The government insurance program for multiemployer pension plans is in trouble. A Trump Administration proposal to raise premiums for a federal pension insurance program could make the problem much worse.

The premium increase would cost the IBEW's National Electric Benefit Fund more than $100 million a year, said Senior Executive Assistant to the International Secretary-Treasurer Darrin Golden. The plan is healthy enough to bear that cost but it could eventually lead to reduced benefits or higher costs. And some underfunded pensions could be tipped into insolvency, essentially making those them worthless.

There are two kinds of pensions: those run by a single company for its employees and those, like the NEBF, that pool contributions from lots of employers. Both must pay premiums to the Pension Benefit Guaranty Corporation, a federal agency that steps in when pension funds can no longer meet their obligations.

The PBGC fund is flush now, with nearly $2 billion in assets, and nearly 95 percent of multiemployer pension plans are perfectly healthy, including the NEBF (see the NEBF report).

"The math for the NEBF has worked since 1946 and as long as there is a functioning economy, people will need electricians," Golden said.

But in less than a decade, some of the 5 percent of troubled plans will go broke. Two dozen extremely underfunded plans alone have more than $67 billion in liabilities that could land in the PGBC's inbox in the next seven years.

If those funds wipe out the PBGC, beneficiaries could see their monthly check reduced up to 98 percent.

In its 2019 budget, the Trump administration proposed closing the shortfall with a five-fold increase in premiums and even larger increases for at-risk funds.

"It's an obvious, simple response, but this a complicated problem, and it is the wrong response," said International Secretary Treasurer Kenny Cooper. "The simple fact is the multiemployer system is not economically viable with premiums at those levels."

Raising premiums, Cooper said, would solve the fund's immediate deficit, but doesn't do anything about why plans are failing, and it is so expensive that it will likely drive some healthy plans into insolvency. It is, he said, like saving a sinking boat by throwing the passengers overboard.

"Raising premiums 500 percent keeps the PBGC solvent, but the goal isn't to keep the PBGC solvent; the goal is to keep the pension funds solvent," he said. "What use is helping a fund for failing pension plans if it makes more pension plans fail? My only concern is the safety of our retirees' hard-earned NEBF benefits."

Raising premiums won't solve the problem because it wasn't risky choices that got the plans into trouble.

All pension plans were hit by the recession, Golden said, and fund managers conservatively invest to weather downturns. For pensions to work, however, they need new workers and the financial crisis hit some parts of the economy harder than others. The failing plans are in industries that were shrinking: mining, long-distance trucking and auto mechanics in car dealerships.

One plan by itself — the Teamsters' Central States plan — has greater liabilities than the entire PBGC multiemployer fund. In 1983, the fund had more than 13,000 employers. In 2015 it had less than 2,600. By contrast, the NEBF is safe, having more than 9,000 employers, on average, who have paid in for decades.

"Pension plans aren't in trouble because a few union pension managers have been investing in magic beans and bitcoins," Golden said.

Cooper said there are a lot of good ideas, but no consensus on a larger restructuring that would buy plans time to earn their way out of trouble.

A good first step, he said, would be allowing a recent pension reform law to work. Under the 2014 Multiemployer Pension Reform Act, plans approaching insolvency can apply to reorganize and reduce benefits in a controlled way. Central States applied for the exemption during the Obama administration. Approval would have removed the plan — and its $20 billion deficit — from the PBGC's $67 billion deficit calculation.

But the application was denied. In fact, only one of the 19 plans that have applied for benefit changes has been approved.

"Even after losing more than 80 percent of their employers, Central States could have returned to solvency if Treasury had implemented the MPRA in the way Congress intended," Cooper said. "The first step is letting the law work the way it was supposed to."

IBEW Political Director Austin Keyser said several proposals are being floated in Congress, but the bill proposed by Democratic Sen. Sherrod Brown of Ohio stands far above the others.

Brown's bill would have created a pension rehabilitation administration and trust fund to make loans to rescue at-risk pension plans. The recent creation of a congressional joint select committee to address the pension problem, however, puts Brown's bill and others on hold while a bipartisan group — including Brown and Folsom, N.J., Local 351's Rep. Donald Norcross — tries to reach a solution.

"We're hopeful the committee comes up with a solution that works for everyone and doesn't weaken strong funds like the NEBF," Cooper said. "One thing we know for sure, this proposal in the president's budget is a just recipe for more chaos."