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Multiemployer plans

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Multiemployer Solvency Crisis: Adjustments to the PBGC's Benefit Guarantee to Reduce Pressure on the Guarantee Fund (PDF)
"Using the Multiemployer Pension Simulation Model (MEPSIM), we project that about 130 multiemployer pension plans covering 2.1 million participants will become insolvent over the next 20 years, and that the [PBGC's] multiemployer guarantee fund -- the backstop against such insolvencies -- will itself be exhausted by 2027.... The adjustments to the guarantee that we examine within this paper have a significant downward impact on the present value of projected PBGC assistance payments, but the impact is not sufficient to prevent the exhaustion of the guarantee fund. Given the large number of plans heading towards insolvency, it is unlikely that a single policy action is available to stabilize the guarantee fund. Rather, several simultaneous actions will be required, among which a reduction of the guarantee can be considered." (The Pension Analytics Group)
PBGC Fiscal Year 2017 Annual Report: Multiemployer Program Deficit Widens; Single-Employer Program Continues to Improve
"[T]he deficit in [PBGC's] insurance program for multiemployer plans rose to $65.1 billion at the end of FY 2017, up from $58.8 billion a year earlier. The increase was driven primarily by the ongoing financial decline of several large multiemployer plans that are expected to run out of money in the next decade. PBGC's Single-Employer Insurance Program continued to improve as the deficit dropped to $10.9 billion at the end of FY 2017, compared to $20.6 billion at the end of FY 2016. The primary drivers of the continued improvement include premium and investment income and increases in the interest factors used to measure the value of future liabilities." (Pension Benefit Guaranty Corporation [PBGC])
Treasury Announces Voting Schedule for International Association of Machinists Motor City Pension Plan MPRA Benefit Reductions
"[T]he proposed benefit reductions will now be subject to a vote of participants and beneficiaries of the Plan. Ballots were mailed to participants and beneficiaries on November 16, 2017. The voting period opens November 16, 2017 ... and closes December 7, 2017[.]" (U.S. Department of the Treasury)
[Opinion] Senators Introduce Bills to Save Financially Troubled Multiemployer Plans and Protect Retirees
"These bills set up a new office in the Treasury Department called the Pension Rehabilitation Administration (PRA), which would receive proceeds from the issuance of Treasury bonds. This money would then be lent to financially-troubled plans as long as they meet certain criteria. The Pension Rights Center is particularly pleased that the loans would be used to fully pay the benefits of retirees and that the bill would require plans, which have already been approved to cut benefits under MPRA, to apply for these new loans and if approved, use that money to restore previously suspended benefits." (Pension Rights Center)
[Opinion] A Few Concerns About the Multiemployer Plan Bailout Bill
"If this is an arbitrage deal (like Pension Obligation Bonds (POBs) were supposed to be) then isn't the whole idea to invest the money in riskier investments for profit? Will these plans be able to consider the Treasury bond money as an asset of the trust without a corresponding liability so as to artificially reduce contributions like what is going on with POBs? What happens with plans that have already cut benefits?" (Burypensions)
[Opinion] The Mother of All U.S. Pension Bailouts?
"[Sen. Sherrod Brown's] bill will ensure more mediocrity as there will be no incentive whatsoever to change what is fundamentally plaguing large U.S. pensions. Your discount rate is too high? No problem, keep it. Your plan is chronically underfunded? No problem, just borrow from the U.S. Treasury in perpetuity. You have no risk-sharing in your plan? Who cares, Uncle Sam will backstop it all so you don't need risk-sharing or better governance." (Pension Pulse)
Sen. Sherrod Brown to Unveil Multiemployer Loan Program Legislation
"The bill ... would create a new office within the Treasury Department called the Pension Rehabilitation Administration. The funds would come from the sale of Treasury-issued bonds to financial institutions. The pension funds could borrow for 30 years at low interest rates.... The bill would also fund a program at the [PBGC] to finance any remaining needs of pension plans borrowing from the new program." (Pensions & Investments)
[Official Guidance] Text of Treasury Department Letter Approving Benefit Reductions by International Association of Machinists Motor City Pension Plan (PDF)
"In consultation with the Secretary of Labor and the Pension Benefit Guaranty Corporation, 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." [Letter dated Nov. 6, 2017] (U.S. Department of the Treasury)
The Continuing Downward Spiral and Death Knell of the Multi-Employer Defined Benefit Plan
"In 2012, the Fund amended the Rehabilitation Plan to include a provision stating that an employer withdrawing from the Fund was required to pay a portion of the Fund's accumulated funding deficiency in addition to the statutorily mandated withdrawal liability.... Westrock sought relief from that amendment ... declaration that the amendment violated ERISA. The district court never addressed the merits of the action but rather dismissed the complaint ... stating that Westrock lacked standing. The Eleventh Circuit, acknowledging that this was a case of first impression which turned on statutory interpretation, affirmed the district court. In doing so, it opined that civil actions under ERISA were limited only to those parties and actions which Congress specifically enumerated." [Westrock RKT Co. v. Pace Industry Union-Management Pension Fund, No. 16-16443 (11th Cir. May 16, 2017)] (Jackson Lewis P.C.)
[Guidance Overview] SOA Mortality Improvement Scale MP-2017 Released
"Since the updated scale reflects more recent experience, it is likely a better estimate of future improvement than scale MP-2016, and with it comes the added benefit of lower liabilities. Sponsors who finalized accounting results earlier in the year may receive requests from auditors to quantify the effect of the new scale." (Cowden Associates, Inc.)
Employer Withdrawal Liability: Something to Consider Before Signing a CBA
"The CBA will likely not refer to withdrawal liability and the union is under no legal obligation to disclose this potential liability to you prior to signing the CBA.... Does the CBA require contributions to be made to one or more defined benefit pension plan(s)? If so, what is the funding status of the pension plans for which you would be obligated to contribute to under the CBA? ... Does the plan provide for a free look period? ... Will the union provide any indemnification for withdrawal liability?" (Graydon)
Sun Capital Redux: Private Equity Fund Seeks Declaratory Judgment on Controlled Group Liability for Portfolio Company's Pension Liabilities
"A complaint filed by Trilantic Capital Partners ... shows that multiemployer pension funds and the PBGC are continuing to pursue a strategy of asserting controlled group liability claims against private investment funds, and previews some of the facts that private investment funds may try to use to rebut those arguments. The complaint seeks a declaratory judgment holding that Trilantic is not in the 'controlled group' of one of its portfolio companies[.]" [Trilantic Capital Partners IV, LP v. United Food & Comm'l Workers Int'l Union-Ind. Pension Fund; New England Teamsters & Trucking Ind. Pension Fund; Nat'l Retirement Fund; and PBGC, No. 17-7485 (S.D.N.Y., complaint filed Sept. 29, 2017)] (Proskauer Rose LLP)
Loans by Federal Government to Multiemployer Plans Could Cost $7 Billion
"Advocates for multiemployer plans are putting the finishing touches on various federal proposals that would offer low-interest financing for struggling plans.... 55 pension funds designated as critical and declining with a combined $28 billion in net assets at the end of 2015 would be eligible for credit assistance. Under one proposal, the gross loan disbursement would be $23.3 billion payable over five years, with the favorable loan terms costing taxpayers $7.2 billion, without factoring in default risk, the researchers said; a one-third default rate on those loans would cost $10.9 billion." (Pensions & Investments)
Teamsters Pension Plan Warns Thousands of Beneficiaries That the Checks May Get Smaller
"The Western Pennsylvania Teamsters fund -- which has about 48 cents for every $1 in benefits it owes to retirees and workers -- notified participants in April that it is considering cutting benefits in order to insure that the fund doesn't become insolvent. The plan is expected to pay out nearly $129 million in benefits this year but will collect only about $54 million in contributions. If the current level of benefits is maintained, the fund is projected to run out of money in 2028." (Pittsburgh Post-Gazette)
Multiemployer Pension Funded Status Improved in First Six Months of 2017 (PDF)
"Multiemployer plan funding as of June 30, 2017, is nearing its best position since the market collapse of 2008. The aggregate funded percentage for multiemployer plans is estimated to have improved to 81% as of June 30, 2017, compared with 77% as of December 31, 2016, reducing the system's shortfall by $21 billion. The estimated investment return for our simplified portfolio for the first six months of 2017 was about 7.6%, far outpacing plans' investment return assumptions. The gap between the funded percentages of critical versus noncritical plans continues to widen." (Milliman)
IRS Work Plan Provides Focus for Examination of Multiemployer Plans
"The work plan states that for multiemployer plans the IRS will 'continue to examine plans that failed to properly calculate retirement benefits affecting service crediting and/or allocation/accruals, failed to make required minimum distributions, and/or failed to adjust benefits when retirement is delayed beyond the Normal Retirement Age' ... Late retirements pose several complex issues, the resolution of which depends on the plan's provisions and the age at which a participant retires." (Cheiron)
Alaska Ironworkers Pension Trust Withdraws Application fo MPRA Benefit Suspension (PDF)
"[T]he Plan hereby withdraws its Application filed on March 30, 2017 for approval of benefit suspension under [MPRA]. The Plan fully intends to file with the Treasury Department a new application for approval of suspension of benefits under the MPRA on or before December 29, 2017." (U.S. Department of the Treasury)
ERISA Provides No Means for Employer to Challenge Multiemployer Plan Changes
"The case raises a rarely litigated legal question: Can an employer use [ERISA] to challenge changes made to an underfunded multiemployer pension fund's rehabilitation plan? The judge Oct. 17 said no, explaining that ERISA only allows employers to bring a narrow subset of claims against the union benefit funds covering their workers." [Keyes Fibre Corp. v. Pace Indus. Union-Management Pension Fund, No. 17-613 (M.D. Tenn. Oct. 17, 2017)] (Bloomberg BNA)
2016 Funding Status Update for Multiemployer Plans Seeking MPRA Benefit Suspensions
"Now that 5500 filing season is over and most of the 2016 forms are searchable on the DOL website [this article provides] the status of union plans that have applied for benefit suspensions under MPRA with links to their latest 5500 filing and a focus on the worst funded plan with a reported funded ratio of 2.99% (yes that is the funded ratio and not the RPA interest rate)." (Burypensions)
The Building and Construction Industry Exemption to Withdrawal Liability
"Withdrawing employers in the 'building and construction industry' ... can be completely exempt from liability, provided three requirements are met ... The term 'building and construction industry' is not expressly defined in ERISA.... Employers that have common ownership must be cautious because withdrawal liability will be triggered if any entity in the same controlled group performs covered work without resuming contributions to the pension plan. Moreover, if withdrawal liability is triggered, any entity in the controlled group could potentially be responsible for paying that liability." (Greensfelder)
Central States Funding Update after MPRA Benefit Reduction Denial
"[N]egative net cash flow of over $2 billion annually for a fund that likely has about $14 billion left in it now means depletion fairly soon considering that those benefit payouts would continue to grow as revenue sources dry up. Assuming no revenue infusions (federal bailout) the percentage that benefits need to be cut corresponding to the years until asset depletion assuming those cuts would look something like this: 0% - 8 years; 30% - 13 years; 50% - 20 years[.]" (Burypensions)
Another Union Plan Withdraws Its MPRA Benefit Reduction Application
"The Southwest Ohio Regional Council of Carpenters Pension Plan out of Austintown, OH was the fifteenth (and last) multiemployer plan to file for benefit suspensions under MPRA. [On Friday, Oct. 13,] a letter popped up on the MPRA website withdrawing that application." (Burypensions)
House and Senate Bills Would Provide Loans for United Mine Workers Pension Fund
"Bipartisan legislation creating an emergency loan program allowing the United Mine Workers of America 1974 Pension Plan, Washington, to avoid insolvency was introduced Tuesday in the House and Senate. As of June 30, 2016, the pension fund had $4.1 billion in assets and $6.17 billion in liabilities, but with more than 10 times as many retirees as active participants, it is only 39.8% funded by actuarial standards." (Pensions & Investments)
The Reality of the Multiemployer Pension Reform Act
"MPRA was intended to provide multiemployer plan trustees with the difficult, but necessary tools required to restore their troubled plans to solvency, and protect retirees from the even larger benefit reductions that the retirees will see when their plans go insolvent and subject to the PBGC guarantee ... [Of] the three MPRA application approvals to date, all had previously applied to the Treasury and then withdrew ... Each plan then resubmitted their application and went through the process again.... [In] order to reapply, an organization must pay for revised actuary projections, and inform participants again that their benefits are going to be cut." (PLANSPONSOR)
Operational Risk Is the Achilles' Heel of DC Plans
"Recommended first steps to an integrated approach to managing operational risk include: [1] Review committee charters ... contracts and job descriptions ... [2] Catalogue planned audits and assessments ... [3] Request a copy of your key service providers' cybersecurity policies and business-continuity plans, and ask for annual updates.... [4] Check the investment policy ... [5] Review service providers' reports[.]" (Segal Consulting)
High Prescription Drug Cost Trends Projected to Be Lower for 2018
"Drug trends for actives and early retirees are expected to remain in the double-digits, continuing to be much higher than medical trend. Price inflation -- not utilization -- is the leading driver of trend... [T]he cost increases of pharmacy benefits now exceed the cost increases of inpatient hospital claim expenses or physician claim expenses ... [O]nce specialty Rx paid through the medical plan is added to Rx paid through PBMs, the cost of Rx is larger than inpatient, outpatient and professional services for some plans." (Segal Consulting)
[Official Guidance] Text of Treasury Department Notice of Multiemployer Pension Plan Application to Reduce Benefits: Western States Office and Professional Employees Pension Fund
"The Board of Trustees of the Western States Office and Professional Employees Pension Fund (WSOPE Pension Fund), a multiemployer pension plan, has submitted an application to reduce benefits under the plan in accordance with [MPRA]. The purpose of this notice is to announce that the application submitted by the Board of Trustees of the WSOPE Pension Fund has been published on the Treasury website, and to request public comments on the application from interested parties, including participants and beneficiaries, employee organizations, and contributing employers of the WSOPE Pension Fund." (U.S. Department of the Treasury)
IRS Revises Procedures for Multiemployer Plan Benefit Suspensions (PDF)
"Revenue Procedure 2017-43 modifies the submission and notice requirements for suspension of benefits applications. Under the revised procedures, if the IRS identifies an error in the application after it is submitted, it will ask for additional materials to correct the error, instead of rejecting the application. The latest guidance also includes [additional] changes[.]" (Prudential)
[Opinion] New York State Teamsters' Pensions to Be Slashed Because of Unfair Law
"[T]he workers and retirees overwhelmingly voted against the cuts (71% of votes cast were against cuts; 29% votes were in favor of cuts). However, the way the vote was structured anybody who DIDN'T cast a ballot -- was counted as a yes vote. Because 60% of the ballots were not returned, this flipped the vote.... MPRA is a bad bill and the cut-back provisions, including these ridiculously unjust voting provisions, have to be repealed." (Pension Rights Center)
Kroger to Leave Central States Pension and Start New Plan
"Kroger Co.... intends to complete its withdrawal from the Central States, Southeast and Southwest Areas Pension Fund, likely on Sept. 16, and move some 2,100 active plan participants to a new traditional pension ... That date marks the expiration of Kroger's collective bargaining agreement with the Teamsters. The withdrawal from the fund is expected to be completed under terms of a new bargaining agreement reached between the company and union in March 2017." (Bloomberg BNA)
Treasury Approves New York State Teamsters Benefit Reductions
"The pension fund is the third multiemployer fund to receive approval for benefit reductions under the Kline-Miller Multiemployer Pension Reform Act of 2014, and the largest to date. As of Jan. 1, the plan was 37.8% funded, with $1.28 billion in assets and $3.39 billion in liabilities. While 9,788 participants voted against the plan and only 4,081 voted for it, another 20,767 did not vote, leaving only 28.26% of the total vote opposed. The law requires 50% to stop it." (Pensions & Investments)
[Official Guidance] Text of Treasury Department Letter Approving Benefit Reductions by New York State Teamsters Conference Pension and Retirement Fund (PDF)
"Because a majority or eligible voters did not vote to reject the benefit reduction, the benefit reduction may go into effect. Treasury, in consultation with DOL and PBGC, has issued a final authorization to reduce benefits under the Fund as described in the Application, effective October 1, 2017, subject to [certain] conditions[.]" (U.S. Department of the Treasury)
[Discussion] Withdrawal Liability Calculation: Use the Pool Method When Contribution History Incomplete?
"I handle the administration for a construction fund. It is my understanding that the IRS has required that a construction fund to use the Presumptive method to calculate withdrawal liability. This fund has never needed to do a withdrawal liability calculation until now. This method requires 20 years worth of contribution history for the Fund but the Administrator can only give me 11 years worth of information. Can we instead use the pool method because the information simply isn't available?" (BenefitsLink Message Boards)
[Official Guidance] PBGC to Provide Early Financial Assistance to Furniture Workers Multiemployer Pension Plan
"The early financial assistance from PBGC, together with benefit reductions that are required as a condition for receiving PBGC assistance, will help the plan to avoid insolvency and to pay benefits to participants.... Under the partition, PBGC provides early financial assistance by moving a portion of the plan's guaranteed benefit obligations to a new, separate plan that will have its costs reimbursed by PBGC." (Pension Benefit Guaranty Corporation [PBGC])
Participants Approve United Furniture Workers Pension Benefit Cuts
"The pension fund identified 9,595 participants and beneficiaries eligible to vote, and delivered ballots to 9,273 ... Of those, 21% voted to reject the suspension. While only 1,041 ballots were in favor of the reduction, the plan will take effect Sept. 1 because a majority of eligible voters receiving a ballot did not vote to reject it. It is the second MPRA approval and the first one to include a partition, which calls for the [PBGC] to provide financial assistance for a new successor pension plan to be overseen by the pension fund's trustees." (Pensions & Investments)
[Guidance Overview] 2017 Q&As: PBGC Meeting with ABA Joint Committee on Employee Benefits, May 10, 2017 (PDF)
13 pages. Topics include: [1] Regulatory review/reform developments: PBGC impact; [2] PBGC early warning program; [3] Multiemployer program update (including PBGC audits of plans terminating by mass withdrawal, and two-pool withdrawal liability method request for information); [4] PBGC informal assistance regarding merger and partitions; [5] Reportable events: recent PBGC experience; [6] Standard terminations: recent PBGC experience; [7] PBGC website project: Q&A presenting informal views; [8] PBGC premiums in the context of de-risking, and de-risking trends. (Joint Committee on Employee Benefits [JCEB], American Bar Association)
114 Multiemployer Pension Plans Projected to Fail Within 20 Years; More Than a Million Participants Could Lose Benefits (PDF)
"As many as 114 multiemployer pension plans covering nearly 1.3 million workers are underfunded by $36.4 billion and expect to become insolvent within the next 20 years because they do not have money to pay participants the full benefits earned.... All the failing multiemployer plans informed regulator s that they are in 'critical and declining' status in keeping with [MPRA].... They do not include those that have already failed, or those that shut down because all the employers withdrew. Nor do they include plans that are 'safe' or 'endangered' under the law." (Cheiron)
Multiemployer Plans Zone Status, Summer 2017 (PDF)
"[T]he survey finding that about two-thirds of calendar-year plans are in the green zone should not obscure the fact that just about half of all participants in the survey are in red-zone plans. Significantly, about one-quarter of the participants in the survey are in plans that are also in 'critical and declining' status." (Segal Consulting)
The Multiemployer Pension System: Simulations of the Status Quo (PDF)
"This paper presents simulations of the multiemployer pension system under various sets of assumptions, so as to assess the range of possible outcomes should the basic features of the multiemployer system remain unchanged. Metrics presented include the number of plans projected to become insolvent, the number of participants in these plans, and the projected year of insolvency of the PBGC's multiemployer guarantee fund. The simulations were performed using the Multiemployer Pension Simulation Model (MEPSIM) ... [which] simulates almost all of the 1,300 plans in the multiemployer universe, excluding only those plans that lack sufficiently complete 5500 data." (The Pension Analytics Group)
First Circuit Opinion: Jurisdiction Exists for Multiemployer Plan Post-Judgment Action to Impose Withdrawal Liability on Successor Employer (PDF)
21 pages. "[It is uncontroverted in the First Circuit] that a plaintiff may seek to impose ERISA liability on an alter ego of the employer that formally bears the obligations imposed by the statute. The dispute here concerns the Fund's attempt to do so in a new action brought subsequent to a judgment against the signatory employer.... Here, the Fund maintains that N&D was -- at the pertinent times -- the same company as D&N and, as such, bore the same obligation under ERISA for the payment of that liability.... The Fund's claim against N&D was thus anchored in ERISA and premised on N&D's de facto status as an ERISA employer, and not ... on alleged wrongful conduct outside the scope of the federal statute." [New England Teamsters and Trucking Industry Pension Fund v.N&D Transportation Co., No. 15-2553 (1st Cir. Aug. 2, 2017)] (U.S. Court of Appeals for the First Circuit)
Pension Insurance System for Union Plans Still Faces Train Wreck
"The latest report, for fiscal year 2016, echoes previous warnings the [PBGC] has issued about its multiemployer program, which covers about 10 million workers. More than 100 plans insured by the agency have told their members that their plans will be insolvent within 20 years, the report says. The PBGC's own insolvency could leave the benefits of some 1.2 million participants in those plans without any safety net." (Bloomberg BNA)
Treasury Approves New York State Teamsters Conference Pension and Retirement Fund Application to Reduce Benefits
"On August 3, 2017, the Board of Trustees of the New York State Teamsters Conference Pension and Retirement Fund was notified that its application to reduce pension benefits under [MPRA] was approved by Treasury.... [T]he proposed benefit reduction will now be subject to a vote of participants and beneficiaries of the Fund. Ballots will be mailed to participants on or around August 14, 2017.... Unless a majority of participants and beneficiaries vote to reject the proposed benefit reduction, the proposed benefit reduction will go into effect on October 1, 2017." (U.S. Department of the Treasury)
[Guidance Overview] Treasury Modifies Procedures for Applications for Multiemployer Plan Benefit Suspensions
"The most significant change in the procedure concerns the actuarial assumptions. Prior procedures required the application to describe the actuarial assumptions used in making projections of the plan's financial status. The revised procedure contains a new Appendix B, 'Information on Actuarial Assumptions and Methods' [which] requires a detailed description of each of the actuarial assumptions used to project the plan's status, including supporting data, the plan's past experience regarding each assumption, and justification of the assumptions in light of the experience." (Cheiron)
Notes from Meeting of Actuaries 'Intersector Group' with PBGC, May 3, 2017 (PDF)
9 pages. Topics include: ... [1] How does the new administration affect the current priorities? ... [2] What is PBGC's plan with respect to mortality assumptions now that the IRS proposed regulations have been released? ... [3] Is PBGC moving forward with review of all other assumptions (e.g., ERISA Section 4044), and what can be expected on that front? ... [4] Are there any changes in the types of issues PBGC is seeing on audits of plan terminations or premium filings? ... PBGC provided a litany of errors it commonly discovers ... [5] Does PBGC expect to finalize the multiemployer plan merger regulation, and are any changes likely from the proposed regulation? (American Academy of Actuaries, Conference of Consulting Actuaries, Society of Actuaries, and ASPPA College of Pension Actuaries [ACOPA])
Notes from Meeting of Actuaries 'Intersector Group' with IRS, May 3, 2017 (PDF)
10 pages. Topics include: [1] Finalizing mortality table regulations ... [2] Change in funding methods ... [3] Relief for closed DB plans' nondiscrimination testing ... [4] Open issues related to variable annuity and hybrid plan designs ... [5] Adjusted Funding Target Attainment Percentage (AFTAP) certifications ... [6] Hybrid plans with interest credit choice based on age ... [7] Cash balance plans with market-based interest crediting rates. (American Academy of Actuaries, Conference of Consulting Actuaries, Society of Actuaries, and ASPPA College of Pension Actuaries [ACOPA])
Treasury Department Gives Thumbs Up to Second Pension Rescue
"The Furniture Workers fund's proposal is the first under the MPRA to have its plan partition request get conditional approval from the federal Pension Benefit Guaranty Corporation, which guarantees a minimum benefit to plan participants. If the partition is approved as part of a vote by plan members, the plan would be divided into two plans -- the original plan and a successor plan -- with the PBGC providing financial assistance to the successor plan." (Bloomberg BNA)
Multiemployer Plans on the Rocks: Furniture Workers Pension Allowed to Cut Retiree Benefits
"[Most multiemployer plans (here, MEPs)] are greatly underfunded, not just the MPRA-applied plans.... [T]he percentage of the liability that's for active employees is very low for the MPRA plans compared to all the other MEPs. For all the other MEPs, almost 40% of the total liability was for active employees." (STUMP)
[Official Guidance] Text of Treasury Department Letter Approving United Furniture Workers 'Pension Fund A' Application to Reduce Benefits (PDF)
On July 20, 2017, the Board of Trustees of the United Furniture Workers Pension Fund A (Fund) was notified that its second application to reduce pension benefits under MPRA was approved by Treasury. As a result, the proposed benefit reductions will now be subject to a vote of participants and beneficiaries of the Fund. Ballots will be mailed to participants and beneficiaries on or around August 1, 2017. (U.S. Department of the Treasury)
Treasury Modifies Multiemployer Benefit Suspension Procedures
"The revised procedures [in Rev. Proc. 2017-43] are effective for applications submitted on or after September 1, 2017, and are intended to facilitate the department's review in light of its experience processing benefit suspension applications." (Conduent)
[Official Guidance] Text of IRS Rev. Proc. 2017-43: Application Procedures for Approval of Benefit Suspensions for Certain Multiemployer Defined Benefit Pension Plans Under Section 432(e)(9) (PDF)
43 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).... The procedures set forth in this revenue procedure must be followed for applications submitted on or after September 1, 2017.... This revenue procedure includes the following changes from Rev. Proc. 2016-27 ...
  • the projected withdrawal liability payments that are included as part of the projection of the plan's available resources, and as part of the support for the certification that the plan is projected to avoid insolvency ... must be separately identified as projected payments attributable to prior withdrawals and projected payments attributable to expected future withdrawals....
  • the requirement to provide sample calculations with respect to the guarantee-based limitation under Section 432(e)(9)(D)(i) and the disability-based limitation under Section 432(e)(9)(D)(iii) for an individual in each category or group that is treated differently under the suspension [is replaced] with a requirement that those sample calculations be provided only for an individual currently receiving benefits, a contingent beneficiary of an individual currently receiving benefits, and a future retiree....
  • specify the age categories for which sample calculations with respect to the age-based limitation under Section 432(e)(9)(D)(ii) (taking into account the guarantee-based limitation and, if applicable, the disability-based limitation) must be provided....
  • [clarification of] the different categories of individuals with respect to which sample notices must be provided as part of the application....
  • consolidate the descriptions of the actuarial assumptions used with respect to certain illustrations and projections included in the application ... [and] provide additional detail regarding those assumptions....
  • require the inclusion of a narrative statement of the reasons the plan is in critical and declining status....
  • a requirement to provide ... the accountant's report under section 103(a)(3) of ERISA....
  • minor clarifications to the Model Notice of Application for Approval of a Proposed Reduction of Benefits....
  • minor clarifications to the power of attorney and declaration of representative form....
  • clarifications to the application checklist[.]"
(Internal Revenue Service [IRS])
Union Pension Plan Participation Can Create Massive Unexpected Liabilities
"Employers have the right to request an annual written estimate of withdrawal liability from any multiemployer pension plan in which they participate. The plan may charge a reasonable fee for the request and may take up to 180 days to comply with the request. An employer who participates in a multiemployer pension plan should request such an estimate on an annual basis so it is aware of the amount of any potential withdrawal liability." (Frost Brown Todd LLC)
Circuit Courts Split on Structural Conflicts of Taft-Hartley Boards When Reviewing ERISA Benefits Determinations
"On the one hand, [LMRA] requires that one-half of the board of a Taft-Hartley plan consist of trustees who are appointed by the employers who fund the plan, and, as such, are arguably motivated to deny the claim for the sake of saving costs. But on the other hand, the other half of the board consists of union-designated trustees who are arguably motivated to grant the claim to help their members.... [T]he Ninth, Sixth, and Fourth Circuits [have ruled] that the boards of trustees of Taft-Hartley plans are not structurally conflicted and the Second Circuit [has ruled] that they are structurally conflicted. This article reviews the underpinnings for the conflict of interest analysis generally and the reasoning of the differing rulings applying this analysis to Taft-Hartley plans." (Proskauer Rose LLP)
Law Firm Can't Escape Malpractice Claim Over ERISA Advice
"There are issues of fact on whether the law firm failed in its duty of care in providing legal advice as well as issues related to causation and damages, Judge George Caram Steeh of the U.S. District Court for the Eastern District of Michigan held June 30.... SSL Assets alleged that Jaffe provided faulty legal advice that ultimately made the investment firm liable for $3.9 million in withdrawal liability under [ERISA] and made it invest several millions in supporting a newly acquired company." [Cohen v. Jaffe Raitt Heuer & Weiss, P.C., No. 16-11484 (E.D. Mich. June 30, 2017)] (Bloomberg BNA)
American Academy of Actuaries Issue Brief: Overview of Multiemployer Issues (PDF)
9 pages. "Of the more than 10 million people who participate in multiemployer pension plans, approximately 1 million are in 100 plans that are projected to be unable to pay the full benefits that have been promised.... Tackling the multiemployer pension plan issue will require solutions that focus on securing 'legacy' pensions and also assuring a secure retirement system in the future. There are only two ways to remedy the situation -- infuse more money into the plans or reduce benefits." (American Academy of Actuaries)
First Comprehensive Look at Multiemployer Health Plans
"The total number of plans in the study was 1,823 for the 2005 plan year, declined steadily to 1,595 in 2013, and then increased slightly to 1,602 for the 2014 plan year.... The 1,602 health plans in the study had more than five million covered participants.... The plans in the study reported more than 209,000 contributing employers.... One in seven plans (14.7%) have costs above $14,000 per participant per year (PPPY), while one in seven (15.4%) have PPPY costs below $6,000." (International Foundation of Employee Benefit Plans [IFEBP])
[Guidance Overview] Primer on Withdrawal Liability
"Withdrawal liability has become a particularly significant issue due to a confluence of factors, including the impact of the recession, historically low interest rates, and changing workforce demographics. This primer is intended to introduce the reader to the basic rules governing the assessment and collection of withdrawal liability and their application in certain situations." (Jackson Lewis P.C., via Association of Corporate Counsel)
Who Really Loses When a Multiemployer Pension Plan Fails?
"Employers are not in the driver's seat when it comes to multiemployer pension plans. The trustees are charged with making very unpopular and difficult decisions ... Employees, retirees, and the general public will likely blame the employer for these broken promises.... It is possible to make these multiemployer pension plan participants whole. But, the employer faces a gauntlet of regulations, procedures, and potential confusion on the part of the plan participants." (Graydon Head & Ritchey LLP)
PBGC Reverses Expansion of Early Warning Factors
"Plan sponsors and others had criticized the new additions to the list as too vague. There were also concerns that these factors could result in more forcefully sought financial concessions from plan sponsors that could ill afford them. The PBGC initially claimed that it had always used similar criteria in its screening process." (Willis Towers Watson)
The Multiemployer Plan Financial Crisis: Effect on Single Employer Plans
"[It] seems likely that any ultimate solution (if there is one) will involve some sort of federal bailout. That bailout could possibly involve single employer plans in some way. For instance, Senator Sanders's KOPPA proposal would fund multiemployer plan benefits by: [1] transferring assets from the PBGC single employer program; and [2] capping contributions to defined contribution plans, to generate tax revenues to pay for direct federal Treasury funding." (October Three Consulting)
[Official Guidance] Text of Treasury Department Extension of Comment Period for Multiemployer Pension Plan Application to Reduce Benefits: United Furniture Workers Pension Fund A
"On April 19, 2017, the Department of the Treasury published a notice of availability and request for comments regarding an application to reduce benefits under the United Furniture Workers Pension Fund A (UFW Pension Fund) in accordance with [MPRA].... The comment period for the notice published April 19, 2017 (82 FR 18536), is extended. Comments must be received on or before June 20, 2017." (U.S. Department of the Treasury)

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