Hostname: page-component-8448b6f56d-c4f8m Total loading time: 0 Render date: 2024-04-24T15:36:36.925Z Has data issue: false hasContentIssue false
  • English
  • Français

Multiemployer plans: evaluating a proposal to spread the pain

Published online by Cambridge University Press:  23 January 2018

ALICIA MUNNELL ,
JEAN-PIERRE AUBRY ,
WENLIANG HOU  and
ANTHONY WEBB
ALICIA MUNNELL
Affiliation:
Boston College, Center for Retirement Research, Chestnut Hill, MA, USA (e-mail: aubryj@bc.edu)
JEAN-PIERRE AUBRY
Affiliation:
Boston College, Center for Retirement Research, Chestnut Hill, MA, USA (e-mail: aubryj@bc.edu)
WENLIANG HOU
Affiliation:
Boston College, Center for Retirement Research, Chestnut Hill, MA, USA (e-mail: aubryj@bc.edu)
ANTHONY WEBB
Affiliation:
Schwartz Center for Economic Policy Analysis (SCEPA) at The New School, New York, USA
Get access Rights & Permissions [Opens in a new window]

Abstract

The Multiemployer Pension Reform Act (MPRA) allows multiemployer plans facing insolvency to apply for approval from the Treasury to cut accrued benefits of plan members to prolong plan solvency—a departure from the benefit protections of Employee Retirement Income Security Act. To assess the law's impact, this paper models Central States Teamsters – by far the largest – plan to have applied under the new law to reduce benefits. Using a stochastic model of future investment returns, the probability of insolvency within 10 years drops from 50% (without cuts) to 6% (with cuts). While benefit cuts increase the overall welfare of participants by extending the plan's life, the welfare of younger retirees (under age 75) worsens and welfare of workers improves.

Keywords

J32MPRAunion pension planscentral states teamstersrisk aversion analysisutility modelPBGCpension benefit guaranty corporationmultiemployer pension reform actmean-variance efficient investment allocation
Type
Article
Information
Journal of Pension Economics & Finance , Volume 18 , Issue 1 , January 2019 , pp. 124 - 139
Copyright
Copyright © Cambridge University Press 2018 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

The research reported herein was supported by the Center's Partnership Program. The findings and conclusions expressed are solely those of the authors and do not represent the opinions or policy of the partners or the Center for Retirement Research at Boston College.

References

Cerner, D. (2013) Testimony for hearing on ‘Strengthening the Multiemployer Pension System: How Will Proposed Reforms Affect Employers, Workers and Retirees?’ House Committee on Education and the Workforce Subcommittee on Health, Employment, Labor, and Pensions. (October 29). Washington, DC.Google Scholar
Chatty, R. (2003) A New Method of Estimating Risk Aversion. NBER Working Paper No. 9988. Cambridge, MA: National Bureau of Economic Research.Google Scholar
Efren, R. G. and Shapiro, J. (2013) Solutions not Bailouts: A Comprehensive Plan From Business and Labor to Safeguard Multiemployer Retirement Security, Protect Taxpayers and Spur Economic Growth. Washington, DC: National Coordinating Committee for Multiemployer Plans.Google Scholar
GMO. (2015) GMO Quarterly Letter. (Third Quarter). Boston, MA: GMO.Google Scholar
Goldman Sachs. (2014) 2015 US Equity Outlook: Low Return & Low Dispersion. New York, NY: Goldman Sachs.Google Scholar
Horizon Actuarial Services. (2013). New York State Teamsters Conference Pension and Retirement Fund. Actuarial Valuation as of January 1, 2013. Washington, DC: Horizon Actuarial Services.Google Scholar
Nyan, T. C. (2013). Testimony for hearing on ‘Strengthening the Multiemployer Pension System: How Will Proposed Reforms Affect Employers, Workers and Retirees?’ House Committee on Education and the Workforce Subcommittee on Health, Employment, Labor, and Pensions. (October 29). Washington, DC.Google Scholar
Pension Benefit Guaranty Corporation. (2014). FY 2013 PBGC Projections Report. Washington, DC: Pension Benefit Guaranty Corporation.Google Scholar
Pension Benefit Guaranty Corporation. (2016). FY 2015 PBGC Projections Report. Washington, DC: Pension Benefit Guaranty Corporation.Google Scholar
Segal Consulting. (2013) Central States, Southeast and Southwest Areas Pension Plan. Actuarial Valuation and Review as of January 1, 2013. New York, NY: Segal Consulting.Google Scholar
U.S. Department of Labor, Pension and Welfare Benefits Administration, Office of Policy and Research. (2001-2012). Form 5500. Washington, DC.Google Scholar