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Multiemployer plans

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Kroger, UPS Challenge Central States Reduction Plan
"Current and former plan participants of Kroger Co., Cincinnati, last week sued the $17.8 billion Teamsters Central States over the rescue plan.... The Teamsters union [had] negotiated a proposal to remove Kroger participants from Central States and create a new plan for Kroger employees, with the company agreeing to absorb the increased withdrawal liability, according to the federal court complaint. Because Central States trustees 'flatly refused to consider' after deliberating for just five days, the plaintiffs are asking the court to order reconsideration of the proposal, to appoint an independent fiduciary to judge the idea and to negotiate an arrangement with Kroger." (Pensions & Investments)
UPS Warns of $3.8 Billion Cost If U.S. Backs Pension Benefit Cut
"The cost would be triggered if the U.S. Treasury Department approves benefit cuts to protect the solvency of the Central States Pension Fund, UPS executives said Thursday. UPS pulled out of the fund in 2007 but agreed to make up any losses its remaining members experienced. The world's largest package-delivery company may have to record a charge of $3.2 billion to $3.8 billion if the government approves the benefit cuts, executives said in an earnings conference call. UPS plans to oppose such a move by the Treasury." (Bloomberg)
Treasury Issues Final MPRA Suspension Regulations
"The final regulations make changes and clarifications to many specific provisions of the proposed regulations. Examples include: [1] Addressing numerous actuarial assumption and projection issues; [2] Clarifying that the plan must pay for actuarial, legal, and communication expenses of the retiree representative; [3] Adopting a new procedure permitting trustees, with the Treasury's approval, to withdraw and resubmit a revised suspension application; [4] Adding new procedural requirements for the participant vote. The final regulations do not change the statutory requirement that those who do not vote are counted as voting in support of a suspension." (Segal Consulting)
Senate Democrats Urge Scrutiny of Central States Rescue Plan (PDF)
"The entire Democratic Party Senate caucus has urged the Treasury Department to closely scrutinize the Central States pension fund's rescue proposal.... The senators wrote that the fund's retirees 'contributed to their pensions over the course of many years -- making the sacrifices of giving up better pay or improved benefits, or even staying in a physically exhausting job that took them away from their families -- so they could earn a pension that they believed could never be taken away.' " (BNA Pension & Benefits Reporter, via Pension Rights Center)
Kroger Workers, Retirees Sue Failing Multiemployer Pension Fund, Trustees
"A group of participants in the Central States Pension Fund is suing the fund, its administrators and trustees for breach of fiduciary duty. The move follows a nationwide movement of retirees who have taken to protesting the troubled fund, which is set to run out of money in 2026. The plaintiffs are current and retired warehouse workers at Kroger Co., hailing from Michigan, Illinois and Kansas, whose retirement funds are invested in the Rosemont, Illinois-based Central States Pension Fund." (
[Official Guidance] Text of IRS Final Regs: Suspension of Benefits Under the Multiemployer Pension Reform Act of 2014
133 pages. ""The preamble to the June 2015 temporary regulations states that it is expected that no application proposing a benefit suspension will be approved prior to the issuance of final regulations, and that, if a plan sponsor chooses to submit an application for approval of a proposed benefit suspension before the issuance of final regulations, then the plan sponsor may need to revise the proposed suspension (and potentially the related notices to plan participants) or supplement the application to take into account any differences in the final regulations ... [T]he provisions of the June 2015 proposed regulations and the September 2015 proposed regulations ... are adopted by this Treasury decision, subject to certain changes ... This Treasury decision also removes the temporary regulations under 432(e)(9) that were published in June 2015 and September 2015. This Treasury decision does not contain final action on the February 2016 regulations....

"[T]the final regulations clarify that a suspension can take into account individual-level contingencies (such as retirement, death, or disability) for individuals who have not commenced benefits before the effective date of the suspension.... These final regulations define the term plan sponsor to mean the association, committee, joint board of trustees, or other similar group of representatives of the parties that establishes or maintains the multiemployer plan. However, in the case of a plan described in section 404(c), or a continuation of such a plan, the term plan sponsor means the association of employers that is the employer settlor of the plan ...

"The final regulations implement the requirement that a retiree representative must be selected for a plan with 10,000 or more participants. For purposes of determining whether a plan has 10,000 or more participants, the final regulations provide that the number of participants is the number reported on the most recently filed Form 5500... The final regulations also provide that the plan sponsor must select the retiree representative at least 60 days before the plan sponsor submits an application to suspend benefits and that the retiree representative must be a plan participant who is in pay status and may or may not be a plan trustee.... The final regulations require that, upon request, the plan sponsor must promptly provide the retiree representative with relevant information (such as plan documents and data) that is reasonably necessary to enable the retiree representative to perform the retiree representative's role, which includes, for example, the retiree representative's attendance at trustee meetings at which the suspension design is being developed.... The final regulations clarify that the plan must pay other reasonable expenses incurred by the retiree representative, such as any reasonable expenses incurred in communicating with the retired and deferred vested participants and beneficiaries of the plan about the proposed suspension ...

"Under the final regulations, a plan sponsor may not suspend benefits unless the plan sponsor makes initial and annual determinations that the plan is projected to become insolvent unless benefits are suspended, although all reasonable measures to avoid insolvency have been taken. These determinations are based on the non-exclusive list of factors described in section 432(e)(9)(C)(ii).... The final regulations provide that the plan sponsor must maintain a written record of its annual determinations in order to satisfy the annual plan sponsor determinations requirement....

"The final regulations contain new rules to clarify when different groups of participants and beneficiaries are treated as separate categories or groups for purposes of applying the equitable distribution requirement in the case of a proposed suspension of benefits under which an individual's benefits after suspension are calculated under a new benefit formula (rather than by reference to an individual's benefits before suspension)....

"The final regulations prescribe rules implementing the statutory notice requirements in section 432(e)(9)(F) that are generally the same as the rules set forth in the 2015 regulations.... The final regulations generally adopt the provisions of the 2015 regulations under which the plan sponsor of a plan in critical and declining status for a plan year that seeks to suspend benefits must submit an application for approval of the proposed suspension of benefits to the Treasury Department.... The final regulations provide that a complete application will be deemed approved unless, within 225 days after a complete application is received, the Treasury Department notifies the plan sponsor that its application does not satisfy one or more of the requirements for approval.... An application must be submitted electronically in a searchable format. The final regulations provide that, after receiving a submission, the plan sponsor will be notified within two business days whether the submission constitutes a complete application....

"The final regulations provide that, in any case in which a suspension of benefits with respect to a plan is made in combination with a partition of the plan under section 4233 of ERISA, the suspension of benefits is not permitted to take effect prior to the effective date of the partition....

[T]hese final regulations clarify that eligible voters include terminated vested participants and retirees (but not alternate payees).... These final regulations set forth rules regarding the ballot package that is sent to eligible voters and the plan sponsor's responsibilities relating to ballots and related communications to participants and beneficiaries....

These regulations are effective on [April 28, 2016, the date they are to be published in the Federal Register]."

(Internal Revenue Service [IRS])

[Official Guidance] Text of IRS Rev. Proc 2016-27: Application Procedures for Approval of Benefit Suspensions for Certain Multiemployer Defined Benefit Pension Plans Under Section 432(e)(9) (PDF)
32 pages. "This revenue procedure contains revised procedures for applications for a suspension of benefits under a multiemployer defined benefit pension plan that is in critical and declining status under Section 432(e)(9). These procedures replace the procedures set forth in Rev. Proc. 2015- 34, 2015- 27 I.R.B. 1218.

"The procedures set forth in this revenue procedure must be followed for applications submitted on or after April 26, 2016....

"The model notice in Appendix A of this revenue procedure replaces the model notice attached to Rev. Proc. 2015-34 for notices with respect to applications submitted under this revenue procedure.... As noted in Rev. Proc. 2015-34, plan sponsors that submit an application under that revenue procedure may need to revise the proposed suspension or supplement the application to take into account the final regulations and this revenue procedure."

(Internal Revenue Service [IRS])

[Official Guidance] Text of Treasury Department Announcement of Multiemployer Pension Plan Application to Reduce Benefits
"The Board of Trustees of the Iron Workers Local Union 16 Pension Fund, a multiemployer pension plan, has submitted an application to Treasury to reduce benefits under the plan in accordance with the Multiemployer Pension Reform Act of 2014 (MPRA). The purpose of this notice is to announce that the application ... has been published on the website of the Department of the Treasury ... and to request public comments on the application from interested parties, including contributing employers, employee organizations, and participants and beneficiaries of the Iron Workers Local Union 16 Pension Fund. Comments must be received by June 9, 2016." (U.S. Department of the Treasury)
Iron Workers Local 16 Pension Fund Application for Benefit Suspension
"The Iron Workers Local Union 16 Pension Fund application proposing benefit suspensions [the full text of which is available at the linked page] ... is currently being reviewed and the review is expected to take several months. IW Local 16's representative has advised [Treasury] that individualized participant notices were sent via first class mail at end of March 2016." (U.S. Department of the Treasury)
Sun Capital Decision May Affect Structuring of Private Investment Funds
"Although the Sun Capital decision was limited to multiemployer pension plan liability, and was likely motivated in part by policy considerations unique to multiemployer pension plans, the legal principles ... may extend to other pension liability (e.g., unfunded liability under a traditional defined benefit pension plan), as well as the application of the coverage and discrimination rules applicable to 401(k) and other defined contribution plans that are dependent upon 'controlled group' status." (Goodwin Procter)
[Guidance Overview] 2015 Annual Funding Notice: PBGC Filing Information
"Multiemployer plans may continue to file the 2015 AFN and other notices -- 'zone' notices, PBGC notices for plans 'avoiding yellow' or 'not electing early red' as added by the Multiemployer Pension Reform Act of 2014, and notices of amortization extension applications under Section 431 of the Internal Revenue Code (together, Other Notices) -- by e-mail ... or mail ... Alternatively, multiemployer plans may, but are not required to, file the AFNs and Other Notices with PBGC through the new e-filing portal, launched by the PBGC in December of last year." (Segal Consulting)
Multiemployer Pension Funding Study: Spring 2016 (PDF)
"The aggregate funded percentage for multiemployer plans is estimated to be 75% as of December 31, 2015, compared with 79% as of June 30, 2015. For most multiemployer pension plans, estimated 2015 investment experience was flat or slightly negative, far below expected returns. Over one-half of the total underfunding for multiemployer plans continues to be attributable to plans that are less than 65% funded. Of the nearly 200 critical plans with 2014 information available, about 40% are projected to be insolvent at some point." (Milliman)
Central States Teamsters Pension Fund Returns -0.81% in 2015
"For the three years ended Dec. 31, the ... pension fund, whose assets totaled $16.1 billion as of Dec. 31, returned an annualized 8.06% ... Northern Trust Asset Management, which is named as fiduciary of the pension fund and oversees 50% of the fund's assets in an active management style, reported ... [an] equity composite return [of] -2.73%, outperforming its -3.04% custom benchmark return, while Northern Trust's fixed-income composite return was -4.49%, underperforming its -3.4% custom benchmark return." (Pensions & Investments)
[Opinion] Karen Friedman's Speech to the Protect Our Pensions Rally (April 14, 2016)
"[T]he Treasury Department has good reason to REJECT the Central States application because it flunks every condition required under the law. The application unfairly distributes benefit cuts, and most important, the cuts won't save the plan. The Treasury Department should JUST SAY NO." (Pension Rights Center)
Retirees Rally at the Capitol, Protesting Pension Cuts
"Some 400,000 retirees who worked in the trucking, parcel delivery and grocery supply industries face drastic pension cuts on July 1... [T]he outrage focused on the seeming lack of political will from Congress to rescue a pension plan that had promised retirement benefits to middle-class workers, even when the same Congress was willing to bail out major financial institutions during the 2008 financial crisis. The workers blamed some of the same Wall Street banks that needed bailouts for the poor investment decisions that sent the Central States Pension Fund hurtling toward insolvency." (The New York Times; subscription may be required)
Pension Plan Withdrawal Liability Imposed on Investor Private Equity Funds
"[P]rivate equity funds may want to ... [1] avoid multiple co-investments with the same fund entities, [2] limit the investment administration and managerial rights granted to the fund entities, [3] avoid substantively identical governing documents for co-investing funds, [4] have the funds co-invest with different outside entities and [5] seek outside funds with independent ownership and management to become minority owners in a portfolio company.... Most significantly, private equity funds will want to be especially aware of any unfunded pension liability that a potential portfolio company may have." [Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, No. 10-10921 (D. Mass. Mar. 28, 2016)] (Holland & Knight)
Sun Capital: An Opportunity to Consider Fund Tax Structures (PDF)
"The court chose to look beyond the 'organizational formalities' employed by the funds and to assert that ... state law forms cannot be elevated over substance when it comes to analyses under ERISA.... The Sun Capital court's 'common control' analysis is interesting in that it amounts to what is essentially a conclusion under the tax law regarding a de facto partnership; yet, the case is not a tax case, the [IRS] is not a party and there is no reason to believe the IRS has ever or will ever assert a partnership-in-fact under these facts." (King & Spalding)
Private Equity Funds, Controlled Groups, and Multi-Employer Plan Withdrawal Liability
"Sun Capital upends much of the conventional wisdom about private equity investments in portfolio companies with multi-employer pension exposure. While it's too soon to know for certain, this could prove to be a seminal case for private equity investments with consequences in areas far removed from pension liability." (Mintz Levin)
2013 PBGC Data Tables: Multiemployer Supplement (PDF)
10 charts illustrate Zone Status over Time (Participant); Zone Status over Time (Plans); Direction of Zone Status Changes; Zone Status and Tests for Declining Status; and Administrative Expenses (across various parameters). (Pension Benefit Guaranty Corporation [PBGC])
DB Pension Plans: Hungry Octopus Just Took a $4.5 Million Bite Out of Private Equity
"This decision ... raises significant concern about whether this rationale will be adopted by other jurisdictions, and how far fund multiemployer plan trustees and the courts will go to find prey to feed a multiemployer plan when a participating employer cannot satisfy its withdrawal liability. Further, given that the PBGC regulation also applies to single employer pension plans, this decision raises concern about how the PBGC might react to this decision, and how far the PBGC may go to seek prey for underfunded single employer pension plans it has taken over." [Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, No. 10-10921 (D. Mass. Mar. 28, 2016)] (Tucker Ellis LLP)
[Guidance Overview] 2016 Key Administrative Dates and Deadlines for Calendar-Year Multiemployer Defined Benefit Plans (PDF)
Detailed 3-page chart of notice and reporting requirements and their deadlines. (Milliman)
ERISA's Two-Pronged Test for Pension Plan Withdrawal Liability
"Two key questions drive the court's determination of whether a private equity fund will be saddled with the ERISA pension liability of a bankrupt portfolio company: [1] whether the fund is engaged in a 'trade or business'; and [2] whether the fund is under 'common control' with or has a 'controlling interest' of at least 80% in the portfolio company." [Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, No. 10-10921 (D. Mass. Mar. 28, 2016)] (Winston & Strawn, LLP)
PBGC Reports Multiemployer Program Likely to Be Insolvent in 10 Years Without Large Premium Increases
"The multiemployer insurance program's deficit stood at $42.4 billion as of September 30, 2014, with assets of only $1.8 billion compared to liabilities of $44.2 billion.... [PBGC] found a greater than 50% chance that it would run out of money by 2025 and a 91% chance that it would run out of money by 2032. This is the result even if failing plans reduce benefits to the fullest extent allowed by MPRA." (Cheiron)
District Court Holds That Private Equity Funds Were Part of Same Controlled Group for Purposes of Pension Liability
"Should this decision be upheld or followed by other courts, it would reshape existing practice in the private equity industry. Investors would no longer be able to rely on the corporate organizational form to ensure that no controlled group exists for purposes of pension liabilities. Rather, each investment would need to be analyzed to determine whether there exists an identity of interest and unity in decision-making amongst the various investors sufficient to give rise to a partnership-in-fact under the nebulous factors articulated by the court." [Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, No. 10-10921 (D. Mass. Mar. 28, 2016)] (Winston & Strawn LLP)
Court Ruling Signals Potential ERISA Liability for Private Equity Fund Sponsors (PDF)
"The district court's application of the First Circuit's new 'investment plus' standard is a noteworthy and potentially troubling development for PE sponsors ... The court's allusion to 'the larger ecosystem of Sun Capital entities' in the course of its analysis suggests a potentially expansive view of the 'investment plus' standard, one that could have a significant impact on PE fund operations, particularly if applied beyond the First Circuit." [Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, No. 10-10921 (D. Mass. Mar. 28, 2016)] (Skadden, Arps, Slate, Meagher & Flom LLP)
Text of PBGC Report to Congress: Multiemployer Fund Likely to Be Exhausted by 2025 (PDF)
"PBGC projects that current premiums ultimately will be inadequate to maintain benefit guarantee levels.... The multiemployer program had a net deficit of $42.4 billion as of the end of FY 2014, the result of liabilities of $44.2 billion and assets of $1.8 billion....

"[There is more than a 40 percent likelihood that the assets of PBGC's multiemployer insurance program will be exhausted by 2024 (43% if no plans elect to suspend or partition, 41% using best estimate assumptions of future suspensions and partitions) and over a 90 percent likelihood of exhaustion by the end of the projection period (93% if no plans elect to suspend or partition, 92% using best estimate assumptions of future suspensions and partitions).

"It is more likely than not that PBGC's multiemployer fund will be exhausted by 2025, whether or not plans make use of suspension and partition."

(Pension Benefit Guaranty Corporation [PBGC])
Fate of 400,000 Teamster Pensions Rests in Ken Feinberg's Hands
"[Special Master Kenneth Feinberg], 70, who also helped adjudicate claims in the Deepwater Horizon oil spill disaster and will soon oversee a fund to compensate victims of state-sponsored terrorism, has repeatedly reminded retirees that the law requires him to answer three big questions: Did Central States exhaust all other alternatives? Are the benefit cuts equitable? And will they preserve the fund?" (Bloomberg)
Private Equity Fund Liable for Portfolio Company's Pension Contributions
"[T]he court ruled that the Sun Capital entities should be treated as a joint venture even though they were not a partnership-in-fact.... Although the ruling does not implicate tax rules ... if the IRS [were to take] a similar position, the consequences [could] extend to minimum coverage and nondiscrimination testing for retirement plans of portfolio companies, because the same common control rules apply to those tests." [Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, No. 10-10921 (D. Mass. Mar. 28, 2016)] (RSM US)
Private Equity Funds Liable to Multiemployer Pension Plan
"Two private equity funds are jointly liable for $4.5 million in pension fund debts owed by one of the companies they own, a federal judge in Massachusetts ruled. This decision is a blow to the private equity community, which may be forced to reevaluate the risks associated with investing in companies that have obligations to multiemployer pension plans.... The Sun Capital funds argued that they each failed to meet the 80 percent ownership threshold required by the statute, because one fund owned 70 percent of the company that owned Scott Brass, and the other fund owned 30 percent. However, [the judge] found the two Sun Capital funds combined to create a joint venture or partnership under federal law, and that 'partnership-in-fact' was a trade or business that owned the entirety of Scott Brass." [Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, No. 10-10921 (D. Mass. Mar. 28, 2016)] (Bloomberg BNA)
Text of Federal District Court Opinion: Private Equity Funds Jointly Liable for Multiemployer Pension Plan Withdrawal Liability (PDF)
44 pages. "[T]he 80 percent ownership rule appears to provide a roadmap for exactly how to contract around withdrawal liability. In this case, for example, the Funds forthrightly admit that an important purpose in dividing ownership of portfolio companies between multiple funds is to keep ownership below 80 percent and avoid withdrawal liability.... The LLC appears to be better understood as a vehicle for the coordination of the two Sun Funds -- and an attempt to limit liability -- than as a truly independent entity. It is another layer in a complex organizational arrangement. Under the MPPAA framework, which looks past the formal separation of entities, it is not clear why there should be any difference if the Sun Funds invest in Scott Brass, Inc. directly, invest through an intermediary holding company, or invest through both an intermediary holding company and an intermediary LLC." [Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, No. 10-10921 (D. Mass. Mar. 28, 2016)] (U.S. District Court for the District of Massachusetts)
[Official Guidance] Text of Treasury Department Announcement of Multiemployer Plan Application to Reduce Benefits and Partition Plan
"The Board of Trustees of the Road Carriers -- Local 707 Pension Fund, a multiemployer pension plan, has submitted an application to Treasury to reduce benefits under the plan in accordance with [MPRA]. The purpose of this notice is to announce that the application ... [will be] published on the website of the Department of the Treasury, and to request public comments on the application from interested parties, including contributing employers, employee organizations, and participants and beneficiaries of the ... Pension Fund to reduce benefits under the plan. Road Carriers -- Local 707 Pension Fund also submitted to PBGC an application to partition the plan. Comments must be received by April 29, 2016." (U.S. Department of the Treasury)
[Official Guidance] Text of PBGC Notice: Pendency of Request for Approval of Alternative Arbitration Procedure Submitted by American Arbitration Association (PDF)
"In 1985 ... PBGC approved the 1981 Multiemployer Pension Plan Arbitration Rules for Withdrawal Liability Disputes (MPPAR), an alternative arbitration procedure sponsored by the International Foundation of Employee Benefit Plans and administered by [the American Arbitration Association (AAA)].... Other than significant changes to the Administrative Fee Schedule, the 2013 MPPAR are identical to the 1986 MPPAR that PBGC previously approved.... AAA has requested PBGC's approval of the updated 2013 Fee Schedule[.]" (Pension Benefit Guaranty Corporation [PBGC])
Central States Retirees: A Wave of Organized Wrath
"A 1982 consent decree, designed to rid the Fund of corruption, turned over management of much of its assets to Wall Street firms such as Goldman Sachs. These firms collected more than a quarter-billion dollars in fees just in 2009-2013. For a while, the Fund was flush -- so flush that the IRS ordered the trustees to either take in less money or pay out more. They started sending retirees a 13th check each year, and later instituted '30-and-Out' and then '25-and-Out.' Retirees made plans accordingly, not knowing that their union president and UPS would impoverish the Fund[.]" (Labor Notes)
Retirees Protest Proposed Pension Cuts
"Just this past weekend, retirees in five states held coordinated actions to call attention to the cuts authorized by [MPRA].... These events come on the heels of testimony from Rita Lewis, who spoke before the Senate Finance Committee about the 'shameful and cruel cuts' authorized by MPRA.... [This] was the first congressional hearing held that provided an overview on the impact MPRA would have on retirees, their families and the overall economy." (Pension Rights Center)
Treasury Is Listening to Retiree Voices on Proposed Pension Cuts
"Through the comments we've received online, our weekly phone calls and these public sessions across the country, we've heard from a cross section of the approximately 400,000 plan participants in the Central States Pension Plan.... We are required to decide on the Central States application, in consultation with the [DOL and PBGC] by May 7, 2016. Congress has given us a very specific task -- review the application and determine if it meets the requirements set out in the law that Congress passed. If it does, we are required by Congress to approve it." (U.S. Department of the Treasury)
SOA Multiemployer Pension Plan Contribution Analysis, 2009-2014 (PDF)
25 pages. "The system's aggregate contributions increased on average 6.9% per year, significantly outpacing the average inflation rate of 2.1% per year. At the same time, contributions for a large percentage of plans were insufficient to prevent their unfunded liabilities from growing, let alone to close their funding gaps.... For 2009, aggregate contributions were 8.75 times the aggregate [minimum required contributions (MRCs)], and contributions for 94% of plans exceeded their MRCs. By 2013, aggregate contributions were twice the aggregate MRC, and contributions for 89% of plans exceeded their MRCs." (Society of Actuaries)
[Guidance Overview] IRS Accepts 55 and Older NRAs in Multiemployer Plans
"The [IRS has] released an internal memorandum [dated February 23, 2016] instructing its agents to accept normal retirement ages (NRAs) that are 55 or older in multiemployer plans, provided that the plan is maintained pursuant to at least one collective bargaining agreement. The memorandum is described as interim guidance and is directed to IRS agents reviewing determination letters and conducting audits." (Segal Consulting)
[Opinion] What Congress Can Do to Help People in Multiemployer Pension Plans
"MPRA is -- and should be -- controversial.... Did distressed multiemployer plans cause their own distress? No.... Is the right response for Congress to repeal MPRA -- or instead to find additional ways to preserve plans? ... PBGC can preserve plans by financial assistance for mergers and 'partitioning'.... But PBGC can't do so if it is underfunded.... To preserve the multiemployer system, PBGC must be adequately funded.... New plan designs can help, but could also harm." (Former PBGC Director Joshua Gotbaum, for The Brookings Institution)
Treasury's Decision on Central States Plan Could Trigger Cuts For Other Plans
"When the Treasury Department delivers its ruling on proposed pension cuts for truckers in May, the cargo for a wide range of retirees could be Pandora's box, warned Pension Rights Center Policy Director Karen Friedman. A decision to let the Central States Pension Fund Trustees cut benefits for 273,000 existing and future retirees may embolden state and local governments to try to reduce payouts as well, she predicted." (Financial Advisor)
Ninth Circuit Joins Seventh Circuit in Holding That Successor May Be Liable for Predecessor's Withdrawal Liability
"Like the Seventh Circuit, the Ninth Circuit adopted a broad view of 'successor liability' for purposes of employment law -- broader than the traditional four tests under state law -- and found that a successor employer can be liable for its predecessor's MPPAA withdrawal liability, so long as the successor: [1] had notice of the liability, and [2] substantially continued the operation of the business.... [T]he reverberations of this case may be felt by unwary asset purchasers and employers, particularly those in the construction industry." [Resilient Floor Covering Pension Trust Fund Bd. of Trustees v. Michael's Floor Covering, Inc., No. 12-17675 (9th Cir. Sept. 11, 2015)] (Epstein Becker Green)
Why the Coming Cuts to Teamster Pensions Deserve More National News Coverage
"Every Monday, Kenneth Feinberg, the appointed special master for the program, holds listening sessions by phone with retirees and others across the country.... [In] a recent session, retirees were angry and frustrated. One 66-year-old who spent his career hauling cars across the country said he was going to lose $2,000 a month. 'I am willing to take a cut, but not 68 percent,' he said. Others said they had disabilities arising from the job. A 74-year-old in bad health told listeners he was facing a cut of $1,700 a month. 'The media is going to have to get involved,' said one caller. 'Eventually it is going to have to get out and tell about our dilemma.' " (Columbia Journalism Review)
Reduced Interest Rate Assumptions by Multiemployer Pension Plans Dramatically Increase Employer Withdrawal Liability
"Some [multiemployer] pension plans ... are setting up two sets of numbers and interest rate assumptions: [1] an extremely low rate using the PBGC long-term rate of about 3.30 percent, and [2] a higher assumed rate of return of 7 to 8 percent based on historical investment returns and future projections.... [This] allows these plans to report a higher funding ratio of assets to plan liabilities, but also to maximize the withdrawal liability for the employers.... The plans are not required to notify the employers prior to or even after interest rate changes are made." (Ford & Harrison LLP)
Present Law, Data, and Selected Proposals Relating to Multiemployer DB Plans
84 pages. "This document ... provides a discussion of present law and data relating to retirement plans generally and to multiemployer defined benefit plans in particular, as well as descriptions of selected proposals relating to multiemployer plans." (Joint Committee on Taxation [JCT], U.S. Congress)
[Opinion] Speech by Pension Rights Center Director Karen Friedman to the Texas-Houston Committee to Protect Pensions
"Central States calls these cuts a 'rescue plan', but these cuts are nothing short of a pension demolition plan that will ruin the lives of more than 270,000 retirees, widows and widowers.... The Central States trustees, from the start, had disabling conflicts of interest ... Central States spent $500,000 of your plan money to lobby for the passage of MPRA.... Even with the steep and unjust cuts proposed in its 'rescue' plan, it is pretty clear that Central States may not survive for the long term, which is a key condition to Treasury accepting this proposal." (Pension Rights Center)
Senate Finance Committee to Hold Hearing: 'The Multiemployer Pension Plan System: Recent Reforms and Current Challenges'
Hearing scheduled for March 1, 2016; live video will be available at the link. Testimony expected from [1] Joshua Gotbaum (former PBGC Director), the Brookings Institution; [2] Dr. Andrew G. Biggs, American Enterprise Institute; [3] Cecil E. Roberts, Jr., International President of United Mine Workers of America; and [4] Rita Lewis, Beneficiary of Central States Pension Plan. (Committee on Finance, U.S. Senate)
Innovation Could Be Outcome of Multiemployer Plan Debate
"One possible silver lining is the NCCMP's proposal to Congress to allow new types of multiemployer plans that have both defined benefit and defined contribution features. Inspired by 'shared-risk' models in other countries, these composite plans would allow existing plans to have two parts: a 'legacy' DB plan that would have to be fully funded with no future accruals and a new composite benefit for future accruals, with pooled management." (Pensions & Investments)
Withdrawal Liability to Bricklayers Pension Fund Upheld in Court
"A Washington District Court judge approved a settlement agreement between the International Union of Bricklayers and Allied Craftworkers, Washington, and a Nashville employer calling for $1.13 million in retroactive pension contributions." (Pensions & Investments)
[Guidance Overview] Refinements Proposed to Multiemployer Suspension Rules (PDF)
"Additional proposed regulations on MPRA benefit suspensions ... address the ordering rule to be used when a plan covers participants who had worked for employers that had withdrawn from the plan prior to December 16, 2014 when the law was enacted. The amount of suspension for such participants will be affected by whether their employer had paid withdrawal liability and agreed to set up a 'make whole' plan." (Xerox HR Services)
[Guidance Overview] Treasury Releases Proposed Regs Clarifying the UPS Rule under MPRA
"Under MPRA, [the Central States, Southeast and Southwest Areas Pension Fund (CSPF)] is supposed to suspend benefits for the participants in this second category 'before' contemplating any suspensions for UPS employees. In the proposed regulations, however, Treasury explains that the best interpretation of the statute is that a suspension does not need to be applied 'to the maximum extent permissible' before any suspension of benefits is permitted for UPS participants. Under the proposed regulations, CSPF would be permitted to suspend the benefits for participants in the second category and UPS employees' benefits simultaneously, provided that the benefit cuts for the second category are greater than or equal to the cuts imposed on UPS employees.... The proposed regulations are consistent with the approach CSPF has included in the benefit suspension application it filed with Treasury on September 25, 2015. UPS has vigorously opposed the approach." (Morgan Lewis)
[Guidance Overview] IRS Issues Proposed Regs on Limitations to the Suspension of Benefits Rules for Multiemployer Plans
"Under the proposed regulations, a suspension of benefits under a plan that is subject to Code Section 432(e)(9)(D)(vii) is first applied to the maximum extent permissible to benefits attributable to service with a subclause I employer. The suspension may then apply to other benefits that are permitted to be suspended and that are attributable to a participant's service with other employers (under subclauses II and III) only if the subclause I suspension is not reasonably estimated to enable the plan to avoid insolvency." (Practical Law Company)
Multiemployer Pension Plan Lowers Threshold That Triggers Partial Withdrawal Liability Payments
"Under the 70% Decline Rule, a partial withdrawal can occur when the employer's contribution base units decline by at least 70% and remain at or below that level over a three-year testing period. However, under the seldom utilized ERISA Section 4205(c), a multiemployer pension plan that covers mostly employees in the retail food industry may be amended to provide that a partial withdrawal is triggered by only a 35% decline in contribution base units instead of a 70% decline. This is the provision that the UFCW National Pension Fund has taken advantage of, and which may ensnare some of its unsuspecting participating employers." (Jackson Lewis P.C.)
New York State Teamsters Mulls Filing for Benefit Reductions
"In a Feb. 5 letter to 34,639 participants, trustees said the plan's actuary determined that it is projected to go insolvent within the next 19 years, placing it in 'critical and declining' status for the plan year that began Jan. 1. That status allows it to apply to the Treasury Department for approval of a plan to suspend benefits." (Pensions & Investments)
List of Multiemployer Plans That Have Filed 'Critical and Declining' Status Notices with the DOL
"Each plan listed [on this page] has notified the [DOL] that it is in 'critical and declining' status and eligible to make certain retiree benefit reductions. Click the name of each plan ... to see the notice." (Pension Rights Center)
[Official Guidance] Text of IRS Notice of Proposed Rulemaking and Public Hearing: Additional Limitation on Suspension of Benefits Applicable to Certain Pension Plans Under the Multiemployer Pension Reform Act of 2014
16 pages. "One specific limitation governs the application of a suspension of benefits under any plan that includes benefits directly attributable to a participant's service with any employer that has withdrawn from the plan in a complete withdrawal, paid its full withdrawal liability, and, pursuant to a collective bargaining agreement, assumed liability for providing benefits to participants and beneficiaries equal to any benefits for such participants and beneficiaries reduced as a result of the financial status of the plan. This document contains proposed regulations that would provide guidance relating to this specific limitation.... Comments must be received by March 15, 2016. Outlines of topics to be discussed at the public hearing scheduled for March 22, 2016 must be received by March 15, 2016." (Internal Revenue Service [IRS])
[Official Guidance] Text of Treasury Department Notice: Reopening of Comment Period on Central States Pension Fund Application to Reduce Benefits
"On October 23, 2015, the Department published a notice of availability and request for comments regarding an application to Treasury to reduce benefits under the Central States, Southeast and Southwest Areas Pension Plan in accordance with the Multiemployer Pension Reform Act of 2014 (MPRA). The purpose of this notice is to reopen the comment period and provide more time for interested parties to provide comments. Comments must be received on or before March 1, 2016." (U.S. Department of the Treasury)
[Opinion] Statement of Pension Rights Center at Treasury Department Public Session on Central States Pension Fund Benefit Reduction Application
"Here's how the Central States application flunks every condition set by MPRA: First, the application fails to demonstrate that the Central States Pension Fund took all reasonable steps to avoid insolvency ... Second, the plan did not equitably distribute the benefit cuts.... Third, even with the steep and unjust proposed cuts, the ability of the Central States Pension Fund to survive for the long term is extremely uncertain -- a key factor that the law says must be considered before the Treasury Department can approve any application to cut retiree pension benefits.... Mr. Feinberg, please reject the application.... There are better solutions." (Pension Rights Center)
Sixth Circuit Denies Equitable Relief for Employer Liability Upon Union-Mandated Withdrawals from Multiemployer Plan (PDF)
"The withdrawal assessment exceeds half of Rubber Associates' annual sales in 2009, 2010, and 2011 ... The parties agree that a complete withdrawal has happened in this case, and that ERISA and the MPPAA require a contributing employer to pay withdrawal liability upon its exit from a multiemployer pension plan. The parties disagree, however, on whether we should create federal common law under ERISA to carve out special liability rules for contributing employers which are forced out of pension funds due to union-mandated withdrawal.... Allowing employers to reduce or eliminate their withdrawal liability even when faced with a union-mandated withdrawal is not essential to the promotion of fundamental ERISA policies." [United Food and Commercial Workers Union-Employer Pension Fund v. Rubber Assoc., Inc., No. 15-3434 (6th Cir. Feb. 4, 2016)] (U.S. Court of Appeals for the Sixth Circuit)
Survey of Principal Features of Multiemployer Defined Contribution Plans (PDF)
"Given the increasing importance of defined contribution plans in helping to ensure participants' 'retirement readiness' as a supplement to a defined benefit pension plan, trustees may want to benchmark their fund's annuity plan, which can be either a profit-sharing plan or a money-purchase pension plan, against Segal's client database." (Segal Consulting)
Sen. Grassley Seeks GAO Review of DOL Oversight of Central States Pension Fund
"In his letter to the GAO, Grassley said that for more than three decades, Central States has operated under a federal court-ordered consent decree obtained by the Labor Department following its investigation that found gross mismanagement and self-dealing by fund managers. Among other things, the consent decree granted the Labor Department considerable oversight authority on the selection of independent fund managers, as well as to changes in investment strategies, among other oversight powers. Grassley wrote that he is unaware of any GAO review of the Labor Department's role in overseeing the pension fund since 1985." (Sen. Chuck Grassley, R-IA)
[Guidance Overview] Benefit Reductions in the Central States Multiemployer DB Pension Plan: Frequently Asked Questions (PDF)
11 pages. Topics include: [1] What is the Central States Pension Plan? [2] Why is the Plan proposing to reduce benefits? [3] Is the PBGC supposed to pay benefits when a plan cannot? [4] How does the Multiemployer Pension Reform Act (MPRA) dictate which benefits to cut and by how much? [5] What is the process for approving benefit reductions? [6] Is a vote of participants required to approve benefit reductions? [7] Has any legislation been introduced that could prevent implementation of the benefit reductions?" [Report No. R44355, dated Jan. 28, 2016.] (Congressional Research Service [CRS])

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