Approximately 1.5 million American workers and retirees face a genuine threat: the pension plans that were supposed to support their retirement could run out of money within the next two decades. The Pension Benefit Guaranty Corporation (PBGC), the federal agency that insures private pension plans, projects that 150 to 200 severely underfunded multiemployer pension plans could exhaust their assets in that timeframe. This isn’t a distant theoretical concern. Consider a truck driver who spent 30 years making contributions to a multiemployer trucking industry pension plan—one of the two largest plans affected by underfunding, covering roughly one-third of all at-risk participants. He expects his pension to be there when he stops working. For many workers in this situation, that expectation is increasingly uncertain. The scope of this crisis is substantial but also specifically concentrated. The problem isn’t evenly distributed across all pension plans in America.
Rather, it centers on multiemployer plans—pension schemes that cover workers at multiple companies, often within the same industry—rather than the corporate pension plans that larger employers sponsor. While the multiemployer system covers approximately 10.8 million participants across roughly 1,400 plans, only a subset faces critical underfunding. The industries most affected are trucking and mining, where workers are particularly exposed to the risk of benefit reductions they cannot prevent or mitigate. What makes this situation complex is that the situation has actually improved in recent years. The American Rescue Plan, signed into law in March 2021, created a Special Financial Assistance Program that provided direct federal funding to over 250 severely underfunded pension plans, protecting more than 3 million workers, retirees, and their families from immediate insolvency. Before this intervention, federal projections suggested the PBGC’s multiemployer insurance program itself would become insolvent by 2026. That deadline has now been extended beyond 2063. However, even with this critical rescue, approximately 1.5 million workers remain in plans vulnerable to eventual shortfalls, and the long-term sustainability of the system still depends on economic conditions, investment returns, and future legislative action.
Table of Contents
- Which American Workers Face the Biggest Pension Risk?
- What Happens When a Pension Plan Runs Out of Money?
- How Did the American Rescue Plan Change the Pension Crisis?
- What Should Workers and Retirees Do Now?
- Corporate Pensions vs. Multiemployer Plans—Why the Dramatic Difference?
- Public Sector Pensions—A Broader Picture of Underfunding
- What’s Changed, and What Remains Uncertain?
Which American Workers Face the Biggest Pension Risk?
The concentration of pension risk in specific industries reveals an important pattern. Of the 1.5 million workers and retirees whose pensions face potential underfunding, roughly one-third work in just two industries: trucking and mining. This geographic and sectoral concentration means that if you drove a truck or worked in a mine for a union employer covered by a multiemployer plan, your retirement security faces greater scrutiny than that of a general population worker. These industries are inherently cyclical and volatile, making their pension contributions and investment returns unpredictable. When the trucking industry experienced downturns—as it has multiple times in recent decades—both contributions and investment returns suffered simultaneously. The total number of at-risk participants, 1.5 million, represents a meaningful portion of America’s private pension system but not its entirety. The PBGC’s broader Multiemployer Program actually covers 10.8 million participants across approximately 1,400 plans. This means that roughly 7.3 million workers in multiemployer plans are not currently facing the acute underfunding crisis affecting the other 1.5 million.
However, this doesn’t mean those 7.3 million workers are entirely safe. A severe economic recession could rapidly deteriorate funding ratios across many more plans, expanding the vulnerable population significantly. Corporate pension plans—those sponsored by single employers like IBM or Ford—present a different picture. As of April 2026, 60% of the top 100 U.S. corporate defined benefit pension plans are actually overfunded, with a funded ratio of 107.8%. This stands in stark contrast to multiemployer plans. The difference stems partly from corporate plans’ access to dedicated cash flows and partly from recent favorable investment returns. But this also means that workers in Fortune 500 corporate pensions are generally more secure than workers in multiemployer plans, creating an inequity where pension security depends heavily on what type of employer sponsored the plan.
What Happens When a Pension Plan Runs Out of Money?
If a multiemployer pension plan becomes insolvent, workers’ pension benefits are protected—but only partially. The PBGC’s Multiemployer Insurance Program guarantees benefits up to a federally determined maximum, which for participants who separated from service in 2026 is approximately $35,500 annually. However, this is significantly less than the full benefits that many workers earned. A worker whose pension benefit was calculated to pay $50,000 annually will receive approximately $35,500 from the PBGC guarantee, with the remaining $14,500 permanently lost. For retirees on tight budgets, this reduction can be devastating, especially if they’ve already adjusted their retirement spending to expected full-benefit levels. The mechanism of benefit cuts reveals an important limitation: the PBGC’s multiemployer insurance program is itself financially stressed. To continue paying guaranteed benefits to workers in failed plans, the PBGC imposes mandatory contributions on all other multiemployer plans—those that are still solvent.
This means that workers in healthy multiemployer plans experience higher pension contributions and lower employer contributions to their own pensions because their plan must help support the system’s insolvency costs. In 2026, PBGC premiums reached record levels of $111 per participant, plus an additional 5.2% of each plan’s unfunded liability (subject to a cap). These rising costs create a perverse incentive: as funding deteriorates in one set of plans, it accelerates deterioration in others through rising insurance premiums. The warning here is structural and difficult to resolve. The PBGC’s guarantees are essential to prevent catastrophic benefit cuts, but the program itself has limited resources. Federal funding through the American Rescue Plan provided temporary relief, but it was not permanent or comprehensive enough to solve all underfunding. Once that money was distributed to the 250+ worst-off plans, the PBGC returned to relying on premiums from other plans and whatever investment returns it could earn. This creates ongoing tension: the more plans that fail, the higher the premiums must be for the survivors, which can push marginal plans toward failure themselves.
How Did the American Rescue Plan Change the Pension Crisis?
In March 2021, Congress passed the American Rescue Plan, which included a landmark provision: the Special Financial Assistance Program for multiemployer pensions. The program allocated approximately $86 billion in direct federal funding to severely underfunded pension plans, distributed over several years. This wasn’t a loan that plans had to repay—it was a grant. The impact was immediate and profound. Over 250 pension plans received funding, and over 3 million workers, retirees, and families were protected from immediate or near-term benefit reductions. The scale of this intervention cannot be overstated. Before the American Rescue Plan, the PBGC’s multiemployer insurance program was projected to become insolvent by 2026. Workers and retirees watched the clock, knowing that once the PBGC ran out of money, future plan insolvencies would trigger immediate, automatic 20-35% benefit cuts.
The American Rescue Plan essentially stopped that clock. Current projections now extend the PBGC’s solvency beyond 2063—the final year in its projection models. This represents a fundamental shift in the trajectory of the multiemployer pension system. However, the American Rescue Plan was not a complete or permanent solution. The 1.5 million workers remaining in underfunded plans still face long-term uncertainty. The legislation allocated a fixed amount of one-time federal funding; it did not restructure the multiemployer system or guarantee permanent subsidies going forward. For the plans that did receive Special Financial Assistance, the help solved the immediate crisis but did not necessarily put them on a path to full funding. Many of these plans will still require difficult decisions—contribution increases, benefit modifications, or future federal assistance—to remain solvent indefinitely. The rescue plan bought time, but it did not eliminate the underlying structural challenges.
What Should Workers and Retirees Do Now?
For workers currently enrolled in a multiemployer pension plan, the first step is to understand your plan’s funding status. The PBGC publishes a list of plans in critical status and declining status, along with detailed funding information. If your plan is on that list, you face higher risk and should plan more conservatively about your retirement income. This means potentially saving more outside your pension, or considering whether you might need to work longer than originally anticipated. Don’t assume your pension will provide your full expected benefit—it may, but planning conservatively protects you against the disappointment of unexpected benefit reductions. The second step is to diversify your retirement income sources. Workers whose pensions might be at risk should place greater emphasis on Social Security benefits (which are guaranteed by the federal government), personal savings, 401(k) contributions, and other independent retirement income. If your employer offers a 401(k) plan, prioritizing contributions to that plan gives you assets that you fully control and that cannot be affected by pension plan insolvency.
This is particularly important for workers in their 50s and 60s who are approaching retirement. You cannot make up decades of underfunding in the few years before you retire, but you can ensure that your retirement doesn’t depend entirely on one source. Retirees already receiving pension benefits face a different but equally important decision. If your plan is in critical status, there’s a possibility of future benefit reductions. Review your household budget to understand where you could cut expenses if necessary. Avoid taking on new long-term financial commitments—like major home renovations or large loans—that assume your current benefit level will never change. This isn’t alarmism; it’s prudent planning. At the same time, understand the likelihood: the American Rescue Plan substantially reduced the number of plans likely to fail, and the PBGC’s guarantees, while imperfect, do provide a floor. The risk is real but manageable for households with realistic planning.
Corporate Pensions vs. Multiemployer Plans—Why the Dramatic Difference?
The contrast between corporate and multiemployer pension funding reveals critical insights about system design. Corporate pension plans cover employees of a single large employer. When General Motors or Boeing experiences financial stress, that company bears the full weight of its pension obligation. This alignment creates powerful incentives: corporate executives and boards have strong motivation to maintain adequate pension funding because the company’s balance sheet reflects it directly. Additionally, large corporations have access to capital markets and can manage pension finances with sophisticated strategies, including liability-driven investment approaches and derivative hedging. Multiemployer plans, by contrast, cover workers across many employers in the same industry. No single employer bears the full risk of underfunding, which means the incentive to contribute adequately is diluted. Additionally, the contributing employers to multiemployer plans are often smaller companies with less financial sophistication and fewer resources.
When the trucking industry or construction industry hits a downturn, many employers simultaneously face pressure to reduce pension contributions. The plans cannot easily compensate by increasing employer contributions because doing so would hurt companies’ ability to compete. The structural design of multiemployer plans creates conditions favorable to underfunding. This limitation is important to acknowledge: the multiemployer system may be fundamentally disadvantaged compared to corporate pensions, regardless of legislative fixes. The American Rescue Plan helped, but it did not restructure the incentive system that led to underfunding in the first place. Future policy options include allowing multiemployer plans to increase benefits more slowly, encouraging plans to seek further federal support before they reach insolvency, or restructuring how contributions are calculated and enforced. None of these solutions are painless. They all involve some combination of higher costs for employers, lower benefits for workers, or continued federal subsidies. There is no neutral solution that distributes the burden equally.
Public Sector Pensions—A Broader Picture of Underfunding
The underfunding crisis is not limited to private multiemployer pensions. State and local government pension plans—which cover teachers, police officers, firefighters, and other public employees—face their own significant underfunding challenge. As of 2025, state and local pension plans have unfunded liabilities of $1.27 trillion, a figure that improved slightly from $1.54 trillion in 2024 but remains substantial. These public plans have a funded status of 82.5%, meaning that for every dollar of benefits owed to current and future retirees, states and localities have funded only 82.5 cents. The gap varies dramatically by state. On average across all states, pension plans are funded at only 72 cents per dollar of benefits owed—a 28% funding gap. Some states like Florida and Wisconsin have funding ratios above 90%, while others like Illinois face funding ratios below 70%.
For public employees, this means their pensions are also at risk, though from a different cause than multiemployer plans. Public pensions are typically protected by state constitutional provisions that make benefit cuts legally difficult or impossible, creating a situation where underfunding can only be resolved through higher taxes, reduced government services, or eventually federal intervention similar to what occurred with private pensions. A sobering projection illustrates how quickly this situation could deteriorate: a single economic recession could increase unfunded liabilities in state and local pension plans to as much as $2.74 trillion by 2026. This suggests that the current $1.27 trillion underfunding represents a baseline scenario assuming moderate economic conditions and investment returns. Any significant market downturn or sustained recession could double the underfunding problem. Public sector workers should be aware that even though their pensions have stronger legal protections than private pensions, they face genuine long-term funding uncertainty. In some states, pension underfunding will eventually require difficult political choices about taxes or service levels.
What’s Changed, and What Remains Uncertain?
The landscape for pension security in America has shifted meaningfully since 2021. The American Rescue Plan accomplished what seemed impossible just years before: it prevented what appeared to be an imminent insolvency of the PBGC’s multiemployer insurance program. Federal policymakers acknowledged that allowing the system to collapse would cause politically unacceptable harm to retirees and workers across the country. This set a precedent: the federal government may be willing to intervene to prevent pension crises, rather than allowing them to fully develop and require emergency damage control. However, what remains uncertain is whether this intervention signals a permanent commitment to pension security or a one-time rescue operation.
The American Rescue Plan was a response to a specific crisis point, not a long-term restructuring of the multiemployer pension system. For the next decade or two, the extended solvency projection beyond 2063 suggests the system has breathing room. But this depends on multiple assumptions: that investment returns remain reasonable, that the economy avoids severe recession, and that contributing employers remain solvent and continue making contributions. Any of these assumptions could prove incorrect. As for public sector pensions, no federal rescue plan exists, and the structural challenges—aging workforces, benefit promises made when demographics were different—will persist regardless of legislative action.