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Multiemployer plans

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Can the PBGC Save Multiemployer Plans?
"[T]he PBGC's insurance fund for multiemployer plans is projected to be exhausted within the next 10 years. One idea is to head off plan insolvencies through 'partitions' that transfer some costs to the PBGC, but little support exists for hiking premiums to cover the costs. The bottom line is that the PBGC, as currently structured, will not be able to stave off plan insolvencies or fully protect workers in plans that become insolvent." (Center for Retirement Research at Boston College)
The Effect of Employer Bankruptcy on Retiree Benefits, with Applications to the Automotive and Coal Industries (PDF)
"Benefits for retired employees are of particular interest to policy makers because of the growing number of retirees and forecasts indicating that some future retirees may not have the necessary financial resources to maintain their standards of living. Part of this congressional concern is what happens when bankrupt employers are unable to provide promised pension and health benefits to their retired employees.... After a discussion of these issues, this report provides three examples of bankruptcy proceedings where the retirees' pensions and health insurance benefits received substantial federal attention: the General Motors Corporation, the Delphi Corporation, and the Patriot Coal Corporation." (Congressional Research Service [CRS])
Countdown to the Second Cycle D Filing Deadline
"Trustees of all multiemployer pension and annuity plans have until January 31, 2015 to submit to the [IRS] their Cycle D determination letter requests for the second five-year staggered determination letter cycle. These requests cover required and discretionary plan amendments for and since the Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART Act). This deadline applies even to those 'off-calendar-year' plans that filed in Cycle E last time." (Segal Consulting)
Multiemployer Benefit Plans: Implementing a Written Policy for Collection of Employer Contributions
"Multiemployer employee benefit plans have unique issues when it comes to employer contributions. In addition to the high number of different employers that may participate in a plan, employers often contribute at different rates, perhaps for different classes of employees, all according to Collective Bargaining Agreements that have different effective dates. These unique issues call for a specific written collection policy." (Bond Beebe Accountants & Advisors)
Underfunded Union Pension Funds Cannot Take Money from Traveling Workers (PDF)
"The U.S. District Court for the Western District of Washington has held that underfunded union pension plans cannot fund their rehabilitation Plan by withholding funds from traveling workers.... The case has a wide impact to traveling workers who perform work in the jurisdiction of multiemployer plans that are in rehabilitation. So far this year, more than 100 multiemployer union pension plans have filed 'Critical' or 'Endangered' status notices with the DOL. If such funds have withheld reciprocity contributions from traveling union members, [those] union members may be entitled to have such contributions, and the earnings thereon, transferred to their Home Fund. As a consequence, the traveling worker will receive an increased pension benefit from his Home Fund." [Lehman v. Nelson et al., No. C13-1835RSM (W.D. Wash. Sept. 11, 2014)] (Davis Wright Tremaine LLP)
A Review of ERISA Litigation in 2014
"This advisory summarizes a selection of the 2014 decisions ... and the key lessons ... including: [1] Union travelers entitled to wrongfully withheld reciprocity pension contributions; [2] TPA engages in prohibited self-dealing by concealing fees; [3] Church plans should proceed with caution unless established and created directly by a church; [4] Employers have no cause of action against multiemployer trustees for negligent plan management; [5] U.S. Supreme Court rejects Moench presumption, adopts plausibility standard; [6] Include contractual time limit in denial of benefits; and [7] Once-per-year IRA rule to be applied on aggregate basis[.]" (Davis Wright Tremaine LLP)
Taft-Hartley Trustees: Traveling Outside State Lines Requires Staying in Line with the IRS Travel Expense Reimbursement Rules
"Under the actual expense method, there must be records to evidence the actual cost of travel expenses.... As an alternative to the actual expense method, the IRS standard rates can be used for meals and incidentals. The only documentation required under this method is proof of time, place, and business purpose of the travel.... Expense reimbursements for the departure and return days must be prorated under the standard meal allowance method by one of two methods." (Belfint Lyons & Shuman, CPAs)
CBO Cost Estimate for S. 2511, a Bill to Amend ERISA to Clarify the PBGC Definition of Substantial Cessation of Operations
"CBO estimates that S. 2511 would reduce the contributions that plan sponsors are required to make to their plans as a result of terminating operations, leading to increases in revenues and decreases in direct spending (including the effects on offsetting receipts, which are recorded as an offset to direct spending). CBO estimates that enacting S. 2511 would, on net, decrease direct spending by $15 million over the 2015-2024 period. The staff of the Joint Committee on Taxation (JCT) estimates that enacting the bill would increase revenues by $14 million over the 2015-2024 period. In total, CBO and JCT estimate that enacting S. 2511 would reduce deficits by $29 million over the 2015-2024 period." (Congressional Budget Office [CBO])
[Guidance Overview] Section 4062(E) Liability in Transition: Planning for an Uncertain Future (PDF)
10 pages. "Both the PBGC moratorium and the HELP Committee's action, which follow a number of noteworthy 4062(e) developments over the past eight years, appear to reflect an increasing momentum for reform. These two key developments highlight the importance of the need for awareness of -- and effective planning regarding -- potential 4062(e) issues in a regulatory and legislative environment that could change significantly in the near-term -- whether as a result of policy or regulatory changes within PBGC or as a result of the enactment of reform legislation, or some combination of both." (Keightley & Ashner LLP, via Bloomberg BNA Pension & Benefits Daily)
Employer Has No Claim Against Multiemployer Trustees for Mismanagement
"[A] key issue that led to the MPPAA was the problem of employer withdrawals, and how rising costs as a result of the diminished contribution base caused by withdrawals forced further withdrawals that could lead to the demise of pension plans. Granting employers the ability -- as any other interested party -- to sue in court to ensure plans are well-managed will improve the stability of those plans and eliminate the need for employers to withdraw." [DiGeronimo Aggregates v. Zemla, No. 13-4389 (6th Cir. Aug 14, 2014)] (Seyfarth Shaw LLP)
Cost of Pension Withdrawal Liability Might Drop, Based on Recent District Court Ruling (PDF)
"[This case] is a departure from how withdrawal liability has been calculated since the PPA, and it may open the door for new challenges that could reduce the amounts owed by withdrawing employers.... However, employers seeking to reduce their withdrawal liability based on the arguments presented in this case must still be careful to heed ERISA's strict timing and notice requirements for disputing the multiemployer plan's calculation of the amount of withdrawal liability." [Board of Trustees of the IBT Local 863 Pension Fund v. C&S Wholesale Grocers Inc./Woodbridge Logistics LLC, No. 12-7823 (D.N.J. Mar. 19, 2014)] (Alston & Bird, LLP)
Delaware Bankruptcy Court: Section 363(f) Bars ERISA Successor Liability Claims
"[The Court] approved the sale of a debtor's assets under section 363(f) free and clear of any successor liability claims for underfunding of the debtor's pension plan under ERISA and the Multiemployer Pension Plan Amendments Act of 1980.... [T]he Court expressed concern that making an exception to free and clear asset sales under section 363(f) for successor liability claims may depress the prices that parties bid for a debtor's assets.... The Court also rejected the Trust's argument that the bidders could have bid less if the successor liability claim was retained." [In re Ormet Corp., No. 13-10334 (Bankr. D. Del. July 17, 2014)] (Practical Law Company)
Text of Sixth Circuit Opinion: Employer Cannot Sue Multiemployer Plan Trustees for Negligent Mismanagement (PDF)
"[No] court has ever recognized the existence of a negligence claim in favor of contributing employers -- under any circumstances -- in the federal common law of pension plans ... Congress has established an extensive statutory framework and expressly announced its intention to occupy the field of private-sector pensions ... [We] hold that a contributing employer to a multiemployer pension plan has no cause of action against plan trustees for negligent management under the federal common law of ERISA pension plans." [DiGeronimo Aggregates v. Zemla, et al., No. 13-4389 (6th Cir. Aug 14, 2014)] (U.S. Court of Appeals for the Sixth Circuit)
Multiemployer Trustee Selection and Orientation: 2014 Survey Results (PDF)
27 pages. "The vast majority of fund representatives believe it is more challenging to be a trustee today compared to the past.... Concern about keeping up with constantly changing regulations is the most common challenge for current trustees.... Respondents regarded employee benefits, business, and accounting/finance as the top three educational backgrounds for good trustees... The majority of representatives believe it takes between three and five years to develop a competent trustee." (International Foundation of Employee Benefit Plans [IFEBP])
Text of Sixth Circuit Opinion: Employer Cannot Challenge Multiemployer Plan Withdrawal Liability by Claiming Negligent Mismanagement of Plan Assets (PDF)
"Plaintiff does not challenge an assessment of liability or defendants' mathematical calculation. Rather, plaintiff contends that defendants negligently managed the Plan, primarily by ratifying contribution rates that were insufficient to support the benefits owed by the Plan, and in doing so, directly caused a large portion of the $1,755,733 withdrawal liability.... ERISA is not silent on who holds a claim against trustees for negligent management of plan assets: participants and beneficiaries do. By omission, employers do not... [We] presume that Congress deliberately omitted this remedy from the statutory scheme because the trustees' plan-management duties flow to participants and beneficiaries, not contributing employers[.]" [DiGeronimo Aggregates, LLC v. Zemla, No. 13-4389 (6th Cir. Aug. 14, 2014)] (U.S. Court of Appeals for the Sixth Circuit)
Private Sector Multiemployer Pension Plans: Current Issues
"Multiemployer plans have been hurt by an expansion of benefits during the 1990s and the twin financial crises since 2000. Most are recovering, but a substantial minority faces serious funding problems. These problems are exacerbated by unique structural challenges: the cyclical nature of the construction industry, which covers the most plan participants; a low ratio of active to total participants that increases the burden on underfunded plans; and insufficient penalties for employers who withdraw from the plans." (Center for Retirement Research at Boston College)
Seventh Circuit Finds Right to Acquire Stock Held in Escrow Created a Controlling Interest Sufficient to Impose Withdrawal Liability
"[T]he Seventh Circuit held that an individual's right to acquire stock in a corporation gave him a controlling interest in the corporation ... This controlling interest placed the liable corporation in a controlled group with the other corporations owned by the shareholder, for purposes of withdrawal liability ... The Seventh Circuit relied on the language of the Assignment Agreement ... [which] explicitly assigned to [the individual] the right to demand the shares is escrow." [Central States, Southeast and Southwest Areas Pension Fund v. CLP Venture LLC, Nos. 13-3010, 13-3776 (7th Cir. July 29, 2014)] (Practical Law Company)
Third Circuit: ERISA Doesn't Preempt N.J. Prevailing Wage Law
[T]he court found the state statute provided an employer with an 'independent legal duty' to follow that didn't require reference to either an employee benefits plan or a specific collective bargaining agreement.... [T]he employer only needed to examine the prevailing wage levels and compare them against the wages and benefits that it was paying to its employees to determine if it was in compliance with the law. As a result ... a claim under the state statute was not completely preempted by ERISA or the LMRA and thus was not properly removed to federal district court in the first place." [New Jersey Carpenters and Trust v. Tishman Construction Corp. of N. D., No. 13-3005 (3rd Cir. July 28, 2014)] (Bloomberg BNA)
[Opinion] Why Congress Needs to Reform Multiemployer Pension Plans Now
"Policymakers, legislators, business and labor groups have debated the issue for two years. Now we're at a key turning point, argues Josh Gotbaum, the PBGC's director. 'If Congress doesn't act this year, it is very likely that major plans will fail and the multi-employer system will collapse,' he [said] ... It's not that plans will run out of money this year or next, Gotbaum says. Instead, he says employers could start scrambling off a sinking ship, accelerating pressures on the system." (Mark Miller, via Reuters)
Unions Swim Against the Tide as Pension Tsunami Looms (PDF)
"Especially if the current [NLRB] moves forward with its initiatives to abbreviate severely the length of time from notice of an election petition to the date of employee voting, unorganized employers should be armed as early as possible with reliable information about 'union' defined benefit pension plans for their own decision-making and to share with employees. Similarly, employers entering a new round of collective bargaining should prepare by learning the basics of contributions relative to benefit value and business risk." (Epstein Becker Green, via Insurance Advocate)
Multiemployer Trustee Selection and Orientation: 2014 Survey Results
[Infographic] "Of the 230 fund representatives that completed the survey, nearly 60% believe that it is more challenging to be a trustee today, as compared to decades ago due to personal liability, fiduciary liability, finding a work-life balance and constantly changing regulations. The majority also find that it is more difficult today to recruit both labor and management trustees, and that it takes between three and five years to develop a competent trustee." [The full survey results are online.\ (International Foundation of Employee Benefit Plans [IFEBP])
Noteworthy Developments of Interest to Sponsors of Multiemployer Retirement Plans, Third Quarter 2014 (PDF)
"[T]he percentage of calendar-year multiemployer pension plans in the 'green zone' is 65 percent, up from 61 percent in 2013.... The percentage of plans in the yellow zone is 8 percent, down from 11 percent in 2013. The percentage in the red zone is 27 percent, down from 28 percent last year. The average PPA '06 funded percentage as of January 1, 2014, is 88 percent, up from 85 percent in 2013." (Segal Consulting)
Top IRS Trouble Spots for Multiemployer Retirement Plan Qualification, and What Trustees Can Do About Them
"[1] Erroneous Benefit Calculations ... [2] Conflicting Plan Documentation ... [3] Missing or Inadequate Participation Agreements ... [4] Benefits Not Adjusted for Late Payment ... [5] Inadequate Suspension Procedures ... [6] Late Required Distributions." (Segal Consulting)
How to Build an Effective Pension Board
"Pension board selection usually centers on getting representation across several groups. Even so, boards often fail to include an array of people who could help foster better management.... a pension board is more effective when its personnel has a diversity of opinion, because such a group fosters debate -- and a range of potential asset management strategies." (Institutional Investor)
Teamsters Rank-and-File Dig In Against Possible Pension Benefit Cuts
"Teamsters retirees from the trucking industry currently enjoy some of the most generous pensions in America -- up to $3,500 a month for 30 years of service from any unionized trucking company that contributed to multiemployer pension plans that once covered the industry like a warm fuzzy financial security blanket. But those pension plans, once thought to be the 'Cadillac' of all retirement plans, are in deep financial trouble.... The issue is acute because the Pension Protection Act of 2006, which prohibits any benefit cuts in troubled pension plans, is due to sunset at the end of this year." (Logistics Management)
PBGC Issues Dire Warning on Multiemployer Plans
"More than a million people risk losing their federally insured pensions in just a few years ... [Multiemployer] pensions were long considered exceptionally safe, but the [PBGC] reported that some plans are now in their death throes and could not recover.... Bailing out those plans seems highly unlikely. But if they are simply left to die, the collapse of the federal insurance program is all but inevitable... The agency does such a projection every year, but this year's version was unusually late and unusually dire." (The New York Times; subscription may be required)
[Guidance Overview] PBGC Simplifies Certain Multiemployer Notice and Valuation Requirements
"[A] compliance determination provides valuable protection from some problematic issues that could arise in a merger. If, however, the trustees ... determine that such protection is not needed, the merger could be executed on a faster timetable. On the other hand, there might be no need to forego the protection of a compliance determination because it appears that, under the new rules, plans that request a compliance determination also may continue to request a waiver of the 120-day period if need be." (Segal Consulting)
Sun Capital Decision Threatens Lenders with Controlled Group Liability (PDF)
"Earlier this year, Sun Capital was cited by a multiemployer plan seeking to hold a lender jointly and severally liable for the employer's withdrawal liability s a member of the employer's controlled group. Lenders need to be alert to circumstances that may give rise to such potential controlled group claims, which have been brought both by multiemployer pension plans and by the [PBGC].... Lenders should always be wary of loans to companies that sponsor defined benefit pension plans or that contribute to multiemployer plans." (McGuireWoods LLP, in The Banking Law Journal)
A Surcharge Is Not a Contribution -- At Least Not for Withdrawal Liability
"The [district court] judge reasoned that while the term 'contribution rate' is undefined in ERISA, there is a definition of 'obligation to contribute' that is directly tied to a collective bargaining agreement. The court found that since the surcharge was not part of collective bargaining, and although required under ERISA (through the PPA), it would not be an actual 'contribution.' Based on this decision, it looks like an employer would have the ability to ask the plan to revise its calculation under a Section 4219 request for review." [Bd. of Trustees of the IBT Local 863 Pension Fund v. C&S Wholesale Grocers, Inc., No. 12-7823 (D.N.J. Mar. 19, 2014)] (Fox Rothschild LLP)
Annual Withdrawal Liability Payments Calculated at Highest Contribution Rate for All Groups, Excludes Surcharge
"The district court first held that ERISA's use of 'highest contribution rate' unambiguously means the highest rate at which the employer was required to contribute to the plan rather than a blended rate to reflect a range of contribution rates.... The court rejected, however, the fund's determination to also include the 10 percent surcharge in calculating Woodbridge's annual withdrawal liability payment. The court reasoned that the obligation to contribute for the 10 percent surcharge arose under ERISA, not under the CBAs or applicable labor-management law. Thus, the surcharge did not constitute an 'obligation to contribute' as defined by ERISA." [Bd. of Trustees of the IBT Local 863 Pension Fund v. C&S Wholesale Grocers, Inc., No. 12-7823 (D.N.J. Mar. 19, 2014)] (Hodgson Russ LLP)
Facts About Multiemployer Pension Plan Funding
"This fact sheet explains funding issues in multiemployer pension plans and links to [Pension Rights Center] on-line calculators, which you can use to gauge the impact that possible benefit cuts or the guarantee limits set by the Pension Benefit Guaranty Corporation could have on your multiemployer plan pension." (Pension Rights Center)
[Guidance Overview] PBGC Reduces Regulatory Burdens on Multiemployer Plans
"Plans involved in a merger are required to jointly file a notice with PBGC before the transaction. The final rule shortens the notice period to 45 days from 120 days in cases where a compliance determination isn't requested.... Under current regulations, multiemployer plans are required to provide a series of notices and updates to notices to PBGC, participants, and beneficiaries if they will be insolvent. The final rule ends the requirement for annual updates to the insolvency notice." (Pension Benefit Guaranty Corporation)
[Official Guidance] Text of PBGC Final Regs: Multiemployer Plans; Valuation and Notice Requirements
"This final rule amends the [PBGC's] multiemployer regulations to make the provision of information to PBGC and plan participants more efficient and effective and to reduce burden on plans and sponsors. The amendments reduce the number of actuarial valuations required for certain small terminated but not insolvent plans, shorten the advance notice filing requirements for mergers in situations that do not involve a compliance determination, and remove certain in solvency notice and update requirements." (Pension Benefit Guaranty Corporation)
Can the Teamsters Save Union Pensions?
"[The Western Conference of Teamsters Pension Trust (WCTPT)] is the best funded of 194 pension funds jointly sponsored by employers and local or regional units of the International Brotherhood of Teamsters.... After the crisis the WCTPT used the fund's size to negotiate lower asset management fees.... Even at the height of the 1990s bull market, employers never took a contribution holiday, which was common at that time. The Western Conference’s early decision, led by Beck, to diversify membership rather than build locals solely with truck drivers also helped." (Institutional Investor)
Spring 2014 Report of Results from the Survey of Calendar-Year Multiemployer Plans' 2014 Zone Status
"In 2014, 65 percent of [multiemployer pension] plans are in the green zone, up from 61 percent in 2013. Plans in the yellow zone decreased from 11 percent in 2013 to eight percent in 2014. Plans in the red zone fell by 1 percentage point between 2013 and 2014. The PPA '06 funded percentage rose from 85 percent in 2013 to 88 percent in 2014. This year, 26 percent of plans have a PPA '06 funded percentage of 100 percent or more." (Segal Consulting)
ERISA Anti-Cutback Rule at Heart of Debate on Proposal for Multiemployer Plans (PDF)
"Only plans that are in danger of becoming insolvent ... and which, after making necessary adjustments, will remain solvent, would be eligible for relief under the [National Coordinating Committee for Multiemployer Plans' (NCCMP)] proposal... Amending the anti-cutback rule could also help prop up the PBGC ... The problem with giving trustees the ability to cut retirees' pension benefits is that, 'when you give them the discretion to do so, in many cases they're going to have to use it' [said Karen Friedman, executive vice president and policy director at the Pension Rights Center in Washington, D.C.]." (Bloomberg BNA Pension & Benefits Reporter, via Pension Rights Center)
An Unusual Victory for the Mid-Atlantic Pension Counseling Project
"[J]ust days before Carol expected to receive her first monthly payment, she was told that she wasn't eligible for the benefit after all because her husband's multiemployer plan had been 'terminated by mass withdrawal' before her husband's death.... Because of Carol's plight and that of other similarly-situated widows, legislation has been introduced in the U.S. Congress to close this gap. But the legislative process takes a long time.... Then something unexpected happened.... [A stranger] stepped forward, offering to pay Carol's survivor's benefit out of his own pocket." (Pension Rights Center)
[Guidance Overview] Guide to Withdrawal Liability for Multiemployer Pension Plans Under ERISA (2014 Update)
20 pages. Excerpt: "This paper is intended as a general guide to the withdrawal liability provisions of ERISA, which were added in 1980 by the Multi-Employer Pension Plan Amendments Act (MPPAA) for practitioners and executives. It discusses the MPPAA's background and the operation of its major provisions, with some emphasis on litigation procedures." (Vedder Price)
First Circuit Upholds Trial Court's Reduction of Fee Award to Pension Fund
"While the appellate court commented that this reduction of the lodestar was 'unusually large,' it nevertheless found the trial court's two-pronged rationale for the reduction to be within that court's discretion. First, the fund's victory on the merits was a partial one: it was awarded about $27,000 in damages, having sought nearly $200,000. Second, the trial court noted the initial lodestar amount ($84,657) dwarfed the size of the damage award. The trial court was within its discretion to consider proportionality as one factor in determining the fee award[.]" [Central Pension Fund of the Int'l Union of Operating Engineers and Participating Employers v. Ray Haluch Gravel Co., No. 11-1944P2-01A (1st Cir. Mar. 11, 2014)] (Wolters Kluwer Law & Business)
Plan Returns Cool, Yet Deliver Third Positive Quarter in a Row; Small Plans Bested by Large Plans (PDF)
"Contrary to last quarter, small plans underperformed large plans for the first quarter of 2014 which pulled the median return ... to a lackluster 1.66 percent ... Taft-Hartley Health and Welfare Funds was the lowest performing plan type for the third quarter in a row with a median return of 1.26 percent.... Corporate Funds delivered the largest size spread, with median returns for small versus large Corporate Funds of 1.71 and 2.39 percent, respectively[.]" (Wilshire Associates)
[Guidance Overview] Some Multiemployer Plans Permitted to Apply Windsor Decision Prospectively Only
"In the case of multiemployer defined benefit plans in the yellow or red zones, amendments increasing liabilities (e.g., through benefit increases) generally are not permitted, except that amendments required as a condition for qualification or to comply with other applicable laws are permitted for plans in their funding improvement adoption period or rehabilitation plan adoption period ... The guidance clarifies that amendments required to bring a plan into compliance as of June 26, 2013 with the Windsor decision and subsequent guidance that are effective on that date are permitted amendments during the applicable adoption period, as well as permitted amendments for plans that are in their funding improvement period or rehabilitation period ... In contrast, amendments that are optional, or that apply the Windsor decision before June 26, 2013, are not permitted amendments." (Segal Consulting)
Notes from Actuaries' 'Intersector Group' Meeting with PBGC, March 12, 2014 (PDF)
7 pages. Excerpt: "Twice a year the Intersector Group meets with representatives of the [PBGC] to dialogue with them on regulatory and other issues affecting pension practice.... PBGC is setting up a mechanism to review regulations once every five years for actuarial and economic assumptions that affect benefit amounts or liability assessments ... The first issue under review is how PBGC sets interest rates based on the annuity survey.... Providing additional guidance on vested benefits is pretty far down PBGC's priority list.... At the 2014 Enrolled Actuaries Meeting, PBGC will describe the proposals that have been made [for multiemployer plans] and the agency's analysis of those proposals. PBGC's current object is to provide data to promote a robust and informed debate." (American Academy of Actuaries)
Remarks on Multiemployer Pension Reform by Congressman John Kline
"The multiemployer pension system is a ticking time bomb that will inflict a lot of pain on homes and workplaces. According to the best information available, multiemployer plans have $818 billion in benefit liabilities yet only $397 billion in assets, which means collectively plans face a $421 billion funding shortfall. The [PBGC] warns its multiemployer pension program will be insolvent in fewer than 10 years, thanks to more obligations and fewer resources.... If we do nothing, benefits will be cut. Let me repeat that: If we do nothing, benefits will be cut. It's only a question of when and by whom." (Committee on Education and the Workforce, U.S. House of Representatives)
District Court Holds a Surcharge Is Not a Contribution for Purposes of Determining a Withdrawn Employer's Payment Schedule
"While 'contribution rate' is undefined, ERISA defines 'obligation to contribute' as an obligation to contribute arising 'under one of more collective bargaining (or related) agreements,' or 'as a result of a duty under applicable labor-management relations law.' [ERISA section 4212(a).] Given this, the court found that a surcharge required by the PPA arises under ERISA, not a collective bargaining agreement or labor-management relations law. Thus, the surcharge could not be considered part of the contribution rate." [Board of Trustees of the IBT Local 863 Pension Fund v. C&S Wholesale Grocers/Woodbridge Logistics LLC, No. 12-7823 (D.N.J. Mar. 19, 2014)] (Seyfarth Shaw LLP)
Unpaid Employer Contributions as Plan Assets: Expansion Of Liability Under ERISA
"In a distinct trend, federal courts have found that, depending on the text of the underlying plan documents, unpaid employer contributions due under a CBA may be viewed as plan assets, such that the representatives of an employer who exercise fiduciary control over those plan assets can be held individually liable for the unpaid amounts (together with interest and penalties) under ERISA. These cases will no doubt help plan trustees and administrators collect monies owed to the plan. They also should serve as cautionary warnings to contributing employers to ensure that they fully understand the obligations that they are undertaking when they agree to contribute to ERISA funds pursuant to CBAs." (Proskauer Rose LLP)
[Opinion] Jobs, Income Inequality and Taft-Hartley Benefit Plans (PDF)
"Necessary policy and regulatory changes include permitting the plans to participate directly in the health-care exchanges, allowing low-wage plan participants access to ACA subsidies and giving the retirement plans greater flexibility to adjust benefits and contribution rates.... Federal policy is chiefly focused on compliance issues for the plans, with little effort to encourage their growth in spite of their proven ability to train and maintain workforces. A better approach would be for the federal government to provide the financial resources necessary to address the plans' challenges, both through tax benefits to health-care plans and regulatory relief to pension plans." (Kraw Law Group, via Bloomberg Pension & Benefits Daily)
Key Findings from the Survey of Calendar-Year Multiemployer Plans' 2014 Zone Status Under PPA '06
"The percentage of calendar-year plans in the green zone is 65 percent, up from 61 percent in 2013. The percentage of plans in the yellow zone is 8 percent, down from 11 percent one year earlier. The percentage of plans in the red zone is 27 percent, which is similar to last year's percentage (28 percent). The average Pension Protection Act of 2006 funded percentage as of January 1, 2014 is 88 percent, which is an increase from 85 percent in 2013." [Results are summarized in a one-page infographic.] (Segal)
Once Thought Secure, Multiemployer Pensions Teeter and Fall
"The pensions of millions of Americans are being threatened because of trouble in a part of the retirement world long considered so safe that no one gave it a second thought.... Multiemployer pensions are not only backed by federal insurance, but they also were thought to be even more secure than single-company pensions because when one company in a multiemployer pool failed, the others were required to pick up its 'orphaned' retirees." (The New York Times; subscription may be required)
[Guidance Overview] Multiemployer Pension Plans May Need Amendments to Comply with IRS Guidance on Same-Sex Marriage Provisions
"The Notice requires that amendments be adopted by a multiemployer pension plan as follows: [1] If the plan's terms with respect to the requirements of section 401(a) define a marital relationship by reference to section 3 of DOMA or are otherwise inconsistent with the outcome of Windsor or the guidance in Rev. Rul. 2013-17 or the Notice, then an amendment to the plan that reflects such outcome or guidance must be adopted. [2] An amendment is required if a plan sponsor chooses to apply the rules with respect to married participants in a manner that reflects the outcome of Windsor for a period before June 26, 2013. The amendment must specify the date as of which, and the purposes for which, the rules are applied in this manner.... For a multiemployer pension plan, an amendment required in [1] is not subject to the requirements of section 432 of the Code ... while an amendment required in [2] is subject to those requirements." (Cary Kane ERISA Lawyer Blog)
[Guidance Overview] PBGC Proposed Regs Encourage Rollovers from DC Plans to DB Plans
"The PBGC wants to increase the retirement plan options available to employees who are participating in defined contribution plans. The proposed regulations promote this goal by providing guarantees to defined contribution plan participants who roll over their plan benefits to a pension plan that is later terminated by the PBGC." (Practical Law Company)
Multiemployer Pension Protection Version 2.0: More Robust Legislation Needed to Address Plans' Funding Challenges
"Failure to extend the PPA would have 'detrimental effects' on both multiemployer plans that are operating under recovery programs, and those that might eventually need to do so, the [American Academy of Actuaries' Pension Practice Council] says.... It cites several challenges driving the need for a more robust successor multiemployer plan funding regime, including: [1] The exhaustion of funds that faces the most severely underfunded plans.... [2] Financial jeopardy for the PBGC's multiemployer insurance program itself, caused by the looming insolvency of many multiemployer plans and PBGC's current deficit." (American Academy of Actuaries)
[Opinion] Text of Comments by U.S. Chamber of Commerce to PBGC on Multiemployer Plans; Proposed Valuation and Notice Requirements (PDF)
"This proposed rule acknowledges this reality and eliminates notice requirements where the administrative burdens and costs outweigh the usefulness of the information provided. As such, we appreciate the PBGC's review of these notice requirements and recognition that certain requirements are not furthering the goals of the PBGC or protecting the interests of participants." (U.S. Chamber of Commerce)
Another Way to Become Personally Liable to a Multiemployer Plan
"[A federal district] court concluded that the founders and sole officers of a cleaning company violated their fiduciary duties under ERISA by failing to remit contributions to a multiemployer plan. The plan's collection policy specifically provided that 'all money owed to the trust, which money (whether paid, unpaid, segregated or otherwise traceable, or not) becomes a trust asset on the due date.' Because of that statement, the court determined that the contributions became trust assets from the date they were owed and that the officers of the company who chose to pay other company obligations were personally liable for the delinquent contributions. That liability attached even though the business was operated in corporate form." [Trustees of the Construction Industry and Laborers' Health & Welfare Trust v. Archie, No. 2:12-CV-225 (D. Nev. Mar. 3, 2014)] (Stinson Leonard Street)
GASB Declines to Delay Implementation Date of Pension Standards
"The Governmental Accounting Standards Board [has] voted unanimously not to delay the implementation date of GASB Statement No. 68, Accounting and Financial Reporting for Pensions. The requirements of Statement 68 are effective for periods beginning after June 15, 2014. The request to the Board for an indefinite delay in implementation date came from stakeholder groups that asserted that such a delay is necessary until related auditing procedures have been implemented for a sufficient period. The concern was expressed that governments in multiple-employer pension plans will receive a modified audit opinion on their financial statements in the interim." (Governmental Accounting Standards Board)
2013 PPA 'Zone' Status of Calendar-Year Multiemployer Plans
"In 2013, a solid majority of plans -- 59 percent -- were in the green zone. This percentage represents a very slight decline from 2012 (60 percent). The percentage of plans in the yellow zone was the same for 2013 as for 2012: 14 percent. Between 2012 and 2013, the percentage of plans in the red zone increased by 1 percentage point, from 26 percent to 27 percent. The average PPA '06 funded percentage for all surveyed plans was 84 percent in 2013, the same percentage as in 2012." (Segal)
[Guidance Overview] Final Regs Implementing ACA 90-Day Waiting Period Limit Include Multiemployer Example
"The example refers to a multiemployer plan that aggregates hours in a calendar quarter. If enough hours are earned in that quarter, the plan provides coverage on the first day of the next calendar quarter. The final rule notes that such a plan has an eligibility provision that is designed to accommodate a unique operating structure and, therefore, is not considered to be designed to avoid compliance with the 90-day waiting period limitation." (Segal)
Funding Status Does Not Preclude Withdrawal from Multiemployer Plan
"Under [PPA '06], if a pension fund is in critical status, the trustees have to adopt a rehabilitation plan. The rehabilitation plan usually increases contributions and adjusts benefits so that the plan will eventually reduce its underfunding. To some extent, the rehabilitation plan assumes that the number of contributing employers will remain constant. So a withdrawing employer can cause some frustration but being in critical status with a rehabilitation plan does not lock an employer into the plan." (Fox Rothschild LLP)
ERISA Successorship Test Meant 'Interest' Was Transferred Between Predecessor and Successor Companies
"The appellate court concluded that the facts adopted by the district court, including that the successors retained most of the predecessor's employees, that all entities operated out of the same location, and that there was substantial overlap in customer lists, among other facts, created a clear picture of notice and continuity, satisfying the ERISA test. Thus, the successor companies could be substituted as judgment debtors in a lawsuit to recover delinquent pension fund contributions." [Sullivan v. Running Waters Irrigation, Inc., No. 13-1308 (7th Cir. Jan. 9, 2014)] (Wolters Kluwer Law & Business)
[Opinion] Multiemployer Pension Plans at Risk Unless Congress Acts
"In addition to the recommendations from the [National Coordinating Committee for Multiemployer Plans], the Chamber believes that additional reforms are needed to address employer concerns. For example, we recommend that limitations be placed on the amount of withdrawal liability that an employer can assume....[M]any of our members [have received] estimates of withdrawal liability that exceed the net worth of the company. Clearly, this is an outcome that was never contemplated when withdrawal liability was implemented and should be rectified." (U.S. Chamber of Commerce)
Reporting and Disclosure Guide for Multiemployer Plans, February 2014 (PDF)
57 pages, in the form of useful charts. Sections include: [1] All ERISA plans; [2] Defined benefit and defined contribution plans; [3] Defined benefit plans only; [4] Defined contribution plans only; and [5] Group health plans. (Buck Consultants)

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