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Multiemployer plans

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Status Update of Pension Plans with Approved MPRA Benefit Reductions
"So far there have been twelve plans approved for benefit cuts under MPRA ... And one plan that got a Proposal Approval letter but not a Final Authorization letter ... We now have data on one plan that has gone through a full year of benefit cuts as reported on their 5500 filings. Payouts dropped about 20% but there is still negative cash flow that projects to bankruptcy, if not in 10 years, then maybe 15." (Burypensions)
[Opinion] American Academy of Actuaries Comments to PBGC on Proposed Methods for Computing Withdrawal Liability under MPRA (PDF)
"PBGC might want to consider making a clearer statement in the regulations that the new rules apply prospectively only, to prevent unintended consequences with respect to prior withdrawal liability determinations.... PBGC would do well to consider clarifying that the simplified methods described in the proposed regulation are 'safe harbor' methods, but that alternate simplified methods could be appropriate as well.... PBGC might consider clarifying the point at which the de minimis credit under section 4201(b)(1) of ERISA is applied in determining an employer's withdrawal liability." (American Academy of Actuaries)
IBEW Local 237 Letter to IRS Withdrawing Application for MPRA Benefit Suspension (PDF)
"The Plan fully intends to submit ... a resubmission review under MPRA as soon as practicably possible. If not permitted, the Plan intends to submit a new application for approval of suspension of benefits under MPRA on or before June 30, 2019." (U.S. Department of the Treasury)
Multiemployer Plans: Current Pension Plan Issues, Legislation and Agency Guidance (PDF)
37 presentation slides, from ABA EBC 2019 Midwinter Meeting. Topics: [1] Financial assistance to insolvent multiemployer plans; [2] Projections report; [3] Final rule -- mergers and transfers; [4] Safe-harbor solvency tests; [5] Changes; [6] Dueling court decisions on Segal Blend and withdrawal liability ; [7] Successor withdrawal liability; [8] Joint Select Committee on Solvency of Multiemployer Plans; [9] Pending legislative proposals. (Employee Benefits Committee [EBC], American Bar Association)
[Guidance Overview] PBGC Proposes Simplified Methods for Withdrawal Liability Calculations
"While the proposed rule is not yet effective, multiemployer pension plans and their contributing employers alike should consider the potential impact of these simplified methods on withdrawal liability calculations.... [T]he simplified methods are optional and plans could continue to use alternative methods that are not specified in the PBGC's regulations.... PBGC is accepting public comments on the proposed regulation through April 8, 2019." (Proskauer Rose LLP)
[Opinion] American Academy of Actuaries Responses to House HELP Subcommittee Questions on Multiemployer Pension Crisis (PDF)
"[1] Have the changes to single employer plan funding rules, including the use of market rates to discount liabilities, under the Pension Protection Act of 2006 resulted in greater retirement security for participants of single employer plans? ... [2] How do multiemployer actuaries set the discount rate for multiemployer plan liabilities for funding purposes? ... [3] Dr. Naughton indicated that multiemployer plans have not collected 'actuarially sound' contributions from contributing employers. [a] What does that mean? [b] Is the system itself sound? [c] What should Congress consider to improve the viability of the system?" (American Academy of Actuaries)
Employer Withdrawal Activity Overview: U.S. Multiemployer Pension Plans (PDF)
10 pages. "The percentage of withdrawing employers dropped from 1.49% in 2009 to 0.85% in 2016, and the percentage of plans that experienced withdrawal fell from 18.5% in 2009 to 15.1% in 2016. However, at 60%, the percentage of participants in plans that experienced withdrawal was the same in 2009 and 2016, although the percentage slowly increased to 67% in 2013 before slowly declining to 2016. On average over 2009-2016, assessed withdrawal liabilities were 0.4% of aggregate plan liabilities for zone determination. But the impact on individual plans varied widely." (Society of Actuaries)
Contribution Analysis for U.S. Multiemployer Pension Plans (PDF)
"In 2016, 83% of plans that covered 69% of all MEPP participants received enough contributions to reduce their unfunded liabilities as measured with funding discount rates -- down from 86% of plans covering 78% of participants in 2015. The decrease stemmed in part from increased unfunded liabilities in 2016. Of the 83% of plans whose contributions were sufficient to reduce unfunded liabilities in 2016, half of them were on pace to eliminate unfunded liabilities within 8.3 years. Eighty percent of them were funding at a pace to eliminate unfunded liabilities within 16.8 years, and 90% of them were funding at a pace of 23.4 or fewer years." (Society of Actuaries)
Multiemployer Plan Withdrawal Liability: Lessons from a Recent Seventh Circuit Decision
"[The Seventh Circuit] affirmed a district court's judgment ordering a group of closely held businesses and the group's owners to pay $640,900 in withdrawal liability, plus interest, liquidated damages, attorneys' fees and court costs. The defendants were found to have waived all defenses to the assessment because they failed to make interim payments and initiate arbitration over the liability." [Trustees of the Suburban Teamsters of Northern Illinois Pension Fund v. The E Company, No. 18-2273 (7th Cir. Jan. 29, 2019)] (McGuireWoods)
[Guidance Overview] 2018 Q&As: PBGC Meeting with ABA Joint Committee on Employee Benefits (PDF)
9 pages. Topics include: [1] Standard termination experience; [2] Reportable events experience; [3] Coverage webpage update; [4] Pilot mediation project; [5] Interagency issues relating to missing participants; [6] Premiums; [7] Early warning; [8] Rule on mergers and transfers between multiemployer plans; [9] Guidance regarding requests for approval of alternative method of withdrawal liability payments; and [10] Responses to PBGC's RFI. (Joint Committee on Employee Benefits [JCEB], American Bar Association)
Legislation Giving Participants More Say in MPRA Benefit Cuts Reintroduced in Senate
"The proposed Pension Accountability Act was introduced by Ohio Sens. Rob Portman, a Republican, and Sherrod Brown, a Democrat, both of whom served on last year's Joint Select Committee on Solvency of Multiemployer Pension Plans, which expired before a reform package could be approved. The bill amends the Multiemployer Pension Reform Act by making participant votes binding in all situations and only counting returned ballots." (Pensions & Investments)
House Holds Hearing on Multiemployer Pensions (PDF)
"The sense from the hearings has been that if the multiemployer pension system fails, the fall-out will not only devastate contributing employers, employees and retirees, [but also may] lead to the failure of other multiemployer plans and increase the burden on state, local and the federal government to provide 'safety-net' social services to the impacted." (United Actuarial Services, Inc.)
[Guidance Overview] PBGC Proposes Simplified Methods for Calculating Withdrawal Liability
"The requirement to disregard a benefit suspension in calculating the value of unfunded vested benefits would apply only for withdrawals that occur within the 10 plan years after the end of the plan year that includes the effective date of the benefit suspension.... The proposed regulations provide simplified methods for disregarding certain contribution increases when determining the allocation of unfunded vested benefits attributed to an employer and the annual withdrawal liability payment amount." (Littler)
[Guidance Overview] PBGC Proposed Regs Would Simplify Multiemployer Plan Withdrawal Liability Calculations
"[U]nder the proposal an employer's withdrawal liability is determined in two steps. First, the plan sponsor determines withdrawal liability payments based on the reduced plan benefits after taking into account the benefit reductions and benefit suspensions. Next, the plan sponsor adds to this the employer's proportional share of the value of the benefit reductions and benefit suspensions." (Buck)
PBGC Proposed Rule Provides Methods for Computing Withdrawal Liability (PDF)
"[T]he proposed withdrawal liability rules: [1] Reflect previous guidance on disregarding adjustable benefit reductions. [2] Provide simplified methods for complying with the [MPRA] requirements to disregard benefit suspensions. [3] Provide new guidance on which contribution increases should be reflected when determining an employer's withdrawal liability assessment and annual payment amount." (Milliman)
House Panel Hears Ideas for Solving 'Urgent' Multiemployer Crisis
"Without congressional action, participants in struggling plans face benefit cuts of 50% or more; when the PBGC multiemployer program itself becomes insolvent as projected to happen by 2025, those cuts will deepen to 90% ... Over a 30-year horizon, an estimated $32 billion to $103 billion in taxes would not be paid if some plan participants lose their pension benefits, while government social safety program costs could increase $170 billion to $240 billion." (Pensions & Investments)
[Opinion] Testimony of American Academy of Actuaries to Senate HELP Subcommittee: Why Congress Must Address the Multiemployer Pension Crisis (PDF)
12 pages. "The trustees of the plans that are projected to be insolvent face a very difficult situation.... The contribution rate increases needed to achieve recovery are so great that if they were imposed, the employers would be unable to remain in business or would choose to withdraw from the plans. For the plans that are unable to meet the criteria for benefit reductions under MPRA, they have no alternative other than to spend down their assets and wait for insolvency to occur.... Congress faces a dual challenge. Action is need ed to address the looming crisis that will occur when both plans and the PBGC exhaust their resources and reach the point of insolvency." (American Academy of Actuaries)
Retirement Benefits for Millions May Be Slashed Without PBGC Reforms, Says GAO
"The increasing fragile PBGC finances for insuring multiemployer plans in unionized industries such as trucking and baking have long been a concern with a deficit running at $54 billion, but GAO cautions single employer plan insurance could also be at risk as well." (Forbes)
PBGC Proposes Simplified Methods for Withdrawal Liability Calculations
"The major technical difficulty in applying the simplified methods arises from the requirement that increases in contributions required to meet a funding improvement plan (FIP) or rehabilitation plan (RP) must be disregarded. This requires the plan administrator to adjust each employer's contribution history by removing only those contributions due to an increase required to meet a FIP or RP. Plan administrators should examine the proposed simplifications to determine whether they provide any substantial reduction in the administrative burden." (Cheiron)
[Opinion] The Troubling Decline in Private Sector DB Plan Coverage: Write to Your Senators (PDF)
"The Butch Lewis Act (S. 2147) ... is another proposed federal government rescue program to throw taxpayer dollars at a social problem... [P]rivate sector defined benefit plans pose a much larger set of problems due to the declining pension coverage of private sector employees whose pension benefits are not subject to collective bargaining." (H. C. Foster and Company)
Public Agency Participation in ERISA Multiemployer Pension Plans
"Because practically all Taft-Hartley plans originated among unions and employers in the private sector, they are subject to ERISA and participants' benefits are, to some extent, 'insured' by the [PBGC].... What surprises many cities and special districts that participate in these trusts is that, under certain circumstances, the trusts can and must require the participating employers to contribute additional sums -- above and beyond what is called for in the applicable [Memorandum of Understanding]." (Best Best & Krieger LLP)
Common Multiemployer Plan Reporting Pitfalls for Employers
"Understanding common errors in benefit reporting will help you avoid shocking discrepancy letters from payroll auditors about owing unreported benefit contributions to a multiemployer plan.... Hours worked versus hours paid ... Omitted weeks ... Probationary periods and extended coverage ... Report all eligible employees ... Reconcile remittances to employee payroll deductions." (Lindquist CPA)
Piling On: Corporations Support the New York Times in Multiemployer Pension Calculation Dispute
"Several large employers are disputing how much money the New York Times owes a union multiemployer pension fund. Recently, six companies ... filed an amicus brief supporting the New York Times in its case before the US Court of Appeals for the Second Circuit.... The underlying issue in this case involves an actuarial method called the 'Segal Blend,' which often is used to value unfunded vested benefits and calculate withdrawal liability (an exit fee) from a union multiemployer pension plan." (McDermott Will & Emery)
Participants' ERISA Retaliation Claim Dismissed
"A federal district court in Illinois held that participants in a multiemployer pension plan failed to plausibly allege that plan fiduciaries retaliated against them in violation of ERISA Section 510 by refusing to consider their employer's offer to settle its withdrawal liability to the plan.... The district court dismissed the participants' claim as implausible, pointing to the participants' admission that the plan fiduciaries refused to consider the employer's proposal both before and after the participants filed suit." [Campbell v. Whobrey, No. 16-4631 (N.D. Ill. Jan. 14, 2019)] (Proskauer's ERISA Practice Center)
Court Finds Union's Withdrawal Liability Indemnification Obligation of Limited Duration
"Five days before the expiration of the final CBA in February 2014, the union disclaimed interest in represented the employer's bargaining unit members and notified the employer it would not be renewing the CBA upon its expiration. This resulted in the employer permanently ceasing to have an obligation to contribute to the plan, resulting in a withdrawal from the plan and the assessment of withdrawal liability against the employer in excess of $680 thousand dollars.... The sole issue before the Third Circuit on appeal was whether the district court properly held that the union's indemnification obligation did not cover withdrawal liability imposed after the expiration of the CBA.... The Court found that the employer could not withdraw and trigger withdrawal liability until it 'permanently ceased to have an obligation to contribute,' and that such cessation could not occur until the termination of the CBA." [Nitterhouse Concrete Prod., Inc. v. Glass, Molders, Pottery, Plastics & Allied Workers Int'l Union, No. 18-1429 (3d Cir. Feb. 6, 2019; unpub.)] (Jackson Lewis P.C.)
[Official Guidance] Treasury Department Approval of Southwest Ohio Regional Council of Carpenters Pension Plan Application for Reduction of Benefits (PDF)
"In consultation with the [DOL] and the [PBGC], Treasury has determined that the Fund is eligible to reduce benefits under MPRA and that your application satisfies the requirements of subparagraphs (C), (D), (E), and (F) of section 432(e)(9) of the Internal Revenue Code, as added by MPRA.... [No] reduction of benefits can take effect before a vote of the participants and beneficiaries of the Fund with respect to the proposed reduction." (U.S. Department of the Treasury)
[Guidance Overview] PBGC's Proposed Regs Include Simplified Methods for Calculating Withdrawal Liability for Employers Leaving Multiemployer Pension Plans
"The proposed regulations incorporate statutory changes under the [PPA] and [MPRA], which require plan sponsors to disregard certain benefit reductions and contribution increases when calculating an employer's withdrawal liability and annual withdrawal liability payments. The proposed regulations also provide simplified methods for calculating withdrawal liability." (Thomson Reuters Practical Law)
Multiemployer Solvency Crisis: An Analysis of Proposed Adjustments to the PBGC's Benefit Guarantee
"[I]ncreasing the PBGC's benefit guarantee to $70 per year of service leads to a $44 billion increase in the projected present value of PBGC assistance payments. Freezing the plan five years before projected insolvency and cutting benefits to their guaranteed levels under current law leads to a $33 billion reduction in projected PBGC assistance payments. If implemented together, [these two provisions] lead to a $34 billion increase in projected PBGC assistance payments." (The Pension Analytics Group)
[Opinion] House Multiemployer Bill Emulates Single-Employer DB Risk Strategies -- With a Twist
"[T]he Rehabilitation for Multiemployer Pensions Act (RMPA) recently introduced in the House by Representative Richard Neal (D-MA) ... proposes to address multiemployer DB risk using two strategies single-employer plans have been increasingly implemented over the past decade: [1] Purchasing annuities to transfer risk permanently to an insurance company. [2] Hedging interest rate risk using liability driven investing (LDI) strategies featuring high quality, duration matched bonds.... Putting the uncertainty of the PRA loan repayments aside, the bill protects retiree pensions better than anything else being proposed." (The Principal Blog)
[Official Guidance] Treasury Department Approval of Toledo Roofers Local No. 134 Pension Fund Application for Reduction of Benefits (PDF)
"Treasury has determined that the Plan is eligible to reduce benefits under MPRA and that your application satisfies the requirements of subparagraphs (C), (D), (E), and (F) of section 432(e)(9) of the Internal Revenue Code, as added by MPRA. This notification is not a final authorization to implement the benefit reduction described in your application. Pursuant to Code section 432(e)(9)(H), no reduction of benefits can take effect before a vote of the participants and beneficiaries of the Plan with respect to the proposed reduction." (U.S. Department of the Treasury)
[Official Guidance] Treasury Department Approval of Mid-Jersey Trucking Industry and Local 701 Pension Fund Application for Reduction of Benefits (PDF)
"Treasury has determined that the Plan is eligible to reduce benefits under MPRA and that your application satisfies the requirements of subparagraphs (C), (D), (E), and (F) of section 432(e)(9) of the Internal Revenue Code, as added by MPRA. This notification is not a final authorization to implement the benefit reduction described in your application. Pursuant to Code section 432(e)(9)(H), no reduction of benefits can take effect before a vote of the participants and beneficiaries of the Plan with respect to the proposed reduction." (U.S. Department of the Treasury)
[Official Guidance] Text of PBGC Proposed Regs: Methods for Computing Withdrawal Liability, Multiemployer Pension Reform Act of 2014
68 pages. "[PBGC] proposes to amend its regulations on Allocating Unfunded Vested Benefits to Withdrawing Employers and Notice, Collection, and Redetermination of Withdrawal Liability. The proposed amendments would implement statutory provisions affecting the determination of a withdrawing employer's liability under a multiemployer plan and annual withdrawal liability payment amount when the plan has had benefit reductions, benefit suspensions, surcharges, or contribution increases that must be disregarded. The proposed amendments would also provide simplified withdrawal liability calculation methods." (Pension Benefit Guaranty Corporation [PBGC])
Multiemployer Pension Reform Efforts Continue After Demise of Congressional Joint Select Committee, Part 2
"Eligible plans could apply for a loan in an amount needed to fund the plan's obligations for the benefits of participants and beneficiaries in pay status at the time the loan is made. Plans that receive a loan would then be required to fund the plan's obligations to those in pay status in one of the following ways: [1] purchasing annuity contracts from an insurance company ... [2] investing the loan proceeds in a cash or fixed income (bond) portfolio designed to match the specific benefit liabilities ... [3] invest in some other portfolio prescribed by the Secretary of the Treasury in regulations." (Morgan Lewis)
2019 Key Administrative Dates and Deadlines for Calendar-Year Defined Contribution Plans (PDF)
This four-page chart includes a descriptive list of the 'key' administrative dates and deadlines for calendar-year defined contribution plans regulated by ERISA and the Internal Revenue Code. (Milliman)
Options for Construction Companies Facing Withdrawal Liability
"[1] Do nothing; [2] Pay it; [3] Use subcontractors; [4] A stock sale of the company; [5] An asset sale of the company; [6] Negotiate with the plan; [7] Terminate your obligations under the CBA." (Greensfelder)
[Opinion] Why a Federal Taxpayer Bailout for Union Pensions Is a Bad Idea
"The loan approach is based on the idea that if the plans get a low-interest loan from the government, and then invest the proceeds in risky assets and target a high return, the loan can be repaid in full.... In fact, the proposal now in Congress is similar to disastrous pension obligation bond issues under which state and local governments went on to sell bonds to the public and put the proceeds at risk in investments that they hoped would earn high returns." (Joshua Rauh, in the Washington Times)
Ninth Circuit Allows Pension Fund to Wipe Out Credit for Prior Partial Withdrawal Liability
"Affirming the district court, and discounting a 33-year old PBGC opinion letter to the contrary, the Ninth Circuit held that the credit for the prior partial withdrawal is applied before the application of the 20-year cap on payments, drastically increasing the amount of payable withdrawal liability. Because the order in which these items are applied can significantly alter the amount of liability, the decision will likely be used by pension funds to decrease or even eliminate the credit for which withdrawn employers would otherwise qualify." [GCIU-Employer Retirement Fund v. Quad Graphics, Inc., No. 17-55667 (9th Cir. Dec. 7, 2018)] (Conn Maciel Carey)
House Ways & Means Committee Chairman Introduces Legislation to Address Multiemployer Pension Crisis
"The bill establishes the Pension Rehabilitation Administration (PRA), a new agency within the Department of the Treasury, authorized to issue bonds in order to finance loans to 'critical and declining' status multiemployer pension plans, plans that have suspended benefits, and some recently insolvent plans currently receiving financial assistance from the [PBGC]." (Committee on Ways and Means, U.S. House of Representatives)
PBGC Premiums Rise Again in 2019; Other Minor Filing Changes Noted
"The flat-rate premium rises to $80 per participant, up from $74. The variable-rate premium for these types of plans is also now higher, at $43 per $1,000 of unfunded vested benefits ... The flat-rate premium for [multiemployer] plans is $29 per participant, rising from $28.... The PBGC also revised the instructions regarding disaster relief to reflect recent changes made to the agency's practices in this area." (HR Daily Advisor)
Defined Benefit Plan Liability with Facility Sales, Restructurings and Cessations
"In certain cases of a facility sale, restructuring or cessation, recently released information by the [PBGC] leaves many unanswered questions about plan sponsor liability for single-employer defined benefit plans." (McDermott Will & Emery)
Are You Liable for Unfunded Pensions? Don't Ignore Successor Liability, Part 2
"How can buyers protect themselves? [1] Thoroughly investigate potential Title IV liabilities prior to the closing.... [2] With an actuary's help, review the plan's funding notices and status and any available liability estimate from the plan. [3] Investigate the seller's financial situation to assess the likelihood that seller will not pay any pension liability assessment. [4] Consider special purchase agreement provisions ... [5] Be cautious about using ERISA Section 4204 to avoid a withdrawal on the sale." (Cohen & Buckmann, P.C.)
Multiemployer Plan Bailout Outlook for 2019
"The two major takeaways from the work of the Joint Select Committee were: [1] all 8 Democratic members strongly supported some type of loan program but were willing to consider other options in addition to the loan program; [2] a majority of Republican members ... strongly opposed a loan program and preferred a solution that relied on the PBGC to assume a significant portion of the financial crisis[.]" (Burypensions)
Some Unions Turning to Variable Benefit Pension Plan Model
"[T]he $95 million New Orleans Carpenters Pension Plan, a plan close to 100% funded ... added a variable plan design for all benefits that have accrued since May. The basic premise ... is that benefits are adjusted up or down based on investment returns. The assumed rate of return ... determines whether benefits for all participants, including retirees, rise or fall on a plan year basis." (Pensions & Investments)
Ninth Circuit Clarifies Law on Partial Withdrawal Liability
"[T]he Ninth Circuit Court of Appeals clarified application of the credit for partial withdrawals, holding that the credit for partial withdrawal is applied before the application of the 20-year limitation on withdrawal liability payments." [GCIU-Employer Retirement Fund v. Quad/Graphics, Inc., No. 17-55667 (9th Cir. Dec. 7, 2018)] (Cheiron)
The Multiemployer Health Plan Landscape: A Ten-Year Look
"The total number of multiemployer health plans in the study declined steadily from 1,811 for the 2006 plan year to 1,594 in 2015. The majority of health plans ... offer dental, vision and life benefits in addition to health benefits.... The majority of plans ... cover both active and retired participants ... The plans in the study cover more than five million active and retired participants.... [and] reported more than 210,000 contributing employers." (International Foundation of Employee Benefit Plans [IFEBP])
[Opinion] Actually, the Central States Pension Plan Is Fully Funded
"There is another 'Central States' -- the Midwest Pension Plan sponsored by the Central States Joint Board ... [and] it's fully funded.... [U]nlike the Central States/Teamsters mob connections which ... resulted in such a corrupt management of their funds that the union was stripped of its ability to control those funds in 1982, the Central States Joint Board seems to have suffered no ill effects and may even have seen unexpected benefits: because pension funds were (partially) kept at the bank ($16 out of $93 million), its assumed asset return was 6% per year in 1999 and for six years thereafter, considerably lower than the average rate used that year, 7.2% (or, at median, 7%)." (Elizabeth Bauer, in Forbes)
[Guidance Overview] Surprise! You May Be Liable for Union Pension Plan Withdrawal Liability
"Shareholders of an incorporated business, partners in a partnership, or an alter ego or successor business may also be responsible for withdrawal liability if the participating employer does not pay the withdrawal liability to the pension plan. [This article provides] an explanation of the potential liability of individuals and entities, other than the employer, when the participating employer becomes insolvent and can't pay the withdrawal liability." (Frost Brown Todd LLC)
2019 Key Administrative Dates and Deadlines for Calendar-Year Multiemployer Defined Benefit Plans (PDF)
This three-page chart includes a descriptive list of the 'key' administrative dates and deadlines for multiemployer defined benefit plans regulated by ERISA and the Internal Revenue Code. (Milliman)
Asset Purchasers Beware: Constructive Notice of Seller's Union Pension Liability
"A recent 9th Circuit decision called out a common misconception -- in the form of 'incorrect legal advice' that the buyer received prior to closing -- that '[a]bsent an express assumption of liability, the Buyer does not assume the [withdrawal] liability' for a multiemployer pension plan. The decision went on to hold a private equity fund liable for $480,000 of withdrawal liability, even though all parties conceded that the purchaser had no actual notice of the liability." [Heavenly Hana LLC v. Hotel Union & Hotel Industry of Hawaii Pension Plan, No. 16-15481 (9th Cir. June 1, 2018)] (The Wagner Law Group)
Understanding the Central States Pension Plan's Tale of Woe
"Had the plan been well-run and properly funded, and had principles of multi-employer plan design and the relevant legislation been designed to ensure long-term solvency rather than relying on new generations of contributors to make up for losses, Central States would have weathered these storms. But Central States was missing all this.... They had flaws in their plan design. And they were neither well-run nor properly funded." (Forbes)
Hatch, Brown Commit to Continued Work on Multiemployer Pension Crisis Past Nov. 30
"When the Joint Select Committee was created, it was expected members would vote on a package by this Friday. [Co-Chairs Orrin Hatch (R-UT) and Sherrod Brown (D-OH)] say that while they have made significant progress and a bipartisan solution is attainable, more time is needed and the committee will continue its work." (Joint Select Committee on Solvency of Multiemployer Pension Plans)
Panel Won't Meet Deadline on Fix for Multiemployer Pension Plans
"A bipartisan committee of lawmakers will miss a Friday deadline to reach an agreement on addressing financial shortfalls of multiemployer pension plans, meaning Congress is less likely to take up legislation on the matter before year's end. Both Republicans and Democrats on the panel said Thursday they nonetheless were close to agreeing on a proposal, and negotiations were expected to continue." (The Wall Street Journal; subscription may be required)
The Multiemployer Solvency Crisis: Estimates of the Cost and Impact of the Butch Lewis Act (PDF)
"Across 500 stochastic trials, the average number of participants in plans projected to become insolvent is 3.2 million in the baseline scenario, and 2.3 million if [the Butch Lewis Act (BLA)] is implemented.... In about 40% of trials, plans covering more than three million participants are projected to become insolvent, while in about 20% of trials we project that fewer than one million participants will be affected by plan insolvency.... Across the 500 trials, the average loan default rate was 52% ... While the loan maturity period is 30 years, BLA delays plans' insolvency by an average of only 16 years." (The Pension Analytics Group)
Rescue for Failing Multiemployer Pensions Not Expected from Joint Select Committee
"A November 30 deadline was set to report bipartisan legislation. But Republican and Democrat members could not agree on an 'equitable' solution, despite getting 'close' to a compromise ... The Committee's inability to report legislation comes in spite of an array of economists that have warned of massive macroeconomic implications of letting the pensions, and the [PBGC] fail." (BenefitsPro)
[Opinion] Multiemployer Pensions: Waiting for the Bailout
"[W]hat is being proposed is a partial bailout, and plan participants in failing plans need to realize that the alternative to a partial bailout is not a full bailout but getting a hell of a lot less than that partial bailout. Even if they managed to get a few top-ups for a few years from a congenial Congress and President (no matter the party), eventually the money situation will be that it will not be sustainable. So it won't be sustained. There are those where surviving just a couple more years will be good enough. But for the pension plan as a whole... they need something more long-term." (STUMP)
District Court Reaffirms Private Equity Partner Liability for Multiemployer Plan Contributions, Awards Damages and Attorneys Fees (PDF)
18 pages. "The private equity plaintiffs here chose in their calculus of risk and return to structure their business to breach what the First Circuit accurately characterized as 'fine lines' ... governing the circumstances in which withdrawal liability will be imposed upon those who invest in distressed businesses.... Any recalibration of the reasonable expectations of investors in companies with ERISA obligations must come from some source other than courts applying current applicable law.... [T]he Judgment of this court will be amended to include interest in the amount of not less than $2,253,787.76; liquidated damages in the amount of $903,307.80; ... [and] attorneys' fees and costs in the amount of $340,977.58."
[Sun Capital Partners III, LP v. New England Teamsters and Trucking Industry Pension Fund, No. 10-10921 (D. Mass. Nov. 26, 2018)] (U.S. District Court for the District of Massachusetts)
Struggling Multiemployer Plans See Help Ahead at Expense of Healthy Funds
"The draft proposal ... offers several measures to help struggling plans protect retiree benefits, including increasing the PBGC minimum guarantee level ... It even undoes benefit cuts already authorized by the Treasury Department under [MPRA], but plans within five years of insolvency would cut to the minimum benefit level and then be terminated.... [H]ealthy plans would also be squeezed by a requirement to use a more conservative discount rate when measuring liabilities." (Pensions & Investments)
The Single Biggest Problem for Multiemployer Pension Plans
"[I]ncreasing contributions, decreasing benefits or providing a federally backed loan all call the viability of the broader defined benefit system into question. If confidence in the system is eroded, the potential economic drags ... may become even more severe as participation decreases and employers see profitability come under pressure." (J.P. Morgan Asset Management)
Analysis Says Multiemployer Loan Program Will Not Help All
"The loan program idea introduced in legislation earlier this year is considered a way for some critically underfunded plans to extend projected insolvency dates and reduce the risk to the PBGC.... The analysis used 500 trials with asset returns varied stochastically to model plans projected to become insolvent within 30 years. According to the analysis, the average total number of participants in plans projected to become insolvent is 3.1 million in the baseline scenario, and 2 million if the loan program is implemented." (Pensions & Investments)
[Opinion] Time for Select Pension Committee to Shine as Midterms' Afterglow Dims
"When Congress passed a law back in February creating the Joint Select Committee on Solvency of Multiemployer Pension Plans, it gave the committee until November 30 to find a bipartisan solution to a looming plan insolvency crisis.... Congressional leaders set the committee's deadline after the election to ensure that committee members had several weeks to operate in a low political pressure environment to reach across the political divide and broker a compromise solution. That time has arrived, and affected retirees are keenly aware of the opportunity it presents." (Pension Rights Center)
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