Multiemployer pensions are the norm among people who work in the trades -- truck drivers, electricians, boilermakers, pipefitters, plumbers, etc.
Union workers in these skilled trades usually work for multiple companies throughout their careers. Every company they work for has to contribute to their pension fund, with the amount based on the union contract.
I live in a neighborhood outside of Detroit where there is evidence everywhere that this kind of retirement plan has worked well for decades. Retirees in their 70s and 80s collect comfortable union pensions. For example, I'm friendly with a 76-year-old widower -- a retired boilermaker -- who lives a few blocks from me. We both like to sit in the park on the Detroit River and watch the bald eagles fish, diving from the trees overhead.
A month or so ago, he told me he was planning to get married again. I congratulated him, and that encouraged him to tell me more. His betrothed, he says, is also widowed. She was previously married to a boilermaker union brother. Together, he said, they'll receive more than $100,000 in annual pension payments. Combined with Social Security, life will be good, he chortled. They plan to buy a second home in Florida and avoid the frigid Michigan winters.
Mazel tov. Excellent retirement planning.
But younger workers may not be so lucky. I wrote a piece that appears elsewhere on this site Wednesday detailing the financial troubles facing multiemployer pensions. Among other sources, I talked to Josh Gotbaum, director of the Pension Benefit Guaranty Corp., the federal agency that guarantees pensions.
Known as the PBGC, this agency doesn't guarantee multiemployer pensions in the same way that it does single-employer pensions. Instead of taking over a failing pension and paying out most -- if not all -- of the promised pension amounts, the PBGC pays only administrative costs and a minimal amount -- about $13,000 annually -- to multiemployer plan retirees when their plans are in trouble. Even so, Gotbaum and others believe that if the PBGC had to make good on even these limited obligations to a few large, but deeply troubled, multiemployer pension plans, the agency would run out of money within 15 to 20 years.
One of the difficulties in devising a solution, Gotbaum says, is a lack of information. There are tens of thousands of small businesses obligated to pay into multiemployer plans, but the PBGC doesn't even have a list of those companies. "In the single-employer world, you know what plan you are talking about, and you know how to get information about it. But in the multiemployer world, we don't even know the names of the companies," he says.
The first step toward shoring up multiemployer pensions, he says, is to get permission from the federal bureaucracy to identify companies with pension obligations. Last week, the PBGC sought that permission by taking the initial step of posting its intentions in the Federal Register and asking for public feedback on its plan.
"What we are trying to do is learn enough so we can figure out what ought to be done," Gotbaum says.
Good luck with that.