Jump to content

Contribution levels and withdrawal liability


Guest ABC

Recommended Posts

Does anyone know of any resources for information concerning contribution and withdrawal liability levels when a plan becomes insolvent and PBGC provides financial assistance (in the form of a loan)? Specifically:

1. Obviously, when a plan is insolvent it is in very poor financial shape. Do contribution obligations tend to increase where a plan becomes insolvent? I don't believe the trustees would have the power to unilaterally increase contributions without the bargaining parties' consent, except as maybe provided in a rehabilitation plan.

2. If a plan becomes insolvent, the plan's unfunded liability is reduced because benefits are reduced to the maximum guaranteed amount. What is the general effect on withdrawal liability, and does this serve to encourage bargaining parties to remain in the plan?

Any thoughts are welcome. Thanks.

Link to comment
Share on other sites

  • 2 months later...

This is my take on the answer to your question. If a Fund goes into "reorganization" status (approaching insolvency) contributing employers may be liable for additional required minimum contributions above the rehab schedules. I note that the draft NCCMP proposal regarding what should happen when the PPA sunsets in 2014 has a proposal that provides that if a Fund goes into reorganization, the employers should be insulated from additional contributions if the Fund is in critical status (just like employers are protected from AFD liability if the Fund is in critical status). If the Fund becomes insolvent (does not have the cash to pay benefits) benefits must be reduced to the maximum PBGC amount and this generally should help employer contribution levels in the future. However, with insolvency, often comes a mass withdrawal where employers are faced with significant exposure. Since the PBGC guarantee is so low, the union does not usually want to continue having part of the wage package allocated to pension contributions. Hope this helps.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...