First, the existence of unfunded liability means that right now there is not enough money in the plan to give all current retirees and journeymen the pension benefits they are entitled to under the plan.
Second, the unfunded liability is viewed as debt owed by the contractor, even if the contractor is healthy and will be in business for decades to come. If a contractor withdraws from the plan and becomes non-union, it is required to pay its proportionate share of the unfunded liability.
However, if a contractor goes out of business, its unfunded liability gets passed on to the remaining contractors in the plan.
The remaining contractors share in the burden of contributing for the same number of employees. Over time, the remaining contractors will have to increase their costs to a point where they won’t be able to compete for jobs.
Unfortunately, it’s simple math. Fewer people paying into the system combined with fewer hours means that we will run out of money at some point.
The exact date of when we’ll run out is unknown. But we do know that there are more union workers over 40 years old than under 40 – and that ratio is unsustainable.
The only way to make sure that the defined pension is there for current workers is to ensure that more workers contribute.