries, participating unions and contributing 
employers; 
Funding improvement plan or rehabilitation plan: Participating unions 
and contributing employers must receive schedules within 30 days of 
adoption. 

Source: GAO analysis of the Pension Protection Act of 2006. 

[End of table] 

PPA requires trustees of plans certified in endangered or critical 
status to take specific actions to improve the plans' financial 
status, such as developing schedules to increase contributions or 
reduce benefits.[Footnote 11] Plans certified as endangered must adopt 
a funding improvement plan, which: 

outlines steps the plan will take to increase the plan's funded status 
over a 10-year period or, in some cases, longer. Plans certified as 
critical must adopt a rehabilitation plan, which outlines actions, to 
enable the plan to cease to be in critical status by the end of a 10- 
year rehabilitation period and may include reductions in plan 
expenditures (including plan mergers and consolidations), reductions 
in future benefit accruals or increases in contributions, if agreed to 
by the bargaining parties, or any combination of such actions. 
[Footnote 12] To assist plans in critical status, PPA amended ERISA to 
allow these plans to reduce or eliminate adjustable benefits, such as 
early retirement benefits, post-retirement death benefits, and 
disability benefits. In addition, critical status plans are generally 
exempt from the excise taxes that IRS can assess on plans with funding 
deficiencies.[Footnote 13] 

The funding requirements of PPA took effect just as the nation entered 
a severe economic recession in December 2007. As a result, Congress 
enacted the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) 
to provide multiemployer plans with temporary relief from some PPA 
requirements by allowing multiemployer plans to temporarily freeze 
their funded status at the previous year's level.[Footnote 14] The 
freeze allows plans to delay creation of, or updates to, an existing 
funding improvement plan or rehabilitation plan, or postpone other 
steps required under PPA.[Footnote 15] WRERA also requires plans to 
send a notice to all participants and beneficiaries, bargaining 
parties, PBGC, and the Department of Labor indicating that the 
election to freeze the status of a plan does not mean that the funded 
status of the plan has improved. WRERA also provided for a 3-year 
extension of a plan's funding improvement or rehabilitation period. 

Although both single-employer and multiemployer plans are subject to 
the rules outlined in Title IV of ERISA, there are several important 
differences between the plan types that affect the structure and 
stability of each type of plan. (See table 2.) 

Table 2: Selected Differences between Single-employer Plans and 
Multiemployer Plans: 

Plan characteristic: PBGC benefit guarantee levels; 
Single-employer plans: PBGC's guarantees benefits up to $54,000 per 
year for a retiree at age 65. Benefit amounts are indexed for 
inflation; 
Multiemployer plans: PBGC guarantees benefits of $12,870 per year, 
based on 30 years of employment. Benefit amounts are not indexed for 
inflation. 

Plan characteristic: PBGC premium structure; 
Single-employer plans: In 2010, plans pay PBGC a flat rate premium of 
$35 per participant that is indexed for inflation. Plans are also 
subject to a variable rate premium based on underfunding and 
termination premiums; 
Multiemployer plans: In 2010, plans pay PBGC an annual flat rate 
premium of $9 per participant. The premium is indexed for inflation. 

Plan characteristic: Insurable events; 
Single-employer plans: The insurable event is generally termination of 
an underfunded plan, after which PBGC assumes responsibility and pays 
benefits directly to participants; 
Multiemployer plans: The insurable event is plan insolvency. 

Plan characteristic: Provision of financial assistance; 
Single-employer plans: PBGC provides no financial assistance to plans 
but instead takes over terminated underfunded plans as trustee; 
Multiemployer plans: PBGC provides loans to plans when they become 
insolvent, and a multiemployer plan need not be terminated to qualify 
for financial assistance. Insolvent multiemployer plans also are 
required to reduce or suspend payment of any portion of benefits to 
beneficiaries that exceeds PBGC's guarantee level. If a plan recovers 
from insolvency, it must begin repaying the PBGC loan. 

Plan characteristic: Fiduciary and settlor function; 
Single-employer plans: Employer sponsor generally assumes fiduciary 
role in addition to its settlor role; 
Multiemployer plans: Individual employers do not assume a fiduciary 
role in plan management, which is instead handled by a board of 
trustees. 

Plan characteristic: Risk distribution; 
Single-employer plans: Plans generally do not share the risk with 
other employers; 
Multiemployer plans: Plans typically continue to operate after an 
individual employer, or sponsor, goes out of business because the 
plan's remaining employers are jointly liable for funding benefits for 
all vested participants. 

Plan characteristic: Portability of benefits; 
Single-employer plans: Plans are established and maintained by only 
one employer and their benefits are not normally portable; 
Multiemployer plans: Plans provide participants some benefit 
portability because they allow workers to continue to accrue pension 
benefits when they change jobs as long as their new employer also 
participates in the same plan. 

Plan characteristic: Ability to adjust contribution and benefit levels; 
Single-employer plans: Employer sponsors, depending on their 
employees' bargaining rights, may make adjustments to future 
contributions and benefits according to the company's fiscal condition 
provided that minimum funding requirements are met; 
Multiemployer plans: Individual employers cannot adjust their plan 
contributions at will and may be restricted in making changes until 
the collective bargaining agreement comes up for renegotiation, 
typically once every 2 or 3 years. 

Plan characteristic: Plan terminations; 
Single-employer plans: PBGC assumes trusteeship and administers 
payment of participant benefits when an underfunded plan terminates; 
Multiemployer plans: If an employer withdraws from a plan, the accrued 
benefits for its workers stay in and are administered by the plan. The 
plan terminates by mass withdrawal of all contributing employers. When 
a plan becomes insolvent, PBGC does not take over trusteeship but 
instead provides financial assistance to its trustees, who continue to 
administer the plan until all guaranteed benefits are paid out. 

Plan characteristic: Employer withdrawal; 
Single-employer plans: There is no withdrawal liability for plan 
sponsors. However, plan sponsors are liable for benefits of its 
employees and to PBGC for any underfunding; 
Multiemployer plans: An employer seeking to withdraw from a plan is 
liable for its allocable share of the plan's unfunded vested benefits 
for all employees covered by the plan. In cases of bankruptcy, the 
remaining employers in the plan assume responsibility for funding 
benefits to the bankrupt employer's participants.[A] 

Source: GAO analysis of ERISA, PBGC documents, and prior GAO reports. 

[A] PBGC officials said that this greater financial risk for employers 
and lower guaranteed benefit level for participants in multiemployer 
plans, in practice, creates incentives for employers, workers, and 
their collective bargaining representatives to avoid insolvency and 
find solutions to a plan's financial difficulties. 

[End of table] 

The overall number of multiemployer plans insured by PBGC has 
decreased steadily since the 1980s as a result of plan mergers and 
terminations. At the same time, the aggregate number of participants--
including active and inactive--has continued to rise. (See figure 1) 

Figure 1: PBGC-Insured Multiemployer Plans and Participants, 1980 
through 2009: 

[Refer to PDF for image: combination vertical bar and line graph] 

Year: 1980; 
Participants: 8.0 million; 
Plans: 2,244. 

Year: 1981; 
Participants: 8.2 million; 
Plans: 2,272. 

Year: 1982; 
Participants: 8.5 million; 
Plans: 2,289. 

Year: 1983; 
Participants: 8.4 million; 
Plans: 2,285. 

Year: 1984; 
Participants: 8.1 million; 
Plans: 2,223. 

Year: 1985; 
Participants: 8.2 million; 
Plans: 2,188. 

Year: 1986; 
Participants: 8.2 million; 
Plans: 2,153. 

Year: 1987; 
Participants: 8.3 million; 
Plans: 2,098. 

Year: 1988; 
Participants: 8.3 million; 
Plans: 2,081. 

Year: 1989; 
Participants: 8.4 million; 
Plans: 2,060. 

Year: 1990; 
Participants: 8.5 million; 
Plans: 1,983. 

Year: 1991; 
Participants: 8.7 million; 
Plans: 1,926. 

Year: 1992; 
Participants: 8.8 million; 
Plans: 1,936. 

Year: 1993; 
Participants: 8.7 million; 
Plans: 1,900. 

Year: 1994; 
Participants: 8.6 million; 
Plans: 1,880. 

Year: 1995; 
Participants: 8.6 million; 
Plans: 1,879. 

Year: 1996; 
Participants: 8.7 million; 
Plans: 1,876. 

Year: 1997; 
Participants: 8.7 million; 
Plans: 1,846. 

Year: 1998; 
Participants: 8.9 million; 
Plans: 1,817. 

Year: 1999; 
Participants: 9.0 million; 
Plans: 1,800. 

Year: 2000; 
Participants: 9.1 million; 
Plans: 1,744. 

Year: 2001; 
Participants: 9.4 million; 
Plans: 1,707. 

Year: 2002; 
Participants: 9.6 million; 
Plans: 1,671. 

Year: 2003; 
Participants: 9.7 million; 
Plans: 1,612. 

Year: 2004; 
Participants: 9.8 million; 
Plans: 1,586. 

Year: 2005; 
Participants: 9.9 million; 
Plans: 1,571. 

Year: 2006; 
Participants: 9.9 million; 
Plans: 1,538. 

Year: 2007; 
Participants: 10.0 million; 
Plans: 1,522. 

Year: 2008; 
Participants: 10.2 million; 
Plans: 1,517. 

Year: 2009; 
Participants: 10.4 million; 
Plans: 1,495. 

Source: PBGC annual Pension Insurance Data Books. 

[End of figure] 

The number of participants in multiemployer plans also varies by 
industry. While PBGC covers workers in all major industrial sectors, 
the construction trades consistently account for over one-third of all 
covered multiemployer plan participants, totaling 36 percent in 2008. 
Other industries, including transportation and manufacturing, account 
for a smaller portion of participants, roughly 15 percent in 2007. 
(See figure 2) 

Figure 2: PBGC-Insured Multiemployer Plan Participants, by Industry, 
2000 through 2008: 

[Refer to PDF for image: vertical bar graph] 

Year: 2000; 
Construction: 3.2 million; 
Manufacturing: 1.3 million; 
Transportation: 1.4 million; 
Retail trade: 1.2 million; 
Services: 1.3 million; 
Other industries: 684,000. 

Year: 2001; 
Construction: 3.6 million; 
Manufacturing: 1.4 million; 
Transportation: 1.1 million; 
Retail trade: 1.4 million; 
Services: 1.4 million; 
Other industries: 540,000. 

Year: 2002; 
Construction: 3.6 million; 
Manufacturing: 1.3 million; 
Transportation: 1.5 million; 
Retail trade: 1.3 million; 
Services: 1.3 million; 
Other industries: 501,000. 

Year: 2003; 
Construction: 3.5 million; 
Manufacturing: 1.5 million; 
Transportation: 1.5 million; 
Retail trade: 1.4 million; 
Services: 1.4 million; 
Other industries: 382,000. 

Year: 2004; 
Construction: 3.6 million; 
Manufacturing: 1.5 million; 
Transportation: 1.6 million; 
Retail trade: 1.3 million; 
Services: 1.4 million; 
Other industries: 458,000. 

Year: 2005; 
Construction: 3.5 million; 
Manufacturing: 1.5 million; 
Transportation: 1.6 million; 
Retail trade: 1.4 million; 
Services: 1.4 million; 
Other industries: 474,000. 

Year: 2006; 
Construction: 3.5 million; 
Manufacturing: 1.5 million; 
Transportation: 1.6 million; 
Retail trade: 1.4 million; 
Services: 1.4 million; 
Other industries: 531,000. 

Year: 2007; 
Construction: 3.6 million; 
Manufacturing: 1.5 million; 
Transportation: 1.6 million; 
Retail trade: 1.4 million; 
Services: 1.5 million; 
Other industries: 529,000. 

Year: 2008; 
Construction: 3.7 million; 
Manufacturing: 1.2 million; 
Transportation: 1.6 million; 
Retail trade: 1.4 million; 
Services: 1.8 million; 
Other industries: 486,000. 

Source: GAO analysis of PBGC annual Pension Insurance Data Books. 

Note: PBGC draws these data from annual premium filings in which plans 
self-report their industry classification based on the predominant 
business activity of all employers in the plan. The industry 
classification categories are based on principal business activity 
codes used in the North American Industry Classification System. 
Additionally, the "Other Industries" category is made up of industries 
that individually account for less than 3 percent of all PBGC-insured 
multiemployer plan participants, including Agriculture, Mining, 
Information, Wholesale Trade, Finance, Insurance, and Real Estate. The 
2001 participant data presented here are from PBGC's Pension Insurance 
Data Book 2002. PBGC published different 2001 participant data in its 
Pension Insurance Data Book 2001. 

[End of figure] 

Multiemployer Plans Reported Large Funding Shortfalls and Face an 
Uncertain Future: 

Multiemployer Plans Have Experienced General Funding Declines Since 
2000: 

Multiple data sources that we examined indicate that most 
multiemployer plans experienced steep declines in their funded status 
in recent years. According to PBGC, multiemployer plans in aggregate 
have not been fully funded--at 100 percent or above level--since 2000 
and their net funded status has declined significantly through 2007, 
the last date for which PBGC data are available. While plans are 
considered "safe" if their funded status is at least 80 percent, the 
aggregate funded status--the percentage of benefits covered by plan 
assets--of multiemployer plans insured by PBGC declined from 105 
percent in 2000 to 69 percent in 2007. (See figure 3) 

Figure 3: Aggregate Funded Status and Funding Level of PBGC-Insured 
Multiemployer Plans, 1980 through 2007: 

[Refer to PDF for image: combined vertical bar and line graph] 

Year: 1980; 
Funding status: 77%; 
Funding level: -$11.8 billion. 

Year: 1981; 
Funding status: 87%; 
Funding level: -$6.9 billion. 

Year: 1982; 
Funding status: 96%; 
Funding level: -$2.4 billion. 

Year: 1983; 
Funding status: 100%; 
Funding level: -$2.1 billion. 

Year: 1984; 
Funding status: 106%; 
Funding level: $4.1 billion. 

Year: 1985; 
Funding status: 116%; 
Funding level: $12.2 billion. 

Year: 1986; 
Funding status: 115%; 
Funding level: $13.8 billion. 

Year: 1987; 
Funding status: 109%; 
Funding level: $9.8 billion. 

Year: 1988; 
Funding status: 116%; 
Funding level: $17.1 billion. 

Year: 1989; 
Funding status: 111%; 
Funding level: $13.7 billion. 

Year: 1990; 
Funding status: 107%; 
Funding level: $10.2 billion. 

Year: 1991; 
Funding status: 103%; 
Funding level: $5.4 billion. 

Year: 1992; 
Funding status: 98%; 
Funding level: -$3.2 billion. 

Year: 1993; 
Funding status: 98%; 
Funding level: -$4.7 billion. 

Year: 1994; 
Funding status: 91%; 
Funding level: -$19.4 billion. 

Year: 1995; 
Funding status: 96%; 
Funding level: -$8.5 billion. 

Year: 1996; 
Funding status: 88%; 
Funding level: -$32.0 billion. 

Year: 1997; 
Funding status: 93%; 
Funding level: -$19.1 billion. 

Year: 1998; 
Funding status: 92%; 
Funding level: -$26.9 billion. 

Year: 1999; 
Funding status: 91%; 
Funding level: -$30.3 billion. 

Year: 2000; 
Funding status: 105%; 
Funding level: $16.9 billion. 

Year: 2001; 
Funding status: 91%; 
Funding level: -$34.2 billion. 

Year: 2002; 
Funding status: 77%; 
Funding level: -$99.2 billion. 

Year: 2003; 
Funding status: 63%; 
Funding level: -$178.2 billion. 

Year: 2004; 
Funding status: 62%; 
Funding level: -$208.5 billion. 

Year: 2005; 
Funding status: 62%; 
Funding level: -$226.1 billion. 

Year: 2006; 
Funding status: 66%; 
Funding level: -$199.7 billion. 

Year: 2007; 
Funding status: 69%; 
Funding level: -$193.3 billion. 

Source: GAO analysis of PBGC annual Pension Insurance Data Books. 

[End of figure] 

The funded status of multiemployer plans insured by PBGC varies 
significantly by industry sector within which the plan operates. 
According to PBGC data, while all industries generally follow the same 
trend in funded status, plans in the transportation industry have 
since 2000 reported a consistently lower funded status than other 
industries. For example, in 2007, the aggregate funded status for 
plans in the transportation industry was 63 percent in contrast to the 
overall average of 69 percent. Furthermore, in 2000, the last year 
that the aggregate funded status of all multiemployer plans was over 
100 percent, the funded status of multiemployer plans in the retail 
trade and services industries was about 30 percent higher than the 
funded status of plans in the transportation industry. (See figure 4.) 
The extent of underfunding in multiemployer plans also varies by 
industry with the construction and transportation industries 
accounting for 71 percent of the underfunding of all PBGC-insured 
multiemployer plans in 2007. 

Figure 4: Funded Status of PBGC-Insured Multiemployer Plans, by 
Industry, 2000 through 2007: 

[Refer to PDF for image: multiple line graph] 

Year: 2000; 
Construction: 105%; 
Manufacturing: 113%; 
Transportation: 85%; 
Retail Trade: 116%; 
Services: 116%; 
Other Industries: 104%; 
Total: 111%. 

Year: 2001; 
Construction: 91%; 
Manufacturing: 98%; 
Transportation: 83%; 
Retail Trade: 93%; 
Services: 99%; 
Other Industries: 91%; 
Total: 101%. 

Year: 2002; 
Construction: 77%; 
Manufacturing: 83%; 
Transportation: 72%; 
Retail Trade: 78%; 
Services: 83%; 
Other Industries: 77%; 
Total: 85%. 

Year: 2003; 
Construction: 64%; 
Manufacturing: 68%; 
Transportation: 58%; 
Retail Trade: 65%; 
Services: 68%; 
Other Industries: 64%; 
Total: 74%. 

Year: 2004; 
Construction: 62%; 
Manufacturing: 67%; 
Transportation: 58%; 
Retail Trade: 62%; 
Services: 67%; 
Other Industries: 62%; 
Total: 72%. 

Year: 2005; 
Construction: 63%; 
Manufacturing: 69%; 
Transportation: 57%; 
Retail Trade: 61%; 
Services: 67%; 
Other Industries: 62%; 
Total: 71%. 

Year: 2006; 
Construction: 66%; 
Manufacturing: 68%; 
Transportation: 62%; 
Retail Trade: 64%; 
Services: 71%; 
Other Industries: 66%; 
Total: 75%. 

Year: 2007; 
Construction: 70%; 
Manufacturing: 76%; 
Transportation: 63%; 
Retail Trade: 69%; 
Services: 74%; 
Other Industries: 69%; 
Total: 80%. 

Source: GAO analysis of PBGC annual Pension Insurance Data Books. 

Note: PBGC draws these data from annual Form 5500 filings in which 
plans self-report their industry classification based on the 
predominant business activity of all employers in the plan. The 
industry classification categories are based on principal business 
activity codes used in the North American Industry Classification 
System. Additionally, the "Other Industries" category is made up of 
industries that individually account for less than 3 percent of all 
PBGC-insured multiemployer plan participants, including Agriculture, 
Mining, Information, and Wholesale Trade. 

[End of figure] 

Since 2007, the last year for which data are available, aggregate plan 
funded status has declined further as a result of investment market 
declines. While the rapid drop in funded status, like the economic 
conditions that caused it, was severe, experts said that its effect on 
plans was similar to what happened to plans during the market 
correction of 2000 to 2002. For example, experts said that some plans, 
learning from the downturn from 2000 to 2002, took remedial steps in 
the following years, such as increasing contributions, and likely 
fared better in the recent recession. In contrast, other plans did not 
change course after the 2000 to 2002 downturn in the hope that market 
returns would erase their deficits and are now the plans in the most 
critical financial condition. 

Many Multiemployer Plans Reported Large Funding Shortfalls during the 
Recent Economic Downturn: 

Although funded status was in a general decline since 2000, the 
economic recession that began in December 2007 had a negative impact 
on the funded status of multiemployer plans, according to a number of 
data sources. Annual actuarial certification data from IRS show that 
the proportion of multiemployer plans reporting in endangered or 
critical zone status rose significantly, from 23 percent of plans in 
2008 to 68 percent of plans in 2009. (See table 3.) 

Table 3: Funding Zone Status of Multiemployer Plans, as Certified with 
IRS, Tax Years 2008 and 2009: 

Funding zone status: Critical status; 
2008: Plans: 138; 
2008: %: 10; 
2009: Plans: 461; 
2009: %: 35. 

Funding zone status: Endangered status; 
2008: Plans: 175; 
2008: %: 13; 
2009: Plans: 444; 
2009: %: 33. 

Funding zone status: Subtotal; 
2008: Plans: 313; 
2008: %: 23; 
2009: Plans: 905; 
2009: %: 68. 

Funding zone status: Safe status; 
2008: Plans: 1,034; 
2008: %: 77; 
2009: Plans: 426; 
2009: %: 32. 

Funding zone status: Total; 
2008: Plans: 1,347; 
2008: %: 100; 
2009: Plans: 1,331; 
2009: %: 100. 

Source: GAO analysis of Internal Revenue Service annual actuarial 
certification data. 

Note: The endangered status category includes plans certifying as 
endangered or seriously endangered. 

[End of table] 

Data from PBGC, although incomplete, show a similar downward trend in 
plan funded status. According to the annual funding notices that PBGC 
received in the 2009 plan year, nearly all of the 484 plans that filed 
reported a decrease in funded status from 2008 to 2009. Similarly, 
PBGC received more notices of critical or endangered status from 
plans, from 266 plans in 2008 to 624 plans in 2009. 

Recent industry surveys of multiemployer plans found similar declines 
in funded status. For example, two industry groups surveying their 
multiemployer plan membership in 2009 found the same result: 80 
percent of plans reported being in critical or endangered zone status, 
a reversal from 2008 when 80 percent of plans reported being in safe 
status.[Footnote 16] Similarly, another industry survey of nearly 400 
plans found that the proportion of plans in the endangered or critical 
zone status increased from 24 percent in 2008 to 80 percent in 2009. 
[Footnote 17] While these surveys are not comprehensive, they provide 
further evidence of the negative impact that the economic downturn had 
on multiemployer plans. 

Although it did not affect their underlying funded status, many plans 
took advantage of the one-time freeze allowed under WRERA. According 
to IRS data, 745 plans elected to freeze their funded status in either 
2008 or 2009, including 373 plans in critical status, 351 in 
endangered status, and 21 plans in safe status. According to experts, 
some plans took advantage of the freeze option for a variety of 
reasons. Plans wanted to give the markets a chance to rebound in order 
to recoup plan assets lost in the downturn. Others may have chosen the 
freeze due to timing of collective bargaining agreements, not wanting 
to take steps to address funding deficiencies until a new agreement 
was reached. Still other plans elected the freeze to avoid having to 
revisit or revise ongoing rehabilitation plans. However, experts also 
noted that the WRERA freeze option was not helpful for all plans. 
Specifically, some plans chose not to freeze in endangered status, 
preferring to go straight to critical status to give them more options 
to address their funding deficiencies. 

Plans Face Long-standing Demographic Challenges and an Uncertain 
Future: 

Multiemployer plans 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. While the number of total participants in multiemployer 
plans has slowly increased, the proportion of active participants to 
retirees and separated vested participants has decreased.[Footnote 18] 
(See figure 5.) For example, multiemployer plans had about 1.6 million 
fewer active participants in 2007 than in 1980, according to PBGC. 
With fewer active participants, plans have more difficulty making up 
funding deficiencies by increasing employers' funding contributions. 
Moreover, increases in life expectancy also put pressure on plans, 
increasing the amount of benefits that the plan will have to pay as 
retirees live longer. 

Figure 5: PBGC-Insured Multiemployer Plan Participation, by 
Participant Status, 1980 through 2007: 

[Refer to PDF for image: stacked vertical bar graph] 

Year: 1980; 
Active: 76%; 
Retired: 18%; 
Separated Vested: 7%. 

Year: 1981; 
Active: 74%; 
Retired: 19%; 
Separated Vested: 7%. 

Year: 1982; 
Active: 73%; 
Retired: 19%; 
Separated Vested: 9%. 

Year: 1983; 
Active: 69%; 
Retired: 22%; 
Separated Vested: 10%. 

Year: 1984; 
Active: 67%; 
Retired: 23%; 
Separated Vested: 10%. 

Year: 1985; 
Active: 66%; 
Retired: 23%; 
Separated Vested: 11%. 

Year: 1986; 
Active: 64%; 
Retired: 23%; 
Separated Vested: 13%. 

Year: 1987; 
Active: 62%; 
Retired: 24%; 
Separated Vested: 14%. 

Year: 1988; 
Active: 61%; 
Retired: 25%; 
Separated Vested: 14%. 

Year: 1989; 
Active: 61%; 
Retired: 25%; 
Separated Vested: 14%. 

Year: 1990; 
Active: 59%; 
Retired: 25%; 
Separated Vested: 16%. 

Year: 1991; 
Active: 57%; 
Retired: 26%; 
Separated Vested: 17%. 

Year: 1992; 
Active: 55%; 
Retired: 28%; 
Separated Vested: 18%. 

Year: 1993; 
Active: 54%; 
Retired: 28%; 
Separated Vested: 18%. 

Year: 1994; 
Active: 53%; 
Retired: 28%; 
Separated Vested: 19%. 

Year: 1995; 
Active: 52%; 
Retired: 29%; 
Separated Vested: 19%. 

Year: 1996; 
Active: 52%; 
Retired: 29%; 
Separated Vested: 19%. 

Year: 1997; 
Active: 52%; 
Retired: 29%; 
Separated Vested: 19%. 

Year: 1998; 
Active: 51%; 
Retired: 30%; 
Separated Vested: 18%. 

Year: 1999; 
Active: 51%; 
Retired: 31%; 
Separated Vested: 19%. 

Year: 2000; 
Active: 51%; 
Retired: 30%; 
Separated Vested: 19%. 

Year: 2001; 
Active: 50%; 
Retired: 30%; 
Separated Vested: 21%. 

Year: 2002; 
Active: 48%; 
Retired: 30%; 
Separated Vested: 22%. 

Year: 2003; 
Active: 47%; 
Retired: 30%; 
Separated Vested: 23%. 

Year: 2004; 
Active: 46%; 
Retired: 31%; 
Separated Vested: 23%. 

Year: 2005; 
Active: 46%; 
Retired: 31%; 
Separated Vested: 24%. 

Year: 2006; 
Active: 45%; 
Retired: 31%; 
Separated Vested: 24%. 

Year: 2007; 
Active: 45%; 
Retired: 31%; 
Separated Vested: 24%. 

Source: PBGC annual Pension Insurance Data Books. 

[End of figure] 

The future growth of multiemployer plans is largely predicated on 
growth of collective bargaining. Yet collective bargaining has 
declined in the United States since the early 1950s. According to 
recent data from the Bureau of Labor Statistics (BLS), union 
membership--a proxy for collective bargaining coverage--accounted for 
7.2 percent of the U.S. private-sector labor force in 2009. In 
contrast, in 1990, union membership in the private sector accounted 
for about 12 percent, and in 1980, about 20 percent. While union 
membership has trended downward in most industries, it has remained 
relatively high in the transportation sector. (See figure 6.) 

Figure 6: Private Sector Union Affiliation, by Industry, 2000 through 
2009: 

[Refer to PDF for image: multiple line graph] 

Year: 2000; 
Private Sector Total: 9%; 
Construction: 17.5%; 
Manufacturing: 14.9%; 
Retail Trade: 6.1%; 
Transportation: 26%; 
Other Industries: 8.5%. 

Year: 2001; 
Private Sector Total: 8.9%; 
Construction: 16.9%; 
Manufacturing: 14.7%; 
Retail Trade: 6%; 
Transportation: 25.3%; 
Other Industries: 8.5%. 

Year: 2002; 
Private Sector Total: 8.6%; 
Construction: 16.7%; 
Manufacturing: 14.6%; 
Retail Trade: 6.1%; 
Transportation: 24.7%; 
Other Industries: 7.8%. 

Year: 2003; 
Private Sector Total: 8.2%; 
Construction: 16%; 
Manufacturing: 13.5%; 
Retail Trade: 6.4%; 
Transportation: 26.2%; 
Other Industries: 7.4%. 

Year: 2004; 
Private Sector Total: 7.9%; 
Construction: 14.7%; 
Manufacturing: 12.9%; 
Retail Trade: 5.7%; 
Transportation: 24.9%; 
Other Industries: 8.1%. 

Year: 2005; 
Private Sector Total: 7.8%; 
Construction: 13.1%; 
Manufacturing: 13%; 
Retail Trade: 5.2%; 
Transportation: 24%; 
Other Industries: 7.6%. 

Year: 2006; 
Private Sector Total: 7.4%; 
Construction: 13%; 
Manufacturing: 11.7%; 
Retail Trade: 5%; 
Transportation: 23.2%; 
Other Industries: 6.7%. 

Year: 2007; 
Private Sector Total: 7.5%; 
Construction: 13.9%; 
Manufacturing: 11.3%; 
Retail Trade: 5.3%; 
Transportation: 22.1%; 
Other Industries: 7%. 

Year: 2008; 
Private Sector Total: 7.6%; 
Construction: 15.6%; 
Manufacturing: 11.4%; 
Retail Trade: 5.2%; 
Transportation: 22.2%; 
Other Industries: 6.9%. 

Year: 2009; 
Private Sector Total: 7.2%; 
Construction: 14.5%; 
Manufacturing: 10.9%; 
Retail Trade: 5.3%; 
Transportation: 22.2%; 
Other Industries: 6.2%. 

Source: GAO analysis of BLS data. 

Note: The "Other industries" category includes the following 
industries: Agriculture, Mining, Information, and Wholesale Trade. 

[End of figure] 

Some experts told us that some industries within which multiemployer 
plans operate were already in decline--such as the printing and 
trucking industries--and that their situation was likely exacerbated 
by the economic downturn. They also noted that other plans, while 
facing short-term funding deficiencies, belonged to industries that 
remained strong--such as the construction and entertainment 
industries--and were likely to improve their funded status as the 
economy improved.[Footnote 19] 

PBGC's ability to assist multiemployer plans is contingent upon its 
insurance program having sufficient funds to do so. The net position 
of PBGC's multiemployer pension insurance program has steadily 
declined since its highest point in 1998 as program liabilities 
outpaced asset growth. (See figure 7.) The program's net position went 
negative in 2003 and by 2009 the multiemployer program reported an 
accumulated deficit of $869 million. 

Figure 7: PBGC Multiemployer Insurance Program Assets, Liabilities, 
and Net Position, Fiscal Years 1980 through 2009: 

[Refer to PDF for image: combined vertical bar and line graph] 

Year: 1980; 
Liabilities: $30 million; 
Assets: $21 million; 
Net position: -$9 million. 

Year: 1981; 
Liabilities: $29 million; 
Assets: $28 million; 
Net position: -$1 million. 

Year: 1982; 
Liabilities: $29 million; 
Assets: $40 million; 
Net position: $11 million. 

Year: 1983; 
Liabilities: $46 million; 
Assets: $52 million; 
Net position: $6 million. 

Year: 1984; 
Liabilities: $44 million; 
Assets: $61 million; 
Net position: $17 million. 

Year: 1985; 
Liabilities: $52 million; 
Assets: $78 million; 
Net position: $27 million. 

Year: 1986; 
Liabilities: $54 million; 
Assets: $98 million; 
Net position: $45 million. 

Year: 1987; 
Liabilities: $45 million; 
Assets: $114 million; 
Net position: $68 million. 

Year: 1988; 
Liabilities: $37 million; 
Assets: $129 million; 
Net position: $92 million. 

Year: 1989; 
Liabilities: $37 million; 
Assets: $161 million; 
Net position: $123 million. 

Year: 1990; 
Liabilities: $58 million; 
Assets: $190 million; 
Net position: $132 million. 

Year: 1991; 
Liabilities: $75 million; 
Assets: $238 million; 
Net position: $163 million. 

Year: 1992; 
Liabilities: $114 million; 
Assets: $283 million; 
Net position: $169 million. 

Year: 1993; 
Liabilities: $131 million; 
Assets: $407 million; 
Net position: $276 million. 

Year: 1994; 
Liabilities: $181 million; 
Assets: $378 million; 
Net position: $197 million. 

Year: 1995; 
Liabilities: $285 million; 
Assets: $477 million; 
Net position: $192 million. 

Year: 1996; 
Liabilities: $381 million; 
Assets: $505 million; 
Net position: $124 million. 

Year: 1997; 
Liabilities: $377 million; 
Assets: $596 million; 
Net position: $219 million. 

Year: 1998; 
Liabilities: $404 million; 
Assets: $745 million; 
Net position: $341 million. 

Year: 1999; 
Liabilities: $493 million; 
Assets: $692 million; 
Net position: $199 million. 

Year: 2000; 
Liabilities: $427 million; 
Assets: $694 million; 
Net position: $267 million. 

Year: 2001; 
Liabilities: $691 million; 
Assets: $807 million; 
Net position: $116 million. 

Year: 2002; 
Liabilities: $786 million; 
Assets: $944 million; 
Net position: $158 million. 

Year: 2003; 
Liabilities: $1.26 billion; 
Assets: $1.0 billion; 
Net position: -$261 million. 

Year: 2004; 
Liabilities: $1.31 billion; 
Assets: $1.07 billion; 
Net position: -$236 million. 

Year: 2005; 
Liabilities: $1.50 billion; 
Assets: $1.16 billion; 
Net position: -$335 million. 

Year: 2006; 
Liabilities: $1.91 billion; 
Assets: $1.17 billion; 
Net position: -$739 million. 

Year: 2007; 
Liabilities: $2.15 billion; 
Assets: $1.20 billion; 
Net position: -$955 million. 

Year: 2008; 
Liabilities: $1.80 billion; 
Assets: $1.33 billion; 
Net position: -$463 million. 

Year: 2009; 
Liabilities: $2.33 billion; 
Assets: $1.46 billion; 
Net position: -$869 million. 

Source: PBGC annual Pension Insurance Data Books. 

[End of figure] 

The demographic challenges that multiemployer plans face also affect 
PBGC's ability to assist them. Plans pay PBGC an annual flat rate 
premium per participant. Similarly, contributions by employers in a 
multiemployer plan are generally paid on a per work-hour basis. 
Consequently, declines in the number of plan participants during 
periods of high unemployment and long-standing reductions in 
collective bargaining can result in less premium income to PBGC and an 
increased probability of PBGC-insured multiemployer plans requiring 
financial assistance. 

PBGC Monitors the Health of Multiemployer Plans, but Does Not Assist 
Troubled Plans on an Ongoing Basis: 

Monitoring Plan Insolvency Risk: 

PBGC monitors the financial condition of its insured multiemployer 
plans to identify plans that are more likely to become insolvent and 
require financial assistance from the multiemployer insurance program. 
To identify the universe of multiemployer plans, PBGC maintains a 
database that matches a plan's annual premium filings with its 
financial information reported on its annual Form 5500 filings. 
[Footnote 20] PBGC then uses multiemployer plans' annual Form 5500 
filings, critical and endangered status notices, and other information 
to generate a contingency list of plans that have an increased risk of 
insolvency and making a claim to the PBGC's multiemployer insurance 
program or terminating altogether. PBGC classifies plans into several 
categories on this contingency list, depending on the plan's 
likelihood of a PBGC claim. (See table 4.) 

Table 4: Classification of Plans on PBGC's Contingency List: 

Classification: Current probable; 
Definition: A plan that is known to be insolvent and has received or 
will begin receiving financial assistance from PBGC. 

Classification: Terminated future probable; 
Definition: A plan that may still have assets but the combination of 
plan assets and collectible payments of withdrawal liability are 
projected to be insufficient to cover plan benefits plus expenses. 

Classification: Ongoing future probable; 
Definition: An ongoing plan with a projected date of insolvency within 
10 years. 

Classification: Reasonably possible; 
Definition: An ongoing plan with a projected insolvency date between 
10 and 20 years away. 

Classification: Remote watch list; 
Definition: Any plan that is not classified as probable or reasonably 
possible, but has a smaller probability of future liability to PBGC. 

Source: PBGC. 

[End of table] 

To determine which multiemployer plans belong in each of these 
categories, PBGC uses an automated screening process that measures the 
financial health of plans. The variables that PBGC reviews are: 

* ratio of active participants (those for whom employers are 
continuing to make contributions) to other participants (those for 
whom plans are making benefit payments); 

* ratio of assets to the present value of vested benefits accrued by 
participants; 

* ratio of plan assets to annual benefit payments to retirees; 

* ratio of annual contributions to carrying costs (i.e., normal cost 
and interest on unfunded liability); 

* ratio of annual contributions from employers to the benefit 
distributions to retirees; and: 

* ratio of plan assets to the present value of retired participants' 
accrued benefits. 

PBGC also monitors plans to assess their risk of insolvency and the 
effect of insolvency on PBGC's multiemployer program. PBGC determines 
expected claims on the multiemployer insurance program based on two 
factors, the amount of underfunding in the plans and the likelihood 
that the plans will become insolvent or face a mass withdrawal of 
contributing employers from a plan. PBGC also analyzes ongoing 
multiemployer plans (i.e., plans that continue to have employers 
making regular contributions for covered work) to determine whether 
they pose probable or possible claims on the insurance program. In 
conducting this periodic analysis, PBGC examines plans that are 
chronically underfunded, have poor cash flow, have a falling 
contribution base, or lack an asset cushion to temporarily weather 
income losses. A combination of any one of these factors may prompt 
PBGC to conduct a more detailed analysis of the plan's funding and the 
likelihood that the contributing employers will be able to maintain 
the plan. Since 2002, the number of plans classified as probable or 
placed on the watch list has steadily increased while the number of 
plans classified as reasonably possible has remained about the same. 
(See figure 8.) 

Figure 8: PBGC-Insured Multiemployer Plans on PBGC's Contingency List, 
Fiscal Years 2000 through 2009: 

[Refer to PDF for image: multiple line graph] 

Number of plans: 

Year: 2000; 
Probable: 47; 
Reasonably Possible: 2; 
Watch List: 52. 

Year: 2001; 
Probable: 56; 
Reasonably Possible: 1; 
Watch List: 49. 

Year: 2002; 
Probable: 58; 
Reasonably Possible: 2; 
Watch List: 47. 

Year: 2003; 
Probable: 62; 
Reasonably Possible: 3; 
Watch List: 62. 

Year: 2004; 
Probable: 67; 
Reasonably Possible: 4; 
Watch List: 65. 

Year: 2005; 
Probable: 77; 
Reasonably Possible: 3; 
Watch List: 113. 

Year: 2006; 
Probable: 85; 
Reasonably Possible: 2; 
Watch List: 115. 

Year: 2007; 
Probable: 94; 
Reasonably Possible: 2; 
Watch List: 131. 

Year: 2008; 
Probable: 90; 
Reasonably Possible: 1; 
Watch List: 127. 

Year: 2009; 
Probable: 104; 
Reasonably Possible: 9; 
Watch List: 157. 

Source: GAO analysis of PBGC data. 

[End of figure] 

Providing Financial Assistance to Plans: 

PBGC provides insolvent multiemployer plans with financial assistance 
in the form of loans to provide beneficiaries with the PBGC- 
guaranteed benefit and for reasonable administrative expenses. PBGC 
considers a plan insolvent if it does not have enough assets to pay 
the PBGC guaranteed benefits for a full plan year.[Footnote 21] An 
insolvent plan can obtain the loan by filing a claim with PBGC's 
multiemployer insurance program. PBGC can set the conditions under 
which it provides plans with this financial assistance. For example, 
PBGC can require that: 

* a loan be repaid if the recipient plan's financial condition 
improves, 

* a loan be collateralized by employer contributions, withdrawal 
liability payments, and other plan assets, and: 

* PBGC be given broad audit authority over the plan. 

In addition, PBGC must require payment of benefits at the guaranteed 
benefit level. 

PBGC provides financial assistance to plans that can no longer make 
benefit payments. Once begun, these loans generally continue year 
after year until the plan no longer needs assistance or has paid all 
promised benefits at the guaranteed level. Although called "loans" in 
statute, these funds are provided to plans that have a declining asset 
base, making them unlikely to be repaid. To date, only 1 of the 62 
plans that received PBGC financial assistance between 1981 and 2009 
has ever repaid its loan. 

While the number of plans receiving financial assistance has risen 
steadily since 1981, the amount paid has peaked twice in the past 
decade. In fiscal year 2009, PBGC paid $85.6 million in financial 
assistance to 43 insolvent plans. (See figure 9.) 

Figure 9: Multiemployer Plans Receiving PBGC's Financial Assistance 
and Amounts Received, 1981 through 2009: 

[Refer to PDF for image: combined vertical bar and line graph] 

Year: 1981; 
Total amount of financial assistance: $311,000; 
Plans: 1. 

Year: 1982; 
Total amount of financial assistance: $1.0 million; 
Plans: 1. 

Year: 1983; 
Total amount of financial assistance: $6.2 million; 
Plans: 2. 

Year: 1984; 
Total amount of financial assistance: $5.8 million; 
Plans: 2. 

Year: 1985; 
Total amount of financial assistance: $1.3 million; 
Plans: 3. 

Year: 1986; 
Total amount of financial assistance: $2.2 million; 
Plans: 5. 

Year: 1987; 
Total amount of financial assistance: $1.6 million; 
Plans: 6. 

Year: 1988; 
Total amount of financial assistance: $1.5 million; 
Plans: 3. 

Year: 1989; 
Total amount of financial assistance: $1.3 million; 
Plans: 3. 

Year: 1990; 
Total amount of financial assistance: $1.0 million; 
Plans: 3. 

Year: 1991; 
Total amount of financial assistance: $2.0 million; 
Plans: 5. 

Year: 1992; 
Total amount of financial assistance: $4.0 million; 
Plans: 6. 

Year: 1993; 
Total amount of financial assistance: $4.0 million; 
Plans: 6. 

Year: 1994; 
Total amount of financial assistance: $3.9 million; 
Plans: 8. 

Year: 1995; 
Total amount of financial assistance: $4.3 million; 
Plans: 9. 

Year: 1996; 
Total amount of financial assistance: $4.0 million; 
Plans: 12. 

Year: 1997; 
Total amount of financial assistance: $4.5 million; 
Plans: 14. 

Year: 1998; 
Total amount of financial assistance: $5.4 million; 
Plans: 18. 

Year: 1999; 
Total amount of financial assistance: $19.2 million; 
Plans: 21. 

Year: 2000; 
Total amount of financial assistance: $91.0 million; 
Plans: 21. 

Year: 2001; 
Total amount of financial assistance: $4.5 million; 
Plans: 22. 

Year: 2002; 
Total amount of financial assistance: $4.9 million; 
Plans: 23. 

Year: 2003; 
Total amount of financial assistance: $5.0 million; 
Plans: 24. 

Year: 2004; 
Total amount of financial assistance: $10.1 million; 
Plans: 27. 

Year: 2005; 
Total amount of financial assistance: $13.8 million; 
Plans: 29. 

Year: 2006; 
Plans: 
Total amount of financial assistance: $70.1 million; 
Plans: 33. 

Year: 2007; 
Total amount of financial assistance: $71.9 million; 
Plans: 36. 

Year: 2008; 
Total amount of financial assistance: $84.6 million; 
Plans: 42. 

Year: 2009; 
Total amount of financial assistance: $85.6 million; 
Plans: 43. 

Source: PBGC annual Pension Insurance Data Books. 

[End of figure] 

Projecting Future Claims to PBGC: 

Since 1998, PBGC has assessed the long-term risk to the single-
employer insurance program using its Pension Insurance Modeling System 
(PIMS), a stochastic simulation model designed to quantify the amount 
of risk facing the programs. According to PBGC, the model helps PBGC 
assess its financial vulnerability from future events that may be 
significantly different from past events. 

Over time PBGC realized that a separate multiemployer plan model was 
needed to account for the unique factors that make up multiemployer 
plans, such as the role and number of unions and the role of 
negotiations in developing collective bargaining agreements. Following 
the enactment of PPA in 2006, PBGC developed a specific multiemployer 
PIMS model (ME-PIMS) that used data from a stratified sample of 132 
plans that included the top 20 in terms of total underfunding. For 
these selected plans, PBGC uses data from the Form 5500 Schedule MB 
(and formerly Schedule B) and other sources to look at benefit levels, 
how benefits were accrued, and how fast they accrued. PBGC then 
estimated compensation levels and funding targets. According to PBGC 
officials, the model is weighted toward the bigger plans because that 
is where most of PBGC's risks lie. The model can project up to 20 
years in the future, but the typical simulation is no longer than 10 
years. As the projection period is extended, the simulation becomes 
less reliable. 

ME-PIMS takes into account the different funding rules, nature of 
exposure, and possible future outcomes of multiemployer plans. The 
model anticipates that individual plans have various probabilities of 
positive and negative experiences, and that these probabilities can 
change significantly over time. Using the ME-PIMS model, PBGC projects 
interest rates, stock returns, and related variables; asset returns; 
plan demographics; plan size; plan benefit level and employer 
contribution increases; and a plan's probability of mass withdrawal. 
PBGC stresses that ME-PIMS is not a predictive model but instead 
simulates the flow of claims that could develop under hundreds of 
combinations of economic parameters and extrapolations of plans' 
respective historical patterns. ME-PIMS cannot model for the financial 
condition of individual employers or industries in part because, until 
recently, PBGC has not had access to information at the contributing 
employer level. PBGC uses ME-PIMS to report the agency's liabilities 
and exposure to losses under the multiemployer program in its annual 
reports. According to PBGC's 2009 annual report, ME-PIMS showed the 
median amount of claims over the next 10 years to be about $5.5 
billion and a median net position outcome of $2.4 billion. 

Data That PBGC Uses Are Outdated: 

While PBGC officials told us that they could benefit from having more 
current data than are available on the Form 5500, they prefer using 
Form 5500 data on multiemployer plans because these older data are the 
most comprehensive, the agency's monitoring system is designed for it, 
the data are audited, and most private plans are required by law to 
file the form on an annual basis. Officials told us that, given the 
current Form 5500 reporting schedule, even with the data capture 
capabilities of the new EFAST2 system, they cannot make up for the 
time lag in plan filing and, as a result, its monitoring suffers. 
[Footnote 22] Officials told us that the time lag made it difficult to 
detect when a plan was in trouble and what steps could be taken to 
avert greater problems. PPA generally requires multiemployer plans to 
provide more timely financial information to PBGC. (See table 5.) 

Table 5: Multiemployer Plan Information Filed with PBGC: 

Notice, report, or filing item: Form 5500 (including Schedules MB and 
R) for annual certification by plan actuary; 
Time frame: By the last day of the 7th calendar month following the 
end of a plan year. Plans may also apply for a one-time filing 
extension of up to 2½ months; 
Plans required to file: All multiemployer plans. 

Notice, report, or filing item: Annual funding notice; 
Time frame: 120 days from end of plan-year for large plans. Small 
plans with 100 or fewer participants must file either with their 
annual report or before the annual report filing deadline; 
Plans required to file: All PBGC-insured plans. 

Notice, report, or filing item: Notices of critical or endangered 
status; 
Time frame: 30 days after the date of certification; 
Plans required to file: All plans that certified with IRS that they 
are in critical or endangered zone status. 

Notice, report, or filing item: Plan actuarial valuations; 
Time frame: Upon request; 
Plans required to file: PBGC asks for but cannot compel plans on its 
contingency list to provide. 

Notice, report, or filing item: PBGC premium filings; 
Time frame: By last day of the 16th full calendar month following end 
of the preceding premium payment year (e.g., April 30, 2009, for 2008 
calendar-year plans) for plans with fewer than 100 participants. By 
15th day of the 10th full calendar month following end of prior plan 
year (e.g., October 15, 2008, for 2008 calendar-year plans) for plan 
with 100 or more participants; 
Plans required to file: All PBGC-insured plans. 

Source: GAO analysis of certain reporting requirements for 
multiemployer plans under ERISA and the Internal Revenue Code of 1986 
(the Code). 

[End of table] 

In addition to Form 5500 data, PBGC-insured multiemployer plans are 
required to submit annual funding notices (AFN) to PBGC. The AFN must 
include, among other things, the plans' identifying information and 
funded percentage for the plan year, a statement of the market value 
of the plan's assets as of the end of the year, a statement of the 
number of retired, separated vested, and active participants under the 
plan, and whether any plan amendment, or scheduled benefit increase or 
reduction has a material effect on plan liabilities. PBGC officials 
told us they do not use the AFNs they receive to determine the overall 
health of the universe of multiemployer plans, but may look at the 
market valuation of assets on the AFN of a specific plan once it has 
been identified through Form 5500 data as a potential candidate for 
the watch list. PBGC officials also told us they do not use the AFN in 
developing data for model simulation, annual reports, or data books. 
PBGC also receives annual notices of critical or endangered status 
from plans within 30 days of plans certifying their funding zone 
status with IRS, as required by PPA. PBGC officials said they compare 
the information in the notices--which alert recipients of the plan's 
funding zone status and the reasons for it--with the plan's Form 5500 
filings to determine whether to place a plan on its contingency list. 
Plans on the list are asked to provide their current actuarial 
valuations so PBGC can monitor plans going forward. PBGC officials 
stated that, while plans are not required to provide this information, 
they are typically willing to cooperate with the requests. 

PBGC Provides Non-Financial Assistance to Troubled Plans on an Ad Hoc 
Basis: 

In addition to providing financial assistance, PBGC can assist 
troubled plans with technical assistance, facilitate mergers, and 
partition the benefits of participants orphaned by employers who filed 
for bankruptcy. Generally, it is up to plans to request these kinds of 
assistance. Occasionally, PBGC is asked to serve as a facilitator and 
work with all the parties to a troubled plan to improve a plan's 
financial status. Plan administrators can request PBGC's help to 
improve funding status of plans or provide assistance on other issues. 
They may contact PBGC's customer service representatives to obtain 
assistance on premiums, plan terminations, and general legal questions 
related to PBGC programs. PBGC has also assisted in the orderly 
shutdown of plans. The plans involved in these actions either merged 
with other multiemployer plans or purchased annuities from private- 
sector insurers for their beneficiaries. For example, PBGC facilitated 
the closeout of seven small multiemployer plans in 2010 that were 
receiving or expected to receive future financial assistance payments 
from PBGC and identified two additional plans for closeout in the 
future. According to PBGC, these small plan closeouts are part of an 
ongoing effort to reduce plan administrative costs borne by PBGC's 
multiemployer program. 

PBGC can also facilitate mergers between two or more multiemployer 
plans. According to PBGC officials, PBGC has received notice of 303 
mergers since 2000, 5 of which PBGC facilitated by paying $8.5 million 
from the multiemployer insurance program to the merged plans. Plans 
considering a merger must request approval from PBGC and typically 
involve merging a plan with a low funding level with a plan having a 
more favorable asset-to-liability ratio. PBGC officials told us that 
they carefully consider each merger request to ensure that the merger 
creates a stronger plan that will sustain operations indefinitely. 
They further noted that PBGC wanted to be sure that plans that 
received funds in a facilitated merger did not end up accepting the 
money only to become a liability to PBGC in the near future, in effect 
causing PBGC to make loans twice to poorly managed plans. 

PBGC can also partition the benefits of certain participants from a 
financially weak multiemployer plan under certain circumstances. 
Partition is a statutory mechanism that permits financially healthy 
employers to maintain a plan by carving out the plan liabilities 
attributable to participants "orphaned" by employers who filed for 
bankruptcy.[Footnote 23] Under ERISA, PBGC has the authority to order 
the partition of a plan's orphaned participants either upon its own 
motion or upon application by the plan sponsor. Once a plan is 
partitioned, PBGC assumes the liability for paying benefits to the 
orphaned participants. ERISA specifies four criteria that dictate when 
PBGC can utilize its partitioning authority.[Footnote 24] PBGC may 
order a partition if: 

* the plan experiences a substantial reduction in the amount of 
contributions that has resulted or will result from a case or 
proceeding under Chapter 11 bankruptcy with respect to an employer; 

* the plan is likely to become insolvent; 

* contributions will have to be increased significantly in 
reorganization to meet the minimum contribution requirement and 
prevent insolvency; and: 

* partition would significantly reduce the likelihood that the 
partitioned plan will become insolvent. 

Like all multiemployer plans, the partitioned participants are 
subjected to ERISA's multiemployer guaranteed benefit limits. 

PBGC may order the partition of a plan after notifying plan sponsors 
and participants, whose vested benefits will be affected by the 
partition. Since the implementation of MPPAA in 1980, PBGC has 
partitioned two plans.[Footnote 25] In the most recent partition in 
July 2010, PBGC said it approved the move because, by removing 1,500 
orphaned participants from the plan, PBGC was able to delay plan 
insolvency for at least 6 additional years and preserve full benefits 
for the approximately 3,700 workers and retirees of firms still 
contributing to the plan. Without partition, the plan would have 
become insolvent sooner and the federal benefit limits would have 
applied to all its retirees. 

Pension Structures in Other Countries Provide Multiemployer Plans with 
Options to Improve Funding: 

The private pension systems in the countries we studied--the 
Netherlands, Denmark, the United Kingdom, and Canada--support 
industrywide, employer-based pension plans that share some common 
attributes with U.S. multiemployer plan structure. Each of the 
countries is a member of the Organisation of Economic Co-operation and 
Development (OECD) and supports a three-pillar pension system that 
consists of a basic state pension (e.g., similar to Social Security), 
private employer-based pensions (e.g., single-or multiemployer), and 
individual retirement savings (e.g., independent retirement accounts). 
While each of the countries we studied had a pension system with some 
unique characteristics, pension officials in some countries told us 
they faced common short-term and long-term challenges in securing 
pension benefits for participants, including plan underfunding and an 
aging workforce.[Footnote 26] 

Multiemployer Plan Structures: 

The scope and coverage of the studied countries' multiemployer pension 
structures varied depending on a country's circumstances and plan 
design. While none of the countries had as much invested in its 
private pension systems as the United States, pension assets in the 
Netherlands exceeded the country's gross domestic product in 2010, 
according to OECD. Moreover, some countries with older workforces had 
a higher density of active trade union workers to help pay for the 
pensioner benefits. (See table 6.) 

Table 6: Comparison of Select Economic and Demographic Characteristics 
in the Studied Countries and the United States (2008): 

Gross domestic product: 
The Netherlands: $675.1 billion; 
Denmark: $202.2 billion; 
United Kingdom: $2.2 trillion; 
Canada: $1.3 trillion; 
United States: $14.4 trillion. 

GDP per capita: 
The Netherlands: $41,063; 
Denmark: $36,808; 
United Kingdom: $35,631; 
Canada: $38,975; 
United States: $47,186. 

Total population: 
The Netherlands: 16.4 million; 
Denmark: 5.5 million; 
United Kingdom: 61.4 million; 
Canada: 33.1 million; 
United States: 304.2 million. 

Size of labor force (ages 25-64): 
The Netherlands: 7.2 million; 
Denmark: 2.4 million; 
United Kingdom: 25.6 million; 
Canada: 14.9 million; 
United States: 126.0 million. 

Trade union density Includes public: 
The Netherlands: 18.9%; 
Denmark: 67.6%; 
United Kingdom: 27.1%; 
Canada: 27.1%; 
United States: 11.9%. 

Effective retirement age (men/women)[A]: 
The Netherlands: 62/61; 
Denmark: 64/61; 
United Kingdom: 63/62; 
Canada: 63/62; 
United States: 65/64. 

Population over age 65: 
The Netherlands: 14.9%; 
Denmark: 15.9%; 
United Kingdom: 16.2%; 
Canada: 13.6%; 
United States: 12.7%. 

Population over age 65 (as % of labor force); 
The Netherlands: 27.4%; 
Denmark: 25.3%; 
United Kingdom: 26.8%; 
Canada: 21.1%; 
United States: 20.8%. 

Average overall life expectancy at age 65; 
The Netherlands: 83.4; 
Denmark: 82.7; 
United Kingdom: 83.3; 
Canada: 84.5; 
United States: 83.6. 

Source: OECD. 

[A] Data on effective retirement age, which is the real age that 
people retire, are reported from 2007. 

[End of table] 

Multiemployer plan structures in these countries did differ from those 
in the United States in several important ways. (See table 7.) First, 
like the United States, the United Kingdom provides some form of 
government-sponsored pension insurance, but while the level of 
compensation guaranteed is upwards of 90 percent, payouts only occur 
when the last remaining employer becomes insolvent. Second, while the 
United Kingdom and the Canadian province of Quebec assess withdrawal 
liability to employers leaving a multiemployer plan in ways similar to 
the United States, officials in the Netherlands, Denmark, and the 
Canadian province of Ontario did not and several experts told us that 
such assessments would discourage employers from remaining in 
multiemployer plans. In the Netherlands and Denmark, collective 
bargaining agreements apply to both union and nonunion workers in an 
industry. 

Table 7: Comparison of Multiemployer Plan Structures in the Studied 
Countries and the United States: 

Plan type: 
The Netherlands: Collectively bargained, defined benefit plans; 
Denmark: Collectively bargained, defined contribution plans; 
United Kingdom: Collectively bargained, defined benefit plans; 
Canada: Collectively bargained, defined benefit plans; 
United States: Collectively bargained, defined benefit plans. 

Affinity groups: 
The Netherlands: Industry; 
Denmark: Profession or trade group; 
United Kingdom: Labor union; 
Canada: Labor union; 
United States: Labor union. 

Application of collective bargaining agreement: 
The Netherlands: Applies to union and nonunion employees in an 
industry; 
Denmark: Applies to union and nonunion employees in a profession or 
trade group; 
United Kingdom: Applies to union employees; 
Canada: Applies to union employees; 
United States: Applies to union employees. 

Plan governance: 
The Netherlands: Boards of trustees comprising equal representation of 
employers and employees; 
Denmark: Boards of trustees comprising equal representation of 
employers and employees; 
United Kingdom: Boards of trustees comprising representation of 
employers and employees; 
Canada: Boards of trustees typically comprising representation of 
employers and employees; 
some plans are union run; 
United States: Boards of trustees comprising equal representation of 
employers and employees. 

Pension guarantees for employees: 
The Netherlands: None; 
Denmark: Pension contributions are guaranteed against any loss that 
would result in the value of the benefits falling below the value of 
the contribution; 
United Kingdom: The Pension Protection Fund generally pays 100% of 
compensation to retirees and up to 90% of compensation to participants 
who have not yet reached retirement age; 
Canada: None; 
United States: PBGC provides a guaranteed benefit of $12,870 per year 
for 30 years of service. 

Withdrawal liability for employers: 
The Netherlands: None; 
Denmark: None; 
United Kingdom: Withdrawing employers must pay proportionate share of 
plan's unfunded liabilities; 
Canada: None imposed on plans under federal jurisdiction; 
in province of Quebec, withdrawing employers must pay proportionate 
share of plan's unfunded liabilities. In province of Ontario, 
employers may withdraw only with consent of the union(s); 
United States: Withdrawing employers must pay allocable share of 
plan's unfunded vested benefits. 

Source: GAO analysis. 

[End of table] 

But, as in the United States, the recent economic downturn had a 
negative impact on defined benefit plans, including multiemployer 
plans, in three of the four countries we studied. The four countries 
experienced double-digit declines in their pension investment returns 
in 2008, according to OECD data,[Footnote 27] and all but one 
experienced steep declines in the funded status of their multiemployer 
plans. For example, in the Netherlands, the aggregate funded status 
dropped below 100 percent for the first time, from 149 percent in 2007 
to 89 percent in 2009.[Footnote 28] Similarly, the United Kingdom 
reported that funded status for all DB plans fell from 102 percent in 
2008 to 80 percent in 2009. Unlike the others, Denmark's plans 
survived the crisis with little decline in overall funding, which 
several plan officials attributed to changes that the pension 
regulator made prior to the crisis, such as moving from actuarial to 
market valuations of plan assets and liabilities. According to 
officials that we spoke with, the Netherlands and Canada also 
implemented funding relief measures to help plans address their 
funding deficiencies, such as extending the length of plan recovery 
periods. Officials at the Dutch Central Bank told us they hired 
additional staff to handle the workload of increasing numbers of 
recovery plans. 

Other Countries' Plans Are Subject to a Range of Funding, Reporting, 
and Regulatory Requirements: 

Minimum Funding Requirements: 

Three of the four countries that we studied reported they had recently 
implemented some form of minimum funding requirements for 
multiemployer plans, but the levels varied by country. Officials we 
spoke with told us that plans that fell below these funding thresholds 
were required to submit recovery plans to bring the funding levels 
back above the minimum level. Canada, Denmark, and the Netherlands 
required plans to be funded at a level of 100 percent or above. The 
United Kingdom recently suspended its minimum funding requirements in 
favor of plan-specific funding levels, and officials told us 
regulators still sought to maintain an aggregate funding level of 110 
percent. Also, plans in the Netherlands are required to build funding 
reserves, or buffers, commensurate to the risk associated with their 
investment policies. Officials at the Dutch Central Bank told us plans 
must develop buffers for interest rate risk, private equity exposure, 
and hedge fund exposure. 

Reporting Requirements: 

While the reporting requirements in these countries are not so 
different from those in the United States, multiemployer plans in some 
countries submit more frequent plan funding and actuarial reports to 
regulators. For example, in the Netherlands and Denmark, all plans are 
required to submit data on a quarterly and annual basis and plans in 
recovery status had, in some countries, additional reporting 
requirements. (See table 8.) 

Table 8: Reporting Requirements for Multiemployer Plans in the Studied 
Countries: 

General reporting requirements for all plans: 
The Netherlands: Annual financial reports; Quarterly financial reports; 
A 15-year continuity analysis every 3 years; 
Denmark: Annual financial and audit reports; Quarterly financial 
reports, solvency assessments, and register of assets report; 
United Kingdom: Actuarial valuation reports every 3 years; 
Canada[A]: Actuarial valuation reports every 3 years. 

Additional requirements for plans in recovery status: 
The Netherlands: Recovery plan; Annual progress report on recovery 
plan; 
Denmark: Recovery plan; Daily market valuation reports; Monthly 
progress reports on recovery plan; 
United Kingdom: Recovery plan; 
Canada[A]: Actuarial valuations at least every year. 

Source: GAO analysis. 

[A] This column summarizes only those multiemployer plans under 
federal jurisdiction. 

[End of table] 

Some countries require plans to submit plan data electronically, which 
officials said allowed for real-time monitoring and transparency. For 
example, Danish plans are required to report market valuations of 
their assets and liabilities, which regulators said allowed them to 
identify plans at risk through market surveillance with minimal up-to-
date information. The regulators told us they can take action as soon 
as a plan is in trouble and proactively notify plans of impending 
financial problems. In the United Kingdom, plan trustees are required 
to update their financial information electronically and can do so in 
real-time on the regulator's information system. In the Netherlands, 
the Dutch Central Bank updates the aggregate funded status of plans on 
a quarterly basis and makes this information available on its public 
Web site. 

Monitoring: 

These countries all monitored multiemployer plans for compliance and 
to determine plan funding and solvency risk. While the Netherlands and 
Denmark monitored the solvency risks of all plans, officials in both 
countries told us they also plan to develop a risk-based monitoring 
strategy, such as that used in the United Kingdom and Canada, which 
would target monitoring to plans that represented the greatest risk. 
Officials in these countries also had varying degrees of authority to 
intervene in the operations of multiemployer plans. (See table 9.) 

Table 9: Monitoring of Multiemployer Plans in the Studied Countries: 

Regulatory authorities: 
The Netherlands: Dutch Central Bank; The Netherlands Authority for the 
Financial Markets; 
Denmark: Financial Supervisory Authority; 
United Kingdom: Pensions Regulator; Pension Protection Fund; 
Department of Works and Pensions; 
Canada[A]: Office of the Superintendent of Financial Institutions; 
(federal). 

Monitoring activities: 
The Netherlands: Risk-based monitoring approach that includes review 
of all plans' rules to see if they comply with legislation; 
Denmark: Risk-based monitoring approach that includes review of all 
plans and conducts formal periodic on-site audits to verify 
information submitted by all plans. Employs a traffic light system 
that determines the risks associated with each plan. Conducts stress 
tests for specific market risks that have certain triggers--a 12% 
decline in equities, 0.7% interest rate change; 8% decline in real 
estate values--that alert it to plans that need to take further action. 
Tracks whether employers made their required contributions to the 
plans and assesses the quality of the board of trustees; 
United Kingdom: Risk-based, plan-specific monitoring approach that 
focuses on education and enablement, with enforcement where 
appropriate. Reviews annual report and meets with plan sponsor to 
discuss the information provided. Assigns permanent case managers to 
the largest plans; 
Canada[A]: Risk-based supervisory framework that identifies plans at 
high risk. Reviews plans for key plan risks, including investment 
portfolio, actuarial assumptions, plan administration, and the 
likelihood of continued sponsor funding. Conducts on-site visits to a 
number of plans usually in response to a complaint. 

Intervention authorities: 
The Netherlands: Can prescribe actions that plans must take and demand 
plan disclosures to participants. Can appoint individuals to a plan's 
board. Can suspend board. Can require plans to maintain financial 
reserves commensurate with their investment risk; 
Denmark: Can close down company. Can put company on administration. 
Can remove board members; 
United Kingdom: Can compel contributions, remove plan trustees, 
require a recovery plan, terminate a plan, and force debt onto an 
employer; 
Canada[A]: Can force disclosure of information from plans if solvency 
ratio falls below certain thresholds; Can terminate plans; Must 
approve any plan terminations, reductions in accrued benefits, 
distributions of surplus, and transfers of assets between plans. 

Source: GAO analysis. 

[A] This column summarizes only those multiemployer plans under 
federal jurisdiction. 

[End of table] 

Plans in Other Countries Have Options to Improve Funded Status: 

Multiemployer plans in the countries we studied have a number of 
options to improve and maintain their funded status, and a specific 
length of time allotted to recovery. (See table 10.) Some of the 
countries allow plans to increase contributions and reduce the rate of 
benefit accruals. In Denmark, regulators told us that plans that fail 
stress tests must adjust investments to resolve funding deficiencies 
within 6 months. The Netherlands, United Kingdom, and Canada have 
longer recovery periods and the Netherlands and Canada allow plans to 
reduce accrued benefits, including the benefits of retirees, although 
this step is seen as a measure of last resort. 

Table 10: Recovery Periods and Tools Available to Improve Plan Funded 
Status in the Studied Countries: 

Length of recovery period; 
The Netherlands: Plans must return to minimum funding level (105%) in 
5 years and 125% funded in 15 years; 
Denmark: Plans expected to resolve funding deficit within 6 months; 
United Kingdom: There is no formula for recovery; 
it is a plan-specific approach; Recovery period varies by plan, 
generally within 10 years; 
Canada[A]: Plans must resolve solvency deficits within 5 years. 

Tools available to assist recovery; 
The Netherlands: Increase contributions, reduce or suspend indexation, 
reduce benefit accrual rate and accrued benefits; 
Denmark: Increase contributions and adjust plan's risk exposure; 
United Kingdom: Increase contributions and reduce benefit accrual rate; 
Canada[A]: Increase contributions, reduce benefit accrual rate and 
accrued benefits. 

Source: GAO analysis. 

[A] This column summarizes only those multiemployer plans under 
federal jurisdiction. 

[End of table] 

Plans may also seek out mergers to reduce administrative costs and 
indirectly help preserve their funded status. Most of the countries we 
studied allow plan mergers, but some officials told us that they were 
infrequent. Canadian officials told us mergers of multiemployer plans 
would be difficult because plan membership is based on profession and 
multiemployer plans do not want to lose control of plan policy and 
governance, even if the plan would be financially better off after a 
merger. In Canada, when full mergers do occur, they said, they tend to 
result from a merger of unions. In the Netherlands, mergers occur, but 
the industry identification of multiemployer plans limits merger 
activity to plans in the same industry. In Denmark, single-employer 
plans can choose to merge with multiemployer plans even if the 
participants are not affiliated with the plan's employer organization 
to take advantage of lower administrative fees. In the United Kingdom, 
there is a large trust that combines many single-employer and several 
multiemployer plans, benefiting all participating plans with lower 
costs and better investment opportunities. 

Changes to U.S. Multiemployer Plan Framework Could Help to Protect 
Pension Benefits: 

Lack of Timely, Complete, and Accurate Information Hinders Ongoing 
Assessments of Multiemployer Plans: 

PPA requires multiemployer plans to file numerous notices with EBSA, 
IRS, and PBGC regarding their funded status. Our review of filings 
received by the three agencies found that plans are not all complying 
with these requirements. Moreover, we found that plans that did comply 
filed notices that varied in form and content. While current reporting 
requirements, if followed, would provide federal agencies with the 
data needed to monitor plan health, the current multiemployer plan 
framework requires plans to submit these data in a fractured format to 
three different agencies that do not share the information they 
receive. As a result, federal officials told us that their agencies 
are limited in their ability to assess the current and recent health 
of multiemployer plans. 

Plans are required to certify their funding zone status each year with 
IRS, but they are not required to include their current funded 
percentage in this report, which would be helpful to officials 
determining the gravity of plans' funding deficiencies. Also, IRS 
officials told us that some plans provided a brief letter identifying 
the zone status, while other plan's submitted lengthy reports that 
detailed the assumptions and calculations used to determine the plan's 
zone status. IRS officials told us that, while some plans provided 
their funded percentage in the certification notice, the agency did 
not track this information nor share the list of certifying plans with 
any other federal agency. 

Within 30 days of certifying their funding zone status with IRS, PPA 
requires plans in critical or endangered status to submit a notice of 
their status to PBGC and EBSA, among others.[Footnote 29] In our 
review of data from 2008 and 2009 obtained from the three agencies, we 
found large discrepancies in the number of plans certifying with IRS 
and the number of plans submitting notices of critical or endangered 
status to PBGC and EBSA. For example, IRS data show that 461 of the 
1,331 plans certified in critical status in 2009, but only 132 plans 
provided notices of their certified status to EBSA. Similarly, some 
plans that elected to freeze their current funding status did not file 
notices of this election with PBGC and EBSA, as required. (See table 
11.) 

Table 11: Comparison of Multiemployer Plan Status Information Received 
by Federal Agencies, 2008 and 2009: 

Number of plans certifying zone status with IRS; 
2008: 1,347; 
2009: 1,331. 

Number of plans indicating critical status: 

Agency notified: IRS; 
2008: 138; 
2009: 461. 

Agency notified: PBGC; 
2008: 111; 
2009: 296[A]. 

Agency notified: EBSA; 
2008: 100[B]; 
2009: 132[C]. 

Number of plans indicating endangered status: 

IRS; 
2008: 175; 
2009: 444. 

PBGC; 
2008: 155; 
2009: 317[D]. 

EBSA; 
2008: 128[E]; 
2009: 83[F]. 

Number of plans indicating their election to freeze funding status in 
2008 or 2009: 

IRS; 
2009: 745. 

PBGC; 
2009: 408. 

EBSA; 
2009: 309[G]. 

Source: GAO analysis of EBSA, IRS, and PBGC data. 

Note: EBSA data analyzed by GAO was taken from the EBSA Web site on 
August 19, 2010. Also, the endangered status category includes 
Endangered Status Notices and Seriously Endangered Status Notices. 

[A] PBGC received 304 Critical Status Notices for 2009, which included 
2 duplicate notices and 6 other notices. 

[B] EBSA posted 102 Critical Status Notices for 2008, which included 2 
duplicate notices. 

[C] EBSA posted 140 Critical Status Notices for 2009, which included 7 
duplicate notices and 1 other notice. 

[D] PBGC received 323 Endangered Status Notices for 2009, which 
included 6 duplicate notices. 

[E] EBSA posted 133 Endangered Status Notices for 2008, which included 
4 duplicate notices and 1 other notice. 

[F] EBSA posted 102 Endangered Status Notices for 2009, which included 
8 duplicate notices and 11 other notices. 

[G] EBSA posted 323 WRERA Notices for 2009, which included 14 
duplicate notices. 

[End of table] 

In addition, for plan years beginning after December 31, 2007, all 
defined benefit plans are required to provide an additional notice--an 
annual funding notice--to PBGC, plan participants and beneficiaries, 
labor organizations, and, in the case of multiemployer plans, also to 
each participating employer. Like the notice of critical or endangered 
status, this notice must be provided within 120 days following the end 
of each plan year. EBSA can assess a civil penalty of $110 per day per 
participant against the plan administrator for failure to submit the 
plan's annual funding notice to participants and beneficiaries. Among 
other things, the AFN provides recent information on a plan's funded 
status, actuarial valuations of assets and liabilities, market 
valuations of assets, and a plan's asset allocation. According to PBGC 
officials, only half of multiemployer plans filed these notices in the 
2008 plan year and many plans had failed to file notices for the 2009 
plan year within the 120-day statutory timeline. PBGC officials could 
not explain why plans failed to file the notices with PBGC. But while 
EBSA can assess a civil penalty for failure to submit an annual 
funding notice, PBGC officials did not share any information on plans' 
annual funding notices with EBSA, making it unlikely that EBSA would 
have the information necessary to assess such a penalty. 

Industry experts told us that the reporting requirements for 
multiemployer plans are confusing and duplicative, and that further 
consolidation of notices is needed. They noted that plan reporting 
requirements have increased significantly and become burdensome for 
plans to administer with each notice having a different recipient and 
due date. Even if participant notices were more clearly written, one 
expert said, there is nothing that an individual can do to address the 
critical or endangered status because benefits are collectively 
bargained. Moreover, participants do not need multiple notices each 
time an event occurs to change the long-term projections of their 
plan's standing. 

Current Multiemployer Framework Faces Challenges in Assisting Plans in 
Need: 

The statutory and regulatory framework guiding multiemployer plans is 
not structured to assist troubled plans, limits the actions agencies 
can take, and promotes little interaction among federal agencies that 
bear joint responsibility for monitoring and assisting these plans and 
their participants. We found that EBSA, IRS, and PBGC do not work 
together to share information received from plans and cannot determine 
whether all multiemployer plans are meeting applicable legal 
requirements. 

First, PBGC's involvement with multiemployer plans is mostly limited 
to the plans on its contingency list that are already insolvent and 
receiving financial assistance or pose a potential risk for future 
claims against PBGC. PBGC has authority to interact with plans on an 
ongoing basis, but has done so infrequently to date. For example, at a 
recent testimony before Congress, an EBSA official stated that one 
large multiemployer plan, the Central States Southeast and Southwest 
Pension Fund, did not meet the criteria for partition, despite having 
$2.1 billion in unfunded liabilities in 2009 and reportedly paying 
over 40 cents on every dollar to beneficiaries whose employers left 
the plan without covering their obligations. In fact, PBGC has only 
used its partition authority twice in its history and facilitated five 
plan mergers since 2000. Experts told us that plans could benefit from 
a greater level of PBGC interaction and a more flexible application of 
the tools available to PBGC. (See table 12.)[Footnote 30] 

Table 12: Experts' Suggestions to Improve PBGC's Assistance to Plans: 

Issue: Level of PBGC involvement; 
Experts' description of the problem: While the multiemployer structure 
was designed to limit PBGC's exposure and let the employers serve as 
principal guarantors, PBGC is typically viewed as the guarantor of 
last resort for multiemployer plans. In the current system, PBGC 
provides little assistance to multiemployer plans prior to insolvency 
and focuses on limiting the government's exposure instead of ensuring 
that participants receive the benefits they deserve. PBGC waits too 
long to intervene and provide assistance to troubled plans. Plans on 
the path to insolvency can only watch and wait until PBGC finally gets 
involved; 
Options suggested by experts: Through more aggressive plan monitoring, 
PBGC could intervene as soon as a plan is in trouble, rather than 
waiting for a plan to become insolvent. PBGC could step in before 
plans reach the point of having to assess mass withdrawal liability, 
at which point all employers are committed to simultaneously 
withdrawing from a plan. PBGC could benefit from a continuous dialogue 
with pension plans--a "case worker" model in which PBGC staff provide 
actuarial or technical assistance to plans on an ongoing basis instead 
of waiting until the plans are unsalvageable. 

Issue: Plan partitioning; 
Experts' description of the problem: In some mature plans, benefit 
payments to orphaned participants make up the majority of plan 
liabilities. PBGC has the authority to partition plan liabilities, but 
it is limited to orphaned pensioners coming from bankrupt companies 
and PBGC has been hesitant to use it; 
Options suggested by experts: PBGC's partition authority could be 
expanded to preserve the healthy part of a plan. Partition should 
apply to situations other than bankruptcy, but the agency should 
exercise caution and use partitioning as a tool of last resort. A high 
qualification threshold needs to be set for such intervention to 
ensure it was reserved for plans in the worst condition. Expansion of 
this authority would benefit about a dozen plans, most of them in the 
mining and trucking industries. Giving PBGC the ability to take over 
the sick part of a troubled plan so the healthy part could remain 
viable would benefit taxpayers in the long term because, if the plan 
became insolvent, PBGC would be responsible for paying benefits to all 
beneficiaries and not just the orphaned participants. Partition should 
be coupled with a requirement that the healthy part of a partitioned 
plan "de-risk" its investment strategies to prevent a repeat of 
financial trouble. 

Issue: Plan mergers; 
Experts' description of the problem: The current economic climate has 
made mergers more difficult because all plans are on unsure footing 
caused by the market collapse. Under the standard fiduciary rules, 
trustees of healthy plans may be less willing to merge with unhealthy 
plans for fear that they could be challenged for breach of fiduciary 
trust for assuming the liabilities of the weaker plan; 
Options suggested by experts: PBGC could be more active in 
facilitating mergers between healthy plans and unhealthy plans to 
maintain solvency and protect the agency from payouts. PBGC could 
alleviate the healthier plans' concerns by stepping in to provide 
incentives and financial assistance to allow these plans to make wise 
fiduciary decisions and support the smaller plans. PBGC could seek 
opportunities to promote mergers among different affinity groups 
because multiemployer plans are willing to consider branching out to 
find ways to preserve the plan and secure their participants' 
retirement future. PBGC would need a funding stream in addition to 
premiums to be able to support merger activity. 

Source: GAO analysis of information collected from pension experts and 
plan practitioners. 

[End of table] 

Second, the Employee Plans Compliance Unit (EPCU) at IRS, which is 
responsible for verifying that all multiemployer plans file annual 
actuarial certifications of funded status and confirming that the 
certifications are filed in a complete and timely manner,[Footnote 31] 
does not have the capacity to identify plans that fail to file or 
verify that all plans submitting certifications are indeed 
multiemployer plans. IRS officials told us they could not determine 
whether all multiemployer plans filed their actuarial certifications 
because they did not know the universe of multiemployer plans. 
Specifically, they said they did not have a complete list of all 
multiemployer plans in part because the data they use is taken from 
the plans' Form 5500 filings, which included plans that had identified 
themselves as multiemployer plans but, judging from the plan name, 
were not (e.g., dental offices or 401(k) plans). Officials told us 
they hoped to get a more accurate data set in the future, but it would 
take several years before this would happen. 

EPCU officials told us plan filings vary widely in scope and length. 
For example, some plans send a brief memo indicating their funding 
zone status; others send a long report detailing each of the actuarial 
assumptions used to determine the zone status. IRS officials told us 
some plans provided funded status as a percentage while others 
reported only zone status. IRS currently collects paper copies of the 
annual certifications. Officials said the annual certification notices 
required the same kind of information as the WRERA notices, which can 
be filled out and filed electronically on the IRS Web site. In March 
2008, IRS proposed guidance to plans on the preferred format or 
content for the annual certification notices, but this guidance has 
not been finalized. 

EPCU officials told us that they did not interact with either EBSA or 
PBGC with regard to the filing of certification notices. They said in 
the past they sent a few short summaries about the funding zone status 
certifications to IRS headquarters, but did not interact directly with 
EBSA or PBGC officials regarding the annual certifications. Moreover, 
IRS did not make certification data available to either EBSA or PBGC 
so they could reconcile the critical or endangered status notices with 
the number of certifications to determine if plans were complying with 
the law. EPCU officials said it would be beneficial for them to have 
direct contact with other federal agencies to share information on 
multiemployer plans. 

Third, EBSA, which is responsible for assessing civil penalties for 
reporting violations against plans that do not file annual actuarial 
certifications of funded zone status, does not receive or actively 
seek out information from PBGC and IRS to enforce this penalty. PPA 
also requires plans that certify their funding zone status as either 
critical or endangered to send notices of endangered and critical 
funding status to EBSA, among others, but, unlike the annual 
certification of a plan's status, there are no penalties associated 
with the failure to furnish endangered or critical status notices. 
EBSA's Office of Participant Assistance scans the notices it receives 
and posts them on its Web site. Officials from EBSA's Office of 
Regulations and Interpretation and the Office of Enforcement said they 
make no attempt to reconcile the status notices with the 
certifications filed with IRS. They said they had no interaction with 
IRS officials on these matters and noted some utility if IRS were to 
share certification data with EBSA.[Footnote 32] 

Elements of Multiemployer Framework May Limit Protection of Benefits: 

The pension experts and plan practitioners that we interviewed 
identified several elements of the multiemployer framework that were 
restrictive and had the potential to affect plans' ability to keep the 
pension promise to beneficiaries. These experts noted that each of 
these elements had unintended consequences made evident by the recent 
economic downturn. (See table 13.)[Footnote 33] 

Table 13: Experts' Suggestions to Improve the Multiemployer Framework: 

Issue: Modifying accrued benefits; 
Experts' description of the problem: Under current law, trustees 
cannot adjust retirement age or accrued benefits, even if the plan is 
in critical status. If plans in endangered or critical status could 
make such adjustments, they would have more tools at their disposal to 
close their funding gaps. Mature plans with high retiree liability 
cannot make any further benefit cuts. Much of a plan's liabilities lie 
in accrued benefits, plans need to be able to cut both future and 
accrued benefits, as well as increase contributions. Most plans with a 
small active participant base have no tools to address asset losses. 
They need a way to reduce accrued benefits to retirees. As it now 
stands, the inability for multiemployer plans to adjust accrued 
benefits creates intergenerational inequity and leaves plans with few 
options to address funding deficiencies; 
Options suggested by experts: Benefits need to be aligned with plan 
funding so incremental benefit cuts can be made, if necessary, to 
preserve plan assets longer. Plans need to strike a compromise between 
active workers and retired beneficiaries to spread the risk. PBGC may 
need to look into whether it can reduce benefits for retirees to help 
plans spread the risk evenly among all participants--active and 
inactive. Decreasing accrued benefits would require legislative 
changes. 

Issue: Withdrawal liability; 
Experts' description of the problem: Withdrawal liability discourages 
employers from leaving a plan; it also discourages new employers from 
joining a plan, especially one with unfunded liabilities, because they 
assume partial responsibility for the unfunded liability of all 
employers in the plan. New employers are afraid to join a 
multiemployer plan due to the burden of the withdrawal liability that 
would befall them after they joined. Without new participants, 
however, there will be no growth in multiemployer plans; 
Options suggested by experts: A plan's current unfunded liability 
should stay with the plan's current employers. A withdrawing employer 
should pay his share of the unfunded liability when withdrawing so as 
to not unfairly pass it onto employers who were not in the plan when 
those debts were incurred. 

Issue: Endangered status designation; 
Experts' description of the problem: Plans in endangered status have 
insufficient tools to address their funding deficiencies. The 
endangered status designation had been a mistake in that it set plans 
up for failure. Plans in endangered status find themselves in a 
"purgatory" forced to face many challenges with limited tools. Some 
plans must wait and watch as their funding status deteriorates to the 
critical level, at which time they can choose from myriad tools to 
address their funding deficiency; 
Options suggested by experts: There is no need for the endangered 
status and it would be best if plans were considered to be either safe 
or critical. Most plans would prefer the safety valves built into 
critical status. Some plans are certifying in critical status--
bypassing endangered status--to take advantage of the additional 
tools. Eliminating the endangered status would require legislative 
changes. 

Issue: PBGC guarantee level; 
Experts' description of the problem: The PBGC guaranty level is low 
and many participants would lose a considerable amount in unguaranteed 
benefits if their plans were to become insolvent. Trustees are aware 
that the best way to insure benefits is to avoid insolvency, thereby 
reducing the liabilities for PBGC. The significant increase in 
premiums since 2005 did not coincide with a comparable rise in the 
benefit guaranty; 
Options suggested by experts: Raising the guarantee would give 
participants more insurance against underfunding because PBGC's 
guaranty would cover more of their benefits if their plan became 
insolvent. The benefit guarantee needs to be indexed to inflation. 
Establishing a benefits-related premium so plans that provided 
participants with larger benefits would pay higher premiums. 
Establishing a risk-based premium structure would be a good idea in 
the future if it were applied to plans with only active employers and 
workers. However, under current conditions, such a structure is not 
feasible as it would require underfunded plans to pay additional 
premiums at a time when they could least afford it. Increasing the 
PBGC guarantee level indexing it to inflation, and adding a risk-based 
guarantee would require legislative changes. 

Source: GAO analysis of information collected from pension experts and 
plan practitioners. 

[End of table] 

Conclusions: 

For decades, multiemployer plans have secured and provided an 
uninterrupted stream of pension benefits to millions of U.S. workers 
and retirees. Through collective bargaining, employers and employees 
worked to maintain their pension benefits despite changing economic 
climates and financial challenges. As a result, the vast majority of 
plans have remained solvent and relatively few plans have made claims 
for financial assistance from PBGC's insurance program since its 
inception in 1980. 

However, the recent economic downturn revealed that multiemployer 
plans, like most pension plans, were vulnerable to sudden economic 
changes and had few options to respond to the funding challenges 
highlighted by these economic conditions. The result was a steep 
decline in the funded status of most multiemployer plans--now below 70 
percent in aggregate. In the short term, the majority of plans will 
have to make difficult decisions to improve their funding and protect 
against future declines. The multiemployer plan universe represents 
diverse groups of employers, participants and industries some of which 
may be better prepared to meet their future funding obligations. While 
some plans may be able to improve their funded status as the economy 
improves, plans in the worst condition may find that the current 
options of increasing employer contributions or reducing benefit 
accruals are insufficient to overcome the funding and demographic 
challenges they face. For these plans, the combination of the effects 
of the economic downturn, the decline in collective bargaining, the 
withdrawal of contributing employers, and an aging workforce has 
likely accelerated their path to insolvency. Without additional 
options to address their underfunding, or new employers joining the 
plans to replenish the contributions, many plans may find themselves 
at greater risk of insolvency and more likely to need PBGC financial 
assistance sooner rather than later. Such a situation would put 
additional stress on PBGC's insurance program that, already in 
deficit, it can ill afford. 

The current statutory and regulatory framework for multiemployer plans 
is not structured to assist troubled plans on an ongoing basis. PBGC, 
Labor and IRS are all required by law to collect various funding data 
from plans, and these data are often duplicative. Moreover, these 
agencies are not making full use of these data to mitigate the risks 
to participants or to enforce plan discipline. While PBGC monitors 
plans on an ongoing basis, it focuses on the short-term risks to the 
trust funds rather than outward on the long-term risks to participants 
or the impact on their benefits if their plans cannot pay the benefits 
they promised. 

There are other approaches to consider. While some practices in the 
countries we studied, such as mandatory employer participation, would 
not be feasible in the U.S. context; others may have more ready 
application for addressing some challenges that U.S. multiemployer 
plans face. For example, the countries that we studied had pension 
regulators that interacted with plans on a frequent basis, collected 
timely and detailed plan information, provided a range of tools to 
plans to address plan underfunding and made information on the funded 
status of plans available to the public. Yet, there is no one-size- 
fits-all solution. For example, some plans' greatest challenges may be 
their aging workforce or vulnerability to economic volatility, while 
others may face challenges inherent to the industries and geographical 
regions they serve. 

Without more timely and accurate information on plan health, PBGC and 
other federal agencies can do little to help plans to respond to 
circumstances like the ones they experienced in the recent economic 
downturn. But collecting this information is not enough. The agencies 
must also incorporate this information into their monitoring and 
oversight efforts and use the most current data to inform their 
policies and risk assessments. To do this, the agencies responsible 
for multiemployer plans must work together to provide greater security 
for multiemployer plans, which for decades have limited the exposure 
to PBGC and the taxpayer. 

Matters for Congressional Consideration: 

To provide greater transparency of the current status of multiemployer 
plans, assist federal monitoring efforts, and help plans address their 
funding deficiencies, Congress should consider: 

* consolidating the annual funding notices and the PPA notices of 
critical or endangered status to eliminate duplicative reporting 
requirements; and: 

* requiring IRS, EBSA, and PBGC to establish a shared database 
containing all information received from multiemployer plans. 

Recommendations for Executive Action: 

1. To improve the quality of information and oversight of 
multiemployer plans, we recommend that EBSA, IRS, and PBGC 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: 

* To identify the universe of multiemployer plans. 

* To reconcile similar information received by each agency. 

* 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. 

2. 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. 

3. 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 Comments and Our Evaluation: 

We provided a draft of this report to the Secretary of Labor, the 
Secretary of the Treasury, and the Director of PBGC for review and 
comment. Each agency provided us with written comments, which we 
reprinted in appendixes II, III, and IV of this report. In responding 
to the draft report, the agencies acknowledged the vital role of these 
plans in providing retirement security to millions of U.S. workers and 
retirees. PBGC further noted that the agency has limited information 
to analyze the health of multiemployer plans, and that additional 
information is needed to monitor plan health. 

The three agencies also generally agreed with our recommendations to 
improve interagency information sharing and to take steps to acquire 
more current and accurate data on the status of multiemployer plans. 
The agencies noted, however, that in their view a new interagency MOU 
was unnecessary. The Department of the Treasury highlighted actions 
that the agency currently takes to coordinate with the other agencies. 
The Department of Labor provided an updated status of the actions that 
the agency has taken with regard to multiemployer plans. For example, 
EBSA said it recently initiated contact with IRS to begin work on 
reconciling certain multiemployer data. IRS and PBGC further stated 
that memoranda were already in place that could be amended to allow 
for better information sharing. While we are encouraged by these 
developments, we do not believe that separate arrangements among 
agencies will produce the kind of interagency cooperation needed to 
facilitate information sharing and effective ongoing monitoring of the 
health of multiemployer plans. Therefore, we continue to believe that, 
in order to foster meaningful interagency coordination, the agencies 
should either amend existing agreements or enter into new ones, as we 
are recommending. EBSA and PBGC also provided technical comments, 
which we incorporated in this report, as appropriate. 

As agreed with your office, unless you publicly announce its contents 
earlier, we plan no further distribution of this report until 30 days 
from its issue date. At that time, we will send copies of this report 
to relevant congressional committees, PBGC, the Secretary of Labor, 
the Secretary of the Treasury, and other interested parties. In 
addition, the report will be made available at no charge on the GAO 
Web site at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-7215 or bovbjergb@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made contributions to 
this report are listed in appendix V. 

Sincerely yours, 

Signed by: 

Barbara D. Bovbjerg: 
Managing Director, Education, Workforce, and Income Security Issues: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

We were asked to answer the following research questions: (1) What is 
the current status of the nation's multiemployer pension plans? (2) 
What steps does PBGC take to monitor the health of these plans? (3) 
What is the structure of multiemployer plans in other countries? (4) 
What statutory and regulatory changes, if any, are needed to help 
plans to continue to provide participants with the benefits due to 
them? 

To identify the current status of the nation's multiemployer pension 
plans, we interviewed officials and analyzed data and documents from 
PBGC, the Department of Labor's Employee Benefits Security 
Administration (EBSA) and the Department of the Treasury's Internal 
Revenue Service (IRS), and reviewed relevant industry studies and 
literature on multiemployer plans. To determine the recent funding 
status of multiemployer plans, we analyzed historical summary data 
published in PBGC's annual data books and summary data from IRS on the 
annual notices of funding status certification submitted in 2008 and 
2009. To corroborate these data, we analyzed notices of critical and 
endangered status and WRERA notices sent to PBGC and EBSA and 
published on EBSA's Web site. To identify the demographics of 
multiemployer plans, including the number of plans, number of 
participants, and industry concentration of plans, we analyzed data 
published in PBGC's annual reports and data books. To determine 
private-sector union affiliation, we analyzed data from the Bureau of 
Labor Statistics. We assessed the reliability of the selected data 
that we used from these sources by comparing the number of plans 
filing reports to federal agencies. We determined that, although the 
data were incomplete and had certain limitations, which we present in 
our report, they were sufficiently reliable for the purpose of making 
clear which federal agencies collect data and showing how these data 
are similar and how they differ. To supplement this quantitative 
analysis, we interviewed EBSA, IRS, and PBGC officials; and a diverse 
range of pension experts and multiemployer plan practitioners. We 
selected experts based on those who had published on multiemployer 
plans or whose names were referred to us by other interviewees, and we 
spoke to 48 experts. We analyzed their responses on the current status 
of plans, the impact of the recent recession, and the future outlook 
of multiemployer plans. As appropriate, we reviewed relevant federal 
laws and regulations that pertain to multiemployer plans. 

To determine the steps PBGC takes to monitor the health of 
multiemployer plans, we interviewed PBGC officials and reviewed 
documentation on PBGC's multiemployer plan monitoring, modeling, and 
assistance policies and procedures. We also reviewed relevant 
statutory and PBGC regulatory requirements with regard to 
multiemployer plans. 

To understand the structure of multiemployer plans in other countries, 
we reviewed four countries selected because of their comparable 
multiemployer plan frameworks--the Netherlands, Denmark, United 
Kingdom, and Canada--and interviewed government officials, plan 
administrators and trustees, employer and union representatives, and 
other pension experts. We selected these countries after completing an 
initial review of employer-sponsored pension plan designs in 
Organisation for Economic Co-operation and Development (OECD) 
countries. We focused on OECD countries in order to increase our 
opportunity to identify practices used in countries with well-
developed capital markets and regulatory regimes comparable, if not 
always similar, to the United States. We acknowledge that there may be 
relevant plan design features from a non-OECD country that we did not 
address in this report. Although we did not independently analyze each 
country's laws and regulations, we collected information about each 
country's multiemployer plan structure and interviewed government 
officials and pension experts and in each country. We relied on the 
expertise of staff in the U.S. State Department to identify potential 
interviewees in these countries and to schedule the interviews. We did 
not review the laws or requirements of those foreign countries 
mentioned in this report. Rather, we relied upon the descriptions and 
materials furnished by officials and experts of these countries. 

To identify what statutory and regulatory changes, if any, are needed 
to help plans continue to provide participants with the benefits due 
to them, we reviewed pension literature and interviewed a variety of 
experts on multiemployer plans, including officials from EBSA, IRS, 
and PBGC; pension experts; and practitioners representing a range of 
industries and plan sizes. We selected experts based on those who had 
published on multiemployer plans or whose names were referred to us by 
other interviewees, and we spoke to 48 experts. 

We conducted this performance audit from September 2009 through 
October 2010,[Footnote 34] in accordance with generally accepted 
government auditing standards. Those standards require that we plan 
and perform the audit to obtain sufficient, appropriate evidence to 
provide a reasonable basis for our findings and conclusions based on 
our audit objectives. We believe that the evidence obtained provides a 
reasonable basis for our findings and conclusions based on our audit 
objectives. 

[End of section] 

Appendix II: Comments from the Department of Labor: 

U.S. Department of Labor: 
Assistant Secretary for Employee Benefits: 
Security Administration: 
Washington, D.C. 20210: 

September 16, 2010: 

Ms. Barbara D. Bovbjerg: 
Director Education, Workforce and Income Security Issues: 
United States Government Accountability Office: 
Washington, DC 20548: 

Dear Ms. Bovbjerg: 

Thank you for the opportunity to review the Government Accountability 
Office's (GAO) draft report entitled "Private Pensions: Changes Needed 
to Better Protect Multiemployer Pension Benefits" (GA0-10-926). GAO, 
in relevant part, is recommending that the Employee Benefits Security 
Administration (EBSA), the Internal Revenue Service (IRS), and the 
Pension Benefit Guaranty Corporation (PBGC) enter into a memorandum of 
understanding that addresses, among other things, the agencies' plan 
for sharing information they collect on multiemployer plans on an 
ongoing basis. The memorandum should address how data will be shared 
to: (i) identify the universe of multiemployer plans; (ii) reconcile 
similar information received by each agency; and (iii) identify 
possible reporting compliance issues and take appropriate enforcement 
action. We agree with GAO that an effective information-sharing 
mechanism among the agencies is needed in this area and will work with 
the IRS and PBGC to establish such a mechanism. We believe, however. 
that this may be accomplished without the necessity of a formal 
memorandum of understanding. 

The Department of Labor, through EBSA, is responsible for 
administering and enforcing the fiduciary, reporting, and disclosure 
provisions of Title I of the Employee Retirement Income Security Act 
of 1974 (ERTSA). ERISA covers approximately 1,500 defined benefit 
pension plans covering more than 10.4 million workers and retirees. As 
you know, recently, ERISA and the Internal Revenue Code were 
substantially amended by the Pension Protection Act of 2006 (PPA), 
with many of the more significant PPA amendments relating to 
multiemployer plans. Shortly after the PPA, the Congress enacted the 
Worker, Retiree, and Employer Recovery Act of 2008, which amended a 
number of the PPA amendments affecting multiemployer plans. As the 
legal landscape has and continues to evolve, EBSA, nonetheless, has 
and continues to commit significant resources to implementing the many 
new or revised requirements applicable to multiemployer plans. Set 
forth below is a description of the status of a number of these items 
which were discussed in GAO's report. 

Annual Reporting by Multiemployer Plans: 

EBSA recently completed a multi-year overhaul of the filing system for 
ERISA's annual return/report (Form 5500) by moving to an all 
electronic system. The move to the all-electronic EFAST2 Form 5500 
filing system was intended not only to make Form 5500 filing data 
available to the government and the public faster and improve the 
quality of data collected, but also to satisfy the PPA requirement 
that the Department make available electronically on its website 
certain actuarial information filed as part of the Form 5500. To 
reflect both the changes in the reporting requirements and in the 
funding rules established by the PPA, the agencies (EBSA, IRS, and 
PBGC) created the new, separate schedule for multiemployer defined 
benefit pension plans (Schedule MB) and added questions to the 
Schedule R (Retirement Plan Information) to collect information 
specifically about multiemployer plans, including contribution amounts 
and rates for employers contributing more than five percent of total 
contributions to the plan and the number of employers withdrawing from 
the plan during the preceding plan year, along with aggregate amount 
of withdrawal liability assessed or estimated to be assessed against 
the withdrawn employers. 

Model Notices for Multiemployer Plans in Critical Status: 

On March 25, 2008, EBSA published in the Federal Register a model 
notice intended to assist multiemployer plans in complying with the 
notification requirement under section 305(b)(3)(D)(i) of ERISA. 
Section 305(b)(3)(D)(i) of ERISA provides that, in any case in which 
it is certified under section 305(b)(3)(A) that a multiemployer plan 
is or will be in endangered or in critical status for a plan year, the 
plan sponsor shall, not later than 30 days after the date of the 
certification, provide notification of the endangered or critical 
status to participants and beneficiaries, the bargaining parties, the 
PBGC, and the Secretary of Labor. Model notices of this type promote 
uniform disclosure and often result in reduced administrative burdens 
to plans. EBSA receives, logs, and posts critical and endangered 
status notices on EBSA's website. EBSA's Office of Participant 
Assistance executes quality control checks regularly to avoid 
duplicative postings. EBSA is not a statutory recipient of annual 
actuarial certifications and, accordingly, does not post such 
certifications to its website. 

Annual Funding Notices: 

On February 10, 2009, EBSA issued Field Assistance Bulletin 2009-01 
(FAB) as interim guidance under section 101(f) of ERISA. Section 101(0 
of ERISA generally requires the administrators of all defined benefit 
plans, including multiemployer plans, to furnish an annual notice to 
the PBGC, participants, beneficiaries, and certain other persons. A 
funding notice must include, among other information, the plan's 
funded percentage, over a three-year period, as well as other 
information relevant to the plan's funded status. Pending further 
guidance, the Department will, as matter of enforcement policy, treat 
a plan administrator as satisfying the requirements of section 101(0 
of ERISA, if the administrator has complied with the guidance 
contained in the FAB and has acted in accordance with a good faith, 
reasonable interpretation of those requirements with respect to 
matters not specifically addressed in the FAB. The FAB contains a 
model notice for multiemployer plan administrators and while not 
mandatory, use of an appropriately completed model will, as a matter 
of Department enforcement policy, satisfy the content requirements of 
section 101(t) of ERISA. On August 10, 2010, EBSA transmitted a 
proposed regulation under section 101(f) to the Office of Management 
and Budget for review under Executive Order 12866. The proposal will 
establish uniform content standards and include a model annual funding 
notice that multiemployer plans may use to satisfy their disclosure 
requirements under section 101(f) of ERISA. 

EBSA does not have the authority to assess civil monetary penalties 
against a plan administrator that violates the annual funding notice 
requirements. Instead, under section 502(c)(1) of ERISA, a plan 
administrator who fails to meet the requirements of section 101(f) of 
ERISA with respect to a participant or beneficiary may, in the court's 
discretion, be personally liable to such participant or beneficiary in 
the amount of up to $110 a day from the date of such failure. Under 
section 502(a)(8) of ERISA, however, a civil action may be brought by 
the Secretary of Labor or a person entitled to receive an annual 
funding notice (e.g., PBGC) to enjoin any act or practice which 
violates section 101(f) or obtain appropriate equitable relief. 

ERISA Civil Monetary Penalties for Failure to Adopt a Funding 
Improvement/Rehabilitation Plan: 

On February 26, 2010, EBSA published a final regulation that 
establishes procedures relating to the assessment of civil penalties 
by the Department of Labor under section 502(c)(8) of ERISA. This 
provision authorizes the Secretary of Labor to assess a civil penalty 
of up to $1,100 a day against the plan sponsor for each violation of 
the requirement under section 305 of ERISA to timely adopt a funding 
improvement or rehabilitation plan for a multiemployer plan in 
endangered or critical status. This regulation became effective on 
March 29, 2010, and while EBSA has not yet assessed civil monetary 
penalties under this provision, EBSA has undertaken compliance review 
activities in this area. In FY 2010, for example, EBSA's Office of 
Chief Accountant reviewed fifty plans for compliance and determined 
that civil penalties were not warranted. EBSA will continue such 
reviews on a regular basis. In conjunction with these reviews, EBSA 
began, and will continue, working with the IRS to reconcile actuarial 
certification and related zone status data, subject to any applicable 
restrictions under section 6103 of the Internal Revenue Code, in order 
to identify plan sponsors who failed to file actuarial certifications. 
With accurate filing data, the agencies will be in a stronger position 
to assess compliance with ERISA §305. 

Conclusion: 

Multiemployer defined benefit pension plans play a vital role in 
providing retirement security to millions of American workers and 
retirees. We agree with GAO's conclusion that a more effective 
information-sharing mechanism among the agencies is necessary and will 
continue to work with the IRS and PBGC to that end. We appreciate 
having had the opportunity to review and comment on the draft report. 
Please do not hesitate to contact us if you have questions concerning 
this response or if we can be of further assistance. 

Sincerely, 

Signed by: 

Phyllis C. Borzi: 
Assistant Secretary: 

[End of section] 

Appendix III: Comments from the Department of the Treasury: 

Department Of The Treasury: 
Washington, D.C. 20220: 

September 24, 2010: 

Ms. Barbara D. Bovbjerg: 
Managing Director: 
Education, Workforce and Income Security: 
United States Government Accountability Office: 
441 "G" Street, NW: 
Washington, DC 20548: 

Dear Ms. Bovbjerg: 

Thank you for the opportunity to review the Government Accountability 
Office (GAO) draft report entitled "Private Pensions: Changes Needed 
to Better Protect Multiemployer Pension Benefits" (GA0-10-926). 

Multiemployer defined benefit pension plans play a vital role in 
providing retirement security to millions of American workers and 
retirees. Concern about the funded status of these plans led Congress 
to enact, in the Pension Protection Act of 2006, a series of revisions 
to the multiemployer pension funding and related rules. 

Since enactment of that law, the three agencies that regulate these 
plans -- the Employee Plans (EP) division within the Internal Revenue 
Service, the Employee Benefits Security Administration (EBSA) within 
the Department of Labor, and the Pension Benefit Guaranty Corporation 
(PBGC) -- have been working together to issue interpretive guidance 
and to implement the new rules. This is part of our longstanding 
practice of coordinating oversight of defined benefit pension plans.
The three agencies' coordination efforts include the following: 

* Mutual review of each agency's regulatory and other multiemployer 
funding administrative guidance prior to publication; 

* Joint development of the schedule MB and schedule R attachments to 
the Form 5500; 

* Discussion of multiemployer issues during bi-weekly three-agency 
conference calls (and follow-up meetings on specific issues); 

* Quarterly regional meetings between EP and EBSA area directors and 
staff; 

* Joint training and outreach efforts, including EP, EBSA, and PBGC 
joint panels at national practitioner benefits conferences; and; 

* Cross-agency internal training and information sharing, such as the 
recent presentation by the manager of PBGC's Multiemployer Program 
Division at a training session for EP examination agents in the 
Multiemployer Audit Program. 

Like many other defined benefit plans, multiemployer plans have been 
under financial strain as a result of the 2008 turmoil in the 
financial markets. As a result, the number of these plans that was 
certified by the plan actuary to be in either endangered or critical 
status increased dramatically from 2008 to 2009. The draft report 
compares the number of plans that are certified in endangered status 
or critical status for the 2008 and 2009 plan years with the number of 
plans providing notice of their critical or endangered status to the 
PBGC and Department of Labor. This leads the reader to draw the 
inference that many plans in endangered or critical status are not 
complying with the requirement to notify the PBGC and Department of 
Labor of that status. However, that inference would be inaccurate to 
the extent that plans took advantage of the election to "freeze" their 
status (i.e., maintain their prior-year status) under section 204 of 
the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA). If a 
multiemployer plan that was neither in endangered nor in critical 
status for 2008 but was certified by the plan actuary to be in 
endangered or critical status for 2009 elects to "freeze' its status 
pursuant to section 204 of WRERA for 2009, there will be a mismatch 
between the notification of status sent to the IRS (which is the 
actuary's actual certification of endangered or critical status) and 
the requirement to notify the PBGC and Department of Labor if the 
plan's status is endangered or critical (because notification to the 
other agencies would take into account the plan's freeze election). 

GAO's draft report recommends that the agencies enter into a 
memorandum of understanding (MOU) that addresses, among other things, 
the agencies' plans for sharing information they collect on 
multiemployer plans on an ongoing basis. The draft report recommends 
that the MOU address how data will be shared to (i) identify the 
universe of multiemployer plans; (ii) reconcile similar information 
received by each agency; and (iii) identify possible reporting 
compliance issues and take appropriate enforcement action. 

In fact MOUs that provide for the sharing between agencies of taxpayer 
information, including information on multiemployer plans, are 
currently in force between the IRS and EBSA and between the IRS and 
PBGC. In addition, the IRS shares taxpayer information, including 
information on multiemployer plans, with the Department of Labor and 
PBGC pursuant to annual requests under section 6103(1)(2) of the 
Internal Revenue Code. These MOUs and annual request letters describe 
the purposes for which information may be requested, and also detail 
information-sharing procedures, including the safeguarding of taxpayer 
data. 

We agree that the agencies should periodically consider modifying the 
MOUs and related documents to ensure that cooperation and sharing of 
information continues efficiently, particularly in light of the 
changes to the funding rules for multiemployer plans enacted in recent 
years. Accordingly, the IRS will be working with EBSA and PBGC to 
consider necessary and useful changes to the MOUs and related 
documents. 

GAO's draft report also recommends that the IRS develop a standardized 
electronic form for annual certifications that would require plans to 
disclose their funded percentage. In March 2008, the IRS issued 
proposed regulations specifying the information that multiemployer 
plans must include as part of the annual certification of their plans' 
funded status under section 432 of the Internal Revenue Code. Those 
proposed regulations would not require that multiemployer plans 
present this information on a specific form or in a specific format 
and do not specifically require disclosure of plans' funded 
percentage. However, as part of the process of finalizing those 
proposed regulations, Treasury and the IRS will take into account, in 
developing future guidance, GAO's recommendation that disclosure of a 
plan's funded percentage be included as part of the certification. We 
also appreciate the rationale for GAO's recommendation to create a 
form for this purpose, and EP will discuss with the IRS's governing 
council on electronic filing the feasibility of developing an 
electronic filing program for such a form. 

Restoring the financial health of multiemployer plans is an important 
part of improving the retirement security of our country. However, it 
will not be an easy task. GAO has performed a useful service in 
identifying possible approaches to improve the situation. 

We appreciate having had the opportunity to review and comment on the 
draft report. Please do not hesitate to contact us if you have 
questions concerning this response or if we can be of further 
assistance. 

Sincerely, 

Signed by: 

J. Mark Iwry: 
Senior Advisor to the Secretary: 
Deputy Assistant Secretary for Retirement and Health Policy: 
United States Department of the Treasury: 

[End of section] 

Appendix IV: Comments from the Pension Benefit Guaranty Corporation: 

PBGC Pension Benefit Guaranty Corporation: 
Protecting America's Pensions: 
Office of the Director: 
1200 K Street, N.W. 
Washington, D.C. 20005-4026: 

September 24, 2010: 

Barbara D. Bovbjerg: 
Managing Director, Education, Workforce and Income Security Issues: 
U.S. Government Accountability Office: 
Washington, DC 20548: 

Re: "Private Pensions: Changes Needed to Better Protect Multiemployer 
Pension Benefits" 

Dear Ms. Bovbjerg: 

Thank you for the opportunity, both to work with your team and to 
comment on your draft report, "Private Pensions: Changes Needed to 
Better Protect Multiemployer Pension Benefits." 

PBGC is grateful that GAO is continuing to focus on multiemployer 
plans. They are undeniably important. Multiemployer plans provide 
retirement security for some 10 million Americans. Furthermore, as the 
report notes, many of these plans are significantly underfunded.
Given GAO's impartial position, longstanding interest and expertise in 
these complex and difficult subjects, we view your report as a step to 
improve public understanding and hope you will continue your efforts 
in future reports. 

This report begins with four important questions: 

1. What is the current status of the nation's multiemployer pension 
plans? 

2. What steps does the PBGC take to monitor the health of these plans? 

3. What is the structure of multiemployer plans in other countries? 

4. What statutory and regulatory changes, if any, could help plans to 
continue to provide participants the benefits due them? 

It then proceeds, using the limited information presently available, 
to describe what is known about the health of multiemployer plans. It 
also reports, in impressive detail, how PBGC monitors the health of 
such plans, as well as the limited authorities that PBGC has to assist 
them. Finally, the draft report describes multiemployer plans in other 
nations, and how other nations have taken steps to safeguard them. 

We would value and welcome future GAO analysis relating to the fourth 
question raised by the draft report, to describe some of the choices 
plans may need to make, of potentially desirable changes to the 
statutory or regulatory structure, and perhaps identify measures used 
by multiemployer plans in other countries that might be considered in 
the United States. 

I hasten to note that neither PBGC nor the Administration has yet 
formed any policy views about whether statutory or regulatory changes 
are appropriate and, if so, what they should be. We are not yet in a 
position to do so. Under the Pension Protection Act, the three ERISA 
agencies have been directed to report, by the end of 2011, on the 
operation and funding status of multiemployer plans. In the context of 
that report, we should be able to consider whether changes are
appropriate. 

Our efforts to analyze these important issues are, however, hamstrung 
by the limited information we possess concerning both multiemployer 
plans and their participating employers. As we noted in conversations 
with GAO staff, neither PBGC nor other federal agencies has sufficient 
information to determine the scope and nature of the challenges 
multiemployer plans actually face, the extent to which plans have used 
the tools that are already available, and the extent to which 
additional measures are or are not justified. 

As GAO knows, the primary responsibility for the health of pension 
plans lies with plan sponsors. Under the Pension Protection Act of 
2006, plans in critical status can reduce plan accruals and adjustable 
benefits and increase contributions. Although PBGC does not administer 
the Internal Revenue Code sections that govern these measures, we can 
and do help plans address their funding-related concerns by reviewing 
alternative withdrawal liability rules and discussing other ideas. We 
spend a lot of time talking to plan professionals about how they can 
help their plans. Nonetheless, multiemployer plans have no obligation 
to work with PBGC or the other federal agencies. (Although there are 
limited reporting requirements to PBGC, there is no sanction if plans 
fail to comply and no requirement to work with PBGC if they do.) 

Furthermore, as GAO knows from the notices we have received, some 
plans are healthy while others are not. The healthy "green zone" plans 
operated under the same rules (and in some cases in the same 
industries) as plans that entered endangered or critical status. For 
the most part, we do not have the information to know why: to what 
extent have endangered or critical plans been affected by broad 
economic factors, to what extent by unfortunate choices in investments 
or benefit/accrual levels, or by other factors. We hope the final 
report will mention these factors. 

The Report's primary discussion about information deals with the 
information that is already collected by IRS, DOL, or the PBGC. It 
recommends that executive agencies coordinate and share the 
information they already possess via a Memorandum of Understanding 
(MOU). This is a useful recommendation, and one whose objective we 
support. However, as the Treasury Department's response to the GAO 
report notes, MOUs that provide for the sharing between agencies of 
information on multiemployer plans are currently in force between IRS 
and EBSA and IRS and PBGC. We can and will review these to ensure that 
we take full advantage of the information already in our possession 
that can be shared, but PBGC does not believe that this will be nearly 
sufficient to prepare us for the challenges we face. 

Without additional information on the current situation of plans — not 
just those that choose to file Annual Funding Notices — and the 
ability to obtain information in some cases on the economic condition 
of major employer participants, we will neither be prepared to help 
multiemployer plans nor be able to analyze whatever statutory changes 
might ultimately be necessary to do so. 

We hope GAO will consider these issues further. Ideally, this report 
would recommend further analysis and data about multiemployer plans, 
because Congress and the executive branch plainly need better 
information about multiemployer plans than what we already have. It 
would help both to note this and suggest what additional reporting may 
be necessary. For example, should there be penalties for failing to 
send PBGC critical or endangered status notices, or for failing to 
send Annual Funding Notices? 

The draft report also recommends that PBGC develop a more active 
approach to monitoring multiemployer plans. We agree that our 
multiemployer program will need more resources and a more robust 
infrastructure. We have already begun to redirect some of our current 
resources to the program, and have begun discussions about additional 
program needs in the future. However, an active approach requires more 
than just a willing staff, even as talented and hardworking a staff as 
that of PBGC. It requires cooperation and information from the plans, 
participants, and employers that we are trying to help. 

Under separate cover, we have provided a list of suggested technical 
corrections and other comments to clarify the draft report. 

Again, we very much appreciate the opportunity you have given us to 
comment on the draft report and to meet with your staff to discuss it. 
We appreciate GAO's ongoing efforts to call attention to retirement 
security issues and the role PBGC plays in protecting pension 
benefits. And we look forward to working with you to help protect them 
in the future. 

Sincerely, 

Signed by: 

Joshua Gotbaum: 
Director: 

cc: Phyllis Borzi: 
Department of Labor: 

J. Mark Iwry: 
U.S. Department of the Treasury: 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Barbara Bovbjerg (202) 512-7215 or bovbjergb@gao.gov: 

Staff Acknowledgments: 

Individuals making key contributions to this report include David R. 
Lehrer, Assistant Director; Jonathan S. McMurray, Analyst-in-Charge; 
Robert Campbell; and Thanh Lu. Joseph Applebaum, Susan Aschoff, and 
Roger J. Thomas also provided valuable assistance. 

[End of section] 

Footnotes: 

[1] Collective bargaining has been the primary means by which workers 
can negotiate, through unions, the terms of their pension plan. The 
National Labor Relations Act (NLRA) required employers to bargain with 
union representatives over wages and other conditions of employment, 
and subsequent court decisions established that employee benefit plans 
can be among those conditions. 

[2] GAO, Private Pensions: Multiemployer Plans Face Short-and Long-
Term Challenges, [hyperlink, http://www.gao.gov/products/GAO-04-423] 
(Washington, D.C.: Mar. 26, 2004), and GAO, Private Pensions: 
Multiemployer Pensions Face Key Challenges to Their Long-Term 
Prospects, [hyperlink, http://www.gao.gov/products/GAO-04-542T], 
(Washington, D.C.: Mar. 18, 2004). 

[3] GAO, Private Pensions: Long-standing Challenges Remain for 
Multiemployer Pension Plans [hyperlink, 
http://www.gao.gov/products/GAO-10-708T], (Washington, D.C.: May 27, 
2010). 

[4] Pub. L. No. 80-101. 

[5] 29 U.S.C. § 1001 nt. 

[6] The single-employer insurance program receives additional 
financing from assets acquired from terminated single-employer plans 
and by recoveries from employers responsible for underfunded 
terminated single-employer plans. PBGC receives no funds from federal 
tax revenues, but it is authorized under ERISA to borrow up to $100 
million from the federal treasury if it has inadequate resources to 
meet its responsibilities. 

[7] Pub. L. No. 96-364. 

[8] Vested benefits are benefits that are no longer subject to risk of 
forfeiture. Unfunded vested benefits are the difference between the 
present value of a plan's vested benefits and the value of plan assets 
as determined in accordance with Title IV of ERISA. 

[9] These liabilities are frequently referred to as orphaned 
liabilities. 

[10] Pub. L. No. 109-280. 

[11] Under PPA, a plan is considered to be in endangered status if it 
is less than 80 percent funded or if the plan is projected to have a 
funding deficiency within 7 years. A plan that is less than 80 percent 
funded and is projected to have a funding deficiency within 7 years is 
considered to be seriously endangered. A multiemployer plan is 
considered to be in critical status if (1) it is less than 65 percent 
funded and has a projected funding deficiency within 5 years or will 
be unable to pay benefits within 7 years; (2) it has a projected 
funding deficiency within 4 years or will be unable to pay benefits 
within 5 years (regardless of its funded percentage); or (3) its 
liabilities for inactive participants are greater than its liabilities 
for active participants, its contributions are less than carrying 
costs, and a funding deficiency is projected within 5 years. 

[12] 26 U.S.C. § 432(e). 

[13] PPA specified that plans in critical status may include in their 
rehabilitation plans reductions in plan expenditures (including plan 
mergers and consolidations), reductions in future benefit accruals, or 
increases in contributions. 

[14] Pub. L. No. 110-458. 

[15] Section 204(b) of WRERA provides a special rule for multiemployer 
plans that would be in critical status for the election year if they 
had not elected to freeze the plan's funded status. In particular, if 
the plan has been certified by the plan actuary to be in critical 
status for the election year, then the plan is treated as being in 
critical status for that year for purposes of applying the excise tax 
exception under section 4971(g)(1)(A) of the Internal Revenue Code. 

[16] See the Segal Company, Winter 2010 Survey of Plans' 2009 Zone 
Status and, the International Foundation of Employee Benefit Plans, 
Multiemployer Pension Funding Status and Freeze Decisions. 

[17] See National Coordinating Committee for Multiemployer Plans, 
Multiemployer Pension Plans, Main Street's Invisible Victims of the 
Great Recession of 2008 (Washington, D.C.: April 2010). 

[18] A separated vested participant is one who has earned a 
nonforfeitable pension benefit but is no longer accruing benefits 
under the plan and has not yet started receiving benefits. 

[19] Although the construction industry has the highest liabilities, 
plans in this industry, one expert said, were more likely to attract 
active participants and improve their funded status in periods of 
economic growth. 

[20] Each year, qualified DB pension plans are required to file a Form 
5500 disclosure of financial information with IRS, EBSA, and PBGC. 
Beginning with the 2009 reporting year, Form 5500 filing and 
processing became wholly electronic. Filers are able to complete Form 
5500 online or with third-party software using a new Web-based 
interface called ERISA Filing Acceptance System 2 (EFAST2) that EBSA 
officials say has greater data capture accuracy than its paper-based 
predecessor. 

[21] An insolvent plan continues operations and PBGC provides 
necessary financial assistance for payment of benefits at guaranteed 
level and for reasonable administrative expenses. 

[22] For 2008 and later plan years, plans are required to identify 
whether they are making scheduled progress on their funding 
improvement or rehabilitation plan on the Form 5500 Schedule MB. In 
addition, plans are required to provide a summary of their funding 
improvement or rehabilitation plan. PPA also requires multiemployer 
plans to report the names of contributing employers that contribute 5 
percent or greater of the total plan contributions for a plan year on 
Form 5500-Schedule R. 

[23] According to PBGC, orphaned participants may also include 
participants whose employers withdrew from a plan without filing 
bankruptcy. However, this group of participants would not be eligible 
for partitioning. 

[24] 29 U.S.C. § 1413. 

[25] PBGC partitioned the pension plan of Council 30 of the Retail, 
Wholesale and Department Stores Union and the Chicago Truck Drivers, 
Helpers & Warehouse Workers Union Pension Plan. 

[26] We did not review or attempt to verify the information or legal 
requirements pertaining to plans maintained in these countries. We 
relied upon the representations and materials furnished by government 
officials in these countries and other experts. 

[27] OECD reports the following returns on pension investments in 
2008: The Netherlands (-16.9%); Denmark (-16.8%); United Kingdom 
(-17.4%); Canada (-21.4%); and the United States (-26.2%). 

[28] In the Netherlands, multiemployer plans share investment gains by 
periodically adjusting the value of workers' benefits, known as 
"indexation." According to officials, pension boards usually adjust 
workers' and also retirees' benefits conditional on the pension fund's 
overall funding level. If a plan's funding ratio is above the 
established benchmark, benefits are indexed to reflect the growth in 
wages or prices. However, if a plan's funding ratio is below the 
established benchmark benefits may be only partially indexed or not 
indexed at all. By law, employers are not allowed to provide full 
indexation if the funded ratio is below 130 percent. According to 
officials, most plans either paid partial indexation or none at all in 
2009. 

[29] This notification is filed with the EBSA, IRS, and PBGC and 
furnished to plan participants, beneficiaries, and the bargaining 
parties. 26 U.S.C. § 432(b)(3)(D)(i) and 29 U.S.C. § 1021(f)(3)(A). 

[30] The suggestions in this table do not reflect GAO's views or the 
views of other federal officials that we interviewed. We collected 
this information interviewing a variety of experts. See appendix I for 
more information about how we conducted this work. 

[31] According to IRS, Section 432(b)(3) of the Code requires an 
actuarial certification of whether or not a multiemployer plan is in 
endangered status, and whether or not a multiemployer plan is or will 
be in critical status, for each plan year. This certification must be 
completed by the 90th day of the plan year and provided to the 
Secretary of the Treasury and to the plan sponsor. Failure of the 
plan's actuary to timely certify the plan's status is treated for 
purposes of section 502(c)(2) of ERISA as a failure or refusal by the 
plan administrator to file the annual report required to be filed 
under section 101(b)(1) of ERISA. A penalty of up to $1,100 per day 
may be assessed by the Secretary of Labor. Plans certified to be in 
endangered status must adopt a funding improvement plan that is 
reasonably expected to enable the multiemployer plan to achieve 
certain funding improvements by the end of its funding improvement 
period. Plans certified to be in critical status must adopt a 
rehabilitation plan that is reasonably expected to enable the 
multiemployer plan to emerge from critical status by the end of its 
rehabilitation period. A funding improvement plan or rehabilitation 
plan must be updated each year after the initial endangered or 
critical year. 

[32] PPA also gave Labor the authority to assess civil monetary 
penalties of up to $1,100 per day against plan sponsors that fail to 
timely adopt funding improvement or rehabilitation plans. However, 
EBSA has not exercised this authority to date because IRS has yet to 
finalize regulations regarding what the content of these plans should 
be. As a result, EBSA has relied on plans to act in a good faith 
compliance basis. According to EBSA, EBSA's Office of the Chief 
Accountant is currently constructing a program to enforce the PPA 
civil penalty provisions. 

[33] The suggestions in this table do not reflect GAO's views or the 
views of other federal officials that we interviewed. We collected 
this information interviewing a variety of experts. See appendix I for 
more information about how we conducted this work. 

[34] Subsequent to sending a draft of this report to the agencies for 
comment, the report's date of issuance was changed from fiscal year 
2010 to fiscal year 2011. As a result, the number of the report was 
changed from GAO-10-926 to GAO-11-79. 

[End of section] 

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Chuck Young, Managing Director, youngc1@gao.gov: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, D.C. 20548: