The Pension Benefit Guaranty Corp.’s safety net for multiemployer private pension plans already has some holes in it, and its effectiveness will decrease as additional terminated plans become insolvent, according to a new PBGC report.

Twenty-one percent of multiemployer participants in “current plans” — that is, insolvent plans currently receiving financial assistance from PBGC — have experienced or are projected to experience a reduction in benefits, the report says, compared with 16% of participants in the agency’s most recent study of single-employer plans.

For “future plans” — that is, terminated plans that have not yet started receiving financial assistance from the PBGC, but are expected to in the future — that number is projected to be 51%, reflecting the fact that those plans have more generous benefits than plans currently receiving aid.

“As the benefit amounts get bigger, the current level of the guarantee will cut a lot more participants and the cuts will be a lot higher,” a PBGC official involved with the study told Pensions & Investments. “Future insolvencies are going to be generally less well protected than the current system.”

For an individual in a multiemployer plan with 10 years of service, PBGC guarantees 100% of the pension benefit only up to $1,320 per year; for an individual with 30 years of service, the amount PBGC guarantees at 100% is less than $4,000 per year. The government guarantees 75% of benefits in excess of that level, but the overall guaranteed payment amount is limited to $12,870 per year for an individual with 30 years of service.

According to the report, participants in future plans are projected to lose 10% or more of their benefit 54% of the time, compared with 39% of the time for those in current plans.

“The risk and magnitude of benefit loss increases dramatically when we look at the plans that are projected to require financial assistance in the future and apply the guarantee,” the PBGC said.

The PBGC study was conducted before the passage of the Multiemployer Pension Reform Act of 2014. The act allows some troubled multiemployer plans to adjust benefits to keep the plan solvent, as long as they remain above the PBGC guarantee level, but it did not change the amount of the PBGC guarantee.

The PBGC had a deficit of $62 billion for the year ending September 30, 2014, compared with $36 billion a year earlier.

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