Under the Employee Retirement Income Security Act (“ERISA”), as amended by the Multiemployer Pension Plan Amendments Act (“MPPAA”), an employer that has assumed an obligation to contribute to collectively-bargained and jointly-administered defined benefit pension plans ( “multiemployer plans”) is liable for its allocable share of any underfunding upon the permanent cessation of that obligation. This “withdrawal liability” has become a significant issue since 2008 due to a confluence of factors, including the economic and investment impact of the recession, historically low interest rates, declining plan participation, and an increase in the number of retirees.
A report published in December 2017 by the U.S. Chamber of Commerce described the situation as “bleak.” 114 multiemployer plans (out of approximately 1,400 in total) are underfunded by $36.4 billion. The Pension Benefit Guaranty Corporation (“PBGC”), the Federal agency with regulatory and enforcement authority over MPPAA, and that backstops multiemployer plan benefits, is itself in financial distress. The PBGC is projected to be insolvent within 5 years, which could wipe out the retirement security of millions of Americans.
Congress has attempted to address this problem numerous times, first with the enactment of MPPAA (which created the concept of withdrawal liability) in 1980. Subsequent attempts have included the Pension Protection Act of 2006 (which attempted to stabilize and improve multiemployer plan funding) and the Multiemployer Plan Reform Act of 2014 (which created tools for multiemployer plans to stave off insolvency). None have been particularly successful, and the multiemployer crisis has worsened.
The most recent such attempt is the Bipartisan Budget Act of 2018, which became law on February 9, 2018. The Act establishes the “Joint Select Committee on Solvency of Multiemployer Pension Plans,” the goal of which is to improve the solvency of both multiemployer plans and the PBGC.
The Committee is tasked with generating a “detailed statement of the findings, conclusions and recommendations” of the joint committee, as well as drafting proposed legislation to carry out these recommendations. Its membership will be comprised of 16 members, appointed equally by the majority and minority leaders of both the Senate and the House of Representatives.
We will continue to monitor this evolving situation.