TMC Update – The McKeogh Company Employees Present on MPRA and Rehab Plans

Boris Vaynblat presented at the Annual Conference of Consulting Actuaries Meeting in October 2018 in Colorado Springs.  He led a session on the Multiemployer Pension Act of 2014 (MPRA).  Boris related his experiences obtaining approval from the US Treasury Department for benefit suspensions for a Pension Fund heading for insolvency, thereby giving the Fund a chance to survive for future generations.

Both Jim McKeogh, president of The McKeogh Company, and Michael Reilly presented at the International Foundation of Employee Benefit Plans (IFEBP) in New Orleans in October. Michael  co-lead a discussion entitled “How to Make Your Client’s MPRA Applications Successful”. His presentation focused on the application process including assumptions and common pitfalls.  Jim sat on a panel of industry experts in the “Ask the Professionals” session as the multiemployer plan expert.

Mandy Notaristefano traveled to Aruba to speak at the Contractors Association of Eastern PA’s 2019 Winter Conference in February 2019.  Mandy’s talk focused on Rehabilitation Plans.  She ran a simulation of a plan that had newly entered critical status and walked the attendees through the development and monitoring of a rehabilitation plan.

Proposed Legislation – Multiemployer Pension Relief

On January 9, 2019, Rep. Richard Neal (D-MA) introduced the Rehabilitation for Multiemployer Pensions Act into Congress.

This bill seeks to help ailing multiemployer pension plans by establishing a new agency within the Treasury Department called the Pension Rehabilitation Administration (PRA).   This agency would be authorized to issue bonds in order to raise capital.  The capital would then be used to issue loans to critical and declining status plans and some already-insolvent plans that are currently receiving financial assistance from the Pension Benefit Guaranty Corporation (PBGC).

The loan would be interest-only for 30 years with principal due at end of 30th year and in an amount needed to fund pensions for current retirees only.  The pension fund would be required to purchase a commercial annuity contract with the loan proceeds, or set the funds aside in a separate pool and invest in a bond portfolio which has cash flows that mimic the expected pension payouts.  In certain situations, a loan could be combined with financial assistance from the PBGC in order to prevent plan insolvency.

Loan applications would need to demonstrate that the loan will enable the plan to avoid insolvency during the 30-year period and that plan would be reasonably expected to pay the loan back with interest.  The plan would not be allowed to reduce benefits during the loan term and could not accept a CBA with lower contribution rates.