This is another in our series addressing the continuing deterioration of multi-employer defined benefit pension plans.
Regardless of the identity of the next tenant of the White House, a major item on the new administration’s domestic agenda must be curbing the continuing deterioration of multi-employer defined benefit pension plans. Hopefully any new legislation will approach the problems differently than did the Kline-Miller Multiemployer Pension Reform Act of 2014 (the “MPRA”).
In the waning moments of the 2014 lame duck Congress, an Omnibus Bill was passed containing the MPRA. This legislation was intended to provide a “quick fix” to the problems confronting multi-employer pension plans by permitting them, for the first time since the passage of ERISA, to reduce core benefits. Those funds were obligated to file applications to the Department of the Treasury seeking the relief sought and providing reasons.
In the two years since the passage of the MPRA, nothing has happened except expenditures of a great deal of money by multi-employer funds to obtain the relief from the Treasury and a hue and cry from Senator who now regret having voted in favor of legislation that has caused such human suffering. They then penned a common letter to the Treasury Department demanding that the lengthy and costly application by the Central States and Southeast Pension Fund be denied. Central States’ application was subsequently denied.
Although other pension funds have also attempted to obtain the relief permitted under the MPRA, none of those applications have been granted. The application filed by the Iron Workers Local 17 Pension Fund which sought cuts of monthly pension benefits for some retirees of up to 50% was withdrawn with the fund submitting a revised application. Applications were recently filed by the New York State Teamsters Conference Pension and Retirement Fund and the Bricklayers and Allied Craftworkers Local 5 New York Retirement Fund.
Based upon the finding by the Treasury Department that the assumptions used by Central States in the actuarial projections contained a bias because the projected 7.5% annual investment rate of return was “significantly optimistic,” it is unclear how these new applications will be addressed by the Treasury Department.
Concurrently, Congress has come up with a new iteration to bail out the multi-employer funds in the form of a “composite plan.” The composite plan has been described as being a newly created defined contribution plan which Congress envisions as being the successor to existing multi-employer plans. Perhaps in an effort to eliminate opposition by the PBGC, these composite plans would not participate in the PBGC’s defined benefit plan insurance.
A positive note is that at least one member of Congress is sounding the alarm about a stealth passage of a pension revamp. Congressman Joseph Courtney of Connecticut has warned about passage of some pension “reform” in the post-election lame duck session and has specifically referred to the manner in the MPRA was passed in 2014 as part of an omnibus bill.