Congress Takes Steps to Help Failing Multiemployer Plans

There has been a lot of chatter as of late about possible legislation and efforts on the Hill to provide relief to failing multiemployer pension plans. On Thursday, November 16th, House Democrats introduced a bill that would allow multiemployer pension plans to receive loans from Treasury.

While the language of the bill is not yet available, according to congress.gov, the bill is intended to create a Pension Rehabilitation Trust Fund and to establish a Pension Rehabilitation Administration (PRA) within the Department of the Treasury to make loans to multiemployer defined benefit plans, and for other purposes. The PRA would allow pension plans to take out loans at low interest rates, in order for the plans to remain solvent and continue providing full retirement benefits for current and future retirees. The money for the loans would come from the sale of Treasury-issued bonds to financial institutions. There will likely be some reporting requirements and other restrictions for plans that take out such loans, to ensure that the plans can pay back the taxpayers.

This bill is in the first stage of the legislative process. The bill is now assigned to three House committees for review and consideration. If approved, it will then be sent to the House or Senate as a whole. A bill must be passed by both the House and Senate in identical form and then be signed by the President to become law.

Treasury Denies Application to Suspend Benefits for Automotive Industries Pension Fund

The U.S. Treasury Department has denied the application to suspend benefits under the Multiemployer Pension Reform Act of 2014 that was submitted by the Automotive Industries Pension Fund in September 2016. Treasury noted in its denial letter that assumptions regarding mortality, Joint and Survivor election percentage by married participants, and the probability of benefit commencement by terminated vested participants over the age of 70 were considered not reasonable.

The Automotive Industries Pension Fund is projected to become insolvent in 2030 without the suspensions.  As of January 1, 2016, the Plan had an unfunded benefit liability of over $700 million, was 60.7% funded, and covered over 25,000 participants.

As of the date of this posting, Treasury has received applications for benefit suspensions from a total of 15 multiemployer pension plans since MPRA took effect.  Five have been denied, one has been approved, three have been withdrawn, and six are pending.