Updated 2/18/16:

The White House’s 2017 budget proposes to give the Pension Benefit Guaranty Corp. the authority to set new variable-rate premiums on multiemployer plans.

That would raise $15 billion for the agency’s beleaguered multiemployer insurance program, according to the budget proposal.

It also calls for a new “exit” premium assessment for individual sponsors that leave multiemployer plans.

The White House says giving PBGC power to assess new variable-rate premiums—under existing law, Congress sets a per-participant premium—and a new exit premium are both needed to assure the agency’s multiemployer program can remain solvent.

Last November, PBGC reported its multiemployer program deficit had widened to $52.3 billion, up $10 billion from the previous year. PBGC actuaries say the program, which partially insurers the collectively bargained pensions of more than 10 million workers, has a more than 50 percent chance of becoming insolvent by 2025.

That risk rises dramatically after 2025, according to PBGC’s annual report.

The proposed variable-rate and exit premiums would assure the program’s solvency beyond the next two decades, the White House claimed in its proposal.

But one advocacy for multiemployer sponsors, and one union alliance that represents 3 million participants, question that claim.

Randy DeFrehn, executive director of National Coordinating Committee for Multiemployer Plans, which lobbies Congress on behalf of multiemployer plan sponsors, said lawmakers have rejected previous proposals from the Obama White House to give PBGC premium-setting authority.

He is hoping they will do the same with the proposals in this year’s budget.

“I think the White House came to these numbers without enough thought and consideration,” said DeFrehn in an interview. “You can’t have something this aggressive imposed on multiemployer plans right now. These proposals would prevent new employers from coming into plans, and drive existing employers out.”

In effect, DeFrehn says the White House’s ideas to save PBGC’s multiemployer insurance program would only expedite its demise.

According to the budget, the variable-rates proposed by the White House would require “plans to pay additional premiums based on their level of underfunding—as is done in the single-employer program.”

Those increases would be crushing to the most vulnerable plans, and their participants, says DeFrehn.

He points to the Teamsters Central States Plan, one of the country’s largest and most dramatically underfunded multiemployer plans.

The Central States plan covers pension benefits for about 410,000 retired and active participants, or about 4 percent of participants covered under PBGC’s multiemployer insurance program.

If the $15 billion in new premiums the White House proposes were split evenly among all participants covered by PBGC, Central States would be on the hook for $600 million, says DeFrehn.

And that number doesn’t account for the proposed variable-rate, which would impose higher premiums on the worst funded plans.

Those levels of increases are simply untenable, said DeFrehn, who suspects the White House’s proposals came from budget experts, not policy experts.

“There needs to be a more gradual approach,” he said.

Such an approach would take into consideration the stress that historically low-interest rates are creating for multiemployer plan liabilities.

And a balanced effort to address PBGC’s funding crisis would consider the relief more sponsors will seek under the Multiemployer Pension Reform Act of 2014, for which DeFrehn and NCCMP members lobbied hard, he explained.

“Any changes or premium increases have to be absorbed into the system. If you jack rates up too high and too quickly, plans will only want out, and that will create greater funding issues for PBGC,” he said.

Moreover, the budget’s proposed exit premium would deter multiemployer plans from attracting new sponsors, at a time when many plans are desperate to do so, DeFrehn argues.

Sponsors already pay a withdrawal liability if they leave a multiemployer plan when they are not fully funded.

DeFrehn says that provision has prevented new employers from entering multiemployer plans.

The proposed exit premium would make matters worse, said DeFrehn, because even fully funded sponsors would have to pay to leave a multiemployer plan, creating yet another deterrent to sponsor participation.

DeFrehn called the exit premium proposal “extremely short-sighted.”

“If you have a shrinking pool of employers, where does that leave us? A smaller pool of employers means none of the plans will be able to sustain funding stress in the long-term,” said DeFrehn.

One consortium of trade unions agrees with that analysis.

A statement issued by North America’s Building Trade Unions, which represents the interests of 14 unions and their 3 million members, said the best way to address the long-term viability of multiemployer plans is to incentivize employers’ participation.

“Unfortunately, a PBGC premium tax would have the exact opposite effect,” the association said.

"We urge the Administration to rethink its approach to this issue and concentrate on proposals that will take positive steps to better secure retirement income security for American workers and their families,” according to the statement.

The International Brotherhood of Teamsters, one of the unions represented by North America’s Building Trade Unions, represents 1.4 million workers, and includes participants in the Central States pension plan.

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Expert calls White House&rsquo;s multiemployer retirement proposal shortsighted

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Expert calls White House’s multiemployer retirement proposal shortsighted