Category: Multiemployer pensions

Congress Considers New Multiemployer Pension Reform

Mary Pat Campbell

Link: https://www.jdsupra.com/legalnews/congress-considers-new-multiemployer-2408608/

Excerpt:

Without congressional intervention, about 100 multiemployer pension plans are expected to become insolvent in the next 20 years, and some much sooner.  In other words, for these pension plans, their liabilities to retired employees and current employees with vested benefits far outweigh their assets and incoming contributions. Although the Pension Benefit Guaranty Corporation is intended to provide a backstop to any insolvencies, the sheer number of plans facing insolvency and the total size of unfunded vested liabilities will bankrupt the PBGC’s multiemployer program as well.  It is against that backdrop that Congress has added the Butch Lewis Emergency Pension Plan Relief Act of 2021 to the COVID-19 relief bill. 

…..

Fourth, the bill would create a special financial assistance program for those plans that are expected to become insolvent in the near future.  Under the bill, the Treasury would grant money to the PBGC, which would then disburse it to eligible plans.  Eligible plans include (a) those in critical and declining status, (b) those that have approved benefit suspensions, (c) those that are in critical status with a funding percentage of less than 40% with more inactive than active participants, and (d) those plans that are already insolvent. The bill would instruct the PBGC to develop regulations within 120 days for applications and to prioritize applications from plans that are (a) insolvent, (b) likely to become insolvent within five years, (c) have a present value of over $1 billion in unfunded vested benefits, or (d) have already implemented benefit suspensions. The money would be paid in a single, lump-sum payment in the amount sufficient to guarantee benefits, without reductions, through 2051.  If a multiemployer plan were to receive financial assistance, it would be required to reinstate any suspended benefits, and repay the amount of benefits previously suspended.  Finally, an employer’s withdrawal liability would be calculated without taking into account this assistance for 15 calendar years after it was received. 

Publication Date: 16 February 2021

Publication Site: JD Supra

Multiemployer Pension Plan Bailout Update: The Good News, Bad News, And The Pricetag

Mary Pat Campbell

Link: https://www.forbes.com/sites/ebauer/2021/02/16/multiemployer-pension-plan-bailout-update-the-good-news-bad-news-and-the-pricetag/?sh=7d41ea2e6fb9

Excerpt:

The legislation states that its objective is “to pay all benefits due” up until 2051. However, experts with whom I spoke explained that this is not intended as a complete funding of all benefits due during the period, but only meant to fill in the gaps so that, added together with their current assets and future contributions, there will be enough funds to pay benefits for the next 30 years.

The bad news:

The text of the legislation, as written at the moment, does not spell out any of these mechanics. Is the plan to require contributions at the same level as these troubled plans are currently paying in, or more, or less? To what extent would those contributions be used to build assets for future accruals, vs. being “spent” on already-accrued benefits by being included in the calculations of federal bailout funds, as offsetting money? My expert friends did not know, and, to be honest, this is the sort of detail that, in any prior pension funding legislation, is spelled out in the law itself rather than left for the PBGC (Pension Benefit Guaranty Corporation) to sort out as regulation. This is concerning, because it risks the whole program going south very quickly.

Author(s): Elizabeth Bauer

Publication Date: 16 February 2021

Publication Site: Forbes

To the union allies of the victor go the pension spoils

Mary Pat Campbell

Link: https://www.washingtonexaminer.com/opinion/op-eds/to-the-union-allies-of-the-victor-go-the-pension-spoils

Excerpt:

Last week, the House Ways and Means Committee approved a massive taxpayer bailout of private sector multiemployer defined benefit pension plans, or MEPs, as part of a budget reconciliation package that is purportedly meant to deal with COVID-19. Senate Budget Committee Chairman Bernie Sanders claims MEPs are underfunded because “of the greed on Wall Street.” But MEPs are troubled because of mismanagement, not because of COVID-19 or Wall Street.

MEPs are jointly sponsored by a union and companies employing members of that union. It is not clear why taxpayers, who had no role in making these pension promises, should be funding them.

The proposal would saddle taxpayers with unfunded pension promises made by eligible MEPs, which are underfunded by more than $100 billion, while providing perverse incentives for other MEPs to subsequently qualify. This would be extremely expensive as MEPs are already underfunded by $673 billion as of 2017 (a funding ratio of 42%).

Author(s): Aharon Friedman

Publication Date: 15 February 2021

Publication Site: Washington Examiner

House Includes Pension Reform Plan in COVID-19 Relief Bill

Mary Pat Campbell

Link: https://www.ai-cio.com/news/house-includes-pension-reform-plan-covid-19-relief-bill/

Excerpt:

Multiemployer pension plans eligible for the program would include plans in critical and declining status, and plans with significant underfunding that have more retirees than active workers in any plan year beginning in 2020 through 2022. Additionally, plans that have suspended benefits and certain plans that have already become insolvent would also be eligible.

The plans would have to apply for the special financial assistance, and, if approved, the payment made by PBGC would be in the form of a single, lump sum. The amount of financial assistance would be equal to the amount required for the plan to pay all benefits due during the period beginning on the date of enactment and ending on the last day of the plan year ending in 2051. Plans would also be required to invest the amounts in investment-grade bonds or other investments as permitted by PBGC.

Author(s): Michael Katz

Publication Date: 11 February 2021

Publication Site: ai-CIO

Mulitemployer Bailout Eligibility

Mary Pat Campbell
Mulitemployer Bailout Eligibility

Excerpt:

It was reported that The Butch Lewis Emergency Pension Plan Relief Act of 2021, to be included in some covid-relief bill, would create a special financial assistance program under which cash payments would be made by the Pension Benefit Guaranty Corporation (PBGC) to financially troubled multiemployer pension plans so they could continue paying retirees’ benefits. The money would be provided to PBGC through a general Treasury transfer. Multiemployer pension plans eligible for the program would include plans in critical and declining status, and plans with significant underfunding that have more retirees than active workers in any plan year beginning in 2020 through 2022. Additionally, plans that have suspended benefits and certain plans that have already become insolvent would also be eligible.

So how many plans would that be? Based on the last full year of data (2018) from the DOL website here is how it breaks down.

Author(s): John Bury

Publication Date: 11 February 2021

Publication Site: Burypensions

Democrats Introduce Bill to Protect Pensions, Expand PGBC’s Power

Mary Pat Campbell

Link: https://www.ai-cio.com/news/democrats-introduce-bill-protect-pensions-expand-pgbcs-power/

Excerpt:

KEY TAKEAWAYS

Bill would create a special partition program that would expand PBGC’s authority.

Pension plans would no longer be able to seek a reduction in benefits under MPRA.

PBGC would begin receiving federal funding and double its maximum guaranteed benefit.

Author(s): Michael Katz

Publication Date: 22 January 2021

Publication Site: ai-CIO

Outlook Improves for Multiemployer Reform in 2021, 2022

Mary Pat Campbell

Link: https://www.ai-cio.com/news/outlook-improves-multiemployer-reform-2021-2022/

Excerpt:

There’s an improved chance Congress will pass legislation over the next year or two to prevent multiemployer pension plans and the Pension Benefit Guaranty Corporation (PBGC)’s multiemployer insurance program from becoming insolvent, according to law firm Morgan Lewis.

In a blog post on the firm’s website, Morgan Lewis Senior Director Timothy Lynch and Partner Daniel Salemi wrote that the biggest factor that could lead to a legislative solution is the fact that the Democratic Party controls the White House and both houses of Congress. They also say the Biden administration may see greater urgency in moving for a solution due to the major economic fallout that would occur if PBGC’s multiemployer program were to become insolvent in 2026, as is currently projected.

Author(s): Michael Katz

Publication Date: 20 January 2021

Publication Site: ai-CIO

How the Federal Reserve’s Actions and Low Interest Rates Impact Public and Private Retirement Savings

Mary Pat Campbell
How the Federal Reserve’s Actions and Low Interest Rates Impact Public and Private Retirement Savings

Graphic:

Excerpt:

The extended period of low interest rates we’re in is not only creating challenges for public pension systems across the nation, but it is also negatively impacting people who are relying on their own savings to fund their retirements.

A common strategy for generating retirement income is to invest savings from an individual retirement account (IRA) or 401(k) into income-producing assets such as corporate bonds. But interest rates on corporate bonds have been falling in recent decades, reaching multi-decade lows in 2020.

Author(s): Marc Joffe

Publication Date: 20 January 2021

Publication Site: Reason

Bipartisan Agreement AKA Multiemployer Pension Bailout

Mary Pat Campbell
Bipartisan Agreement AKA Multiemployer Pension Bailout

Excerpt:

Two years ago retired coal miners traveled to Washington, D.C. to lobby lawmakers to put in place a federal safety net in case the United Mine Workers of America (UMWA) pension fund fails. Coal plant closures and company bankruptcies have sent the pension fund to the edge of collapse. In October, 2019 Murray Energy, the last major company propping up the dwindling fund, also went bankrupt and the prediction was insolvency in FY23.

From their 5500 form for the year ended 6/30/19 confirming the timeline.

Author(s): John Bury

Publication Date: 2 February 2021

Publication Site: Burypensions

House panel to weigh multiemployer pension reform bill

Mary Pat Campbell

Link: https://www.pionline.com/legislation/house-panel-weigh-multiemployer-pension-reform-bill

Excerpt:

Legislation to help struggling multiemployer pension funds is to be considered this week by a key House panel as part of a COVID-19 relief measure.

The House Ways and Means Committee is expected to start marking up a package of pandemic relief measures Wednesday, including one aimed at stabilizing pensions for more than 1 million participants in multiemployer plans approaching insolvency.

The pension section of the proposed Emergency Pension Plan Relief Act of 2021 is cited as the “Butch Lewis 4 Emergency Pension Plan Relief Act of 2021.”

It is based on a previously proposed multiemployer pension relief bill named for retiree Butch Lewis that called for a federal loan program for struggling plans and more resources for the Pension Benefit Guaranty Corp. to help troubled plans through partitions.

Author(s): Hazel Bradford

Publication Date: 9 February 2021

Publication Site: Pensions & Investments

The Covid Spend-O-Rama’s Multiemployer Pension Bailouts: Some Disappointed First Impressions

Mary Pat Campbell

Link: https://www.forbes.com/sites/ebauer/2021/02/09/the-covid-spend-o-ramas-multiemployer-pension-bailouts–some-first-impressions/?sh=5fa34dbb2e62

Excerpt:

Which brings us to yesterday’s proposal. It is named the “Butch Lewis Emergency Pension Plan Relief Act of 2021” but it is not the “Butch Lewis Act” and it is not the “Emergency Pension Plan Relief Act of 2021.”

There are some commonalities, to be sure. The new bill maintains the provision which allows plans to use the “zone” status from prior to the pandemic to avoid designation as endangered, critical, or critical and declining. It allows plans to stretch their “funding improvement and rehabilitation period” from 10 to 15, or from 15 to 20 year, depending on the plan’s particulars. It permits plans to amortize asset losses over 30 years to reduce their required contributions — plus, added in the new version, the option to also defer recognizing “other losses related to the virus SARS-CoV-2” such as reductions in employment or increases in retirements.

But there’s another change that’s substantial. In the prior, HEROES Act version, the drafters maintained the concept of the “partition,” shifting liabilities for a portion of an at-risk pension to the PBGC and funneling extra funds there to be able to make those payments; to be sure, that version had planned to increase the maximum benefit substantially in order to protect retirees from benefit cuts, but the structure remained somewhat similar. The new proposal simply sends cash to eligible ailing multiemployer plans directly.

….

A straightforward read of this, then, is that every penny of pension benefits due to be paid to present or future retirees, for the next 30 years, would be paid by the federal government.

Author(s): Elizabeth Bauer

Publication Date: 9 February 2021

Publication Site: Forbes

Multiemployer Plan Bailout Caps Benefit Plan Limits

Mary Pat Campbell

Link: https://www.asppa.org/news/multiemployer-plan-bailout-caps-benefit-plan-limits

Graphic:

Excerpt:

Legislation before the House Ways & Means Committee plans to help pay for a multiemployer plan bailout by utilizing a budget “gimmick” that would freeze retirement plan contribution limits—though not for collectively bargained plans. 

More specifically, the Butch Lewis Emergency Pension Plan Relief Act of 2021, included as subtitle H of a nine-part package that the committee plans to mark up this week, would impose a cost-of-living freeze on:

the Code Section 415(c) annual contribution limit for defined contribution plans; 

the Section 415(b)(1)(A) annual defined benefit limit; and 

the Section 401(a)(17) annual compensation limit. 

This appears to be designed to fill a budget hole in the 10-year scoring window—and as such would freeze these limits starting in calendar year 2030.[1] Ironically, it’s scored to lose money in the years leading up to the effective date, apparently anticipating that individuals will be inclined to increase contributions before the limits are imposed. 

Author(s): TED GODBOUT AND NEVIN E. ADAMS

Publication Date: 9 February 2021

Publication Site: ASPPA