Why Do I Owe the Union Pension Fund More than my Company is Worth?
Many unionized employers participate in what are known as "multi-employer pension plans," also referred to as “Taft-Hartley plans.” These are collectively bargained plans maintained and contributed to by more than one employer, typically within the same or related industries such as manufacturing, trucking and entertainment.
The Pension Benefit Guaranty Corporation (the “PBGC”) estimates that approximately 10 million Americans are covered by multi-employer pensions. There has been a good deal of controversy surrounding multi-employer pensions since Congress amended the pension law in December 2014 to allow companies to cut back not only active workers’ plans, but also those of retirees. The PBGC has been warning in recent years that approximately 10 percent of participants are in severely troubled plans.
Multi-employer pension plans hold risks not only for participants, but also for otherwise healthy employers. Even though a company may be current on paying all the money it owes for its employees on a regular basis, if it ever failed to sign a new union contract, or its employees were to de-certify the union, or the union refused to give it a successor contract, the company would trigger its unfunded pension fund liability. This is the company's proportional share of the total unfunded liability for all vested retirees for that union covered by their contracts. It is not unusual for a company that is current on its pension obligations to owe so much money to the pension fund that the company has a negative net worth.
This is the first in a series of posts that will address issues surrounding multi-employer pension plans. In particular, we’ll be discussing issues and risks related to a company’s unfunded pension fund liability.
We’ll help you answer questions such as: Should I worry about this? Why? What can I do about it?
Please stay tuned for additional information in upcoming posts.
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