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Multiemployer Pensions Get Relief in The American Rescue Plan


Expert Witness: ERISA Benefits Consulting, Inc.
Financially distressed multiemployer pension plans are receiving $86 billion in financial assistance as a result of the American Rescue Plan Act (ARPA) enacted by Congress in March 2021.

Multiemployer pension plans are most common in labor-intensive, unionized industries where workers move from one employer to another over the course of their working career. Construction, transportation, hospitality, manufacturing, and entertainment are leading industries where multiemployer plans are often present.

The Butch Lewis Emergency Pension Plan Relief Act

The ARPA 2020 COVID relief bill includes the Butch Lewis Emergency Pension Plan Relief Act of 2021, which will support endangered multiemployer pensions in several ways.

"Special financial assistance" will be granted to plans that fill out an application which is subsequently approved. Once the request for funding is granted for a plan, the Pension Benefit Guaranty Corporation (PBGC) will provide the plan with a single lump sum payment that will allow them to continue paying benefits
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through plan year 2051 and remain solvent. Assistance payments, which are funded by U.S. general funds via the U.S. Treasury, do not need to be repaid.

The Congressional Budget Office (CBO) estimates that $82 billion of the total expected multiemployer funding of $86 billion will be spent in 2022, followed by $2 billion in 2023. Approximately 185 distressed multiemployer pension plans are expected to participate in the program, but the number could be as high as 336 plans.

The Relief Act also gives multiemployer plans some flexibility in regard to their designated status as endangered, critical, or critical and declining. Depending on their current status, some plans may be able to extend their rehabilitation period and/or amortize investment losses over a longer time period.

The Central States Pension Fund, with more than 400,000 participants, is one of the largest multiemployer plans that is expected to benefit from the ARPA relief. According to its most recent annual filing with the IRS, Department of Labor and the PBGC, the Form 5500, it is funded at only 23.19% of its current liabilities. The Fund has projected its insolvency date, i.e., the exhausting of funding, to be 2025.

The PBGC Multiemployer Plan

The Pension Benefit Guaranty Corporation's Multiemployer Program oversees defined benefit pension plans that are created through one or more collective bargaining agreements (CBA) between employers and one or more employee organizations or unions. The plans are often jointly governed by a board of trustees consisting of both labor and management representatives.

The PBGC stated in its 2020 annual financial report, "The Multiemployer Insurance Program continues to face a crisis that threatens the retirement security of millions of Americans and is highly likely to become insolvent in 2026. The Multiemployer Insurance Program remains severely underfunded with a negative net position of $63.7 billion."

The multiemployer funding grants provided under ARPA are expected to reduce pressure on the PBGC by protecting multiemployer plan solvency through the mid-2040s.

The Kline-Miller Multiemployer Pension Reform Act of 2014

Congress previously addressed the underfunding of multiemployer plans in The Kline-Miller Multiemployer Pension Reform Act of 2014 (MPRA). As part of the MPRA, Congress established new options for trustees of multiemployer plans that were at risk of running out of money. Trustees of multiemployer plans that were deemed to be in "critical and declining status" (meaning they were projected to run out of money within 15 to 20 years) could request approval for a reduction in benefits.

Since the MPRA was enacted, approximately 17 multiemployer plans have been approved for benefit reductions, six applications have been denied, four applications have been withdrawn, and four are under review.

Background on Multiemployer Pension Plans

The "multiemployer" plan is not to be confused with the "multiple employer pension plan" (MEPP). A "multiple employer" plan is defined as follows,

"a plan maintained by more than one employer allowing the pooling of plan assets for investment purposes and reduction in the cost of plan administration. A multiple employer plans maintains separate accounts for each employer so that contributions provide benefits only for the employees of the contributing employer. There are no collective bargaining agreements requiring contributions in a multiple employer plan."

"Multiple employer plans" are 401(k) plans, so there is no PBGC role or potential PBGC liability.



ABOUT THE AUTHOR: Mark Johnson, Ph.D., J.D.
Mark Johnson, Ph.D., J.D., is an experienced pension and ERISA expert. As a former ERISA Plan Managing Director and plan fiduciary for a Fortune 500 company, Dr. Johnson has practical knowledge of plan documents as well as an in-depth understanding of ERISA obligations. He works as an expert consultant and witness on 401(k), ESOP and pension fiduciary liability; retiree medical benefit coverage; third party administrator disputes; individual benefit claims; pension benefits in bankruptcy; long term disability benefits; and cash conversion balances. He can be reached at 817-909-0778. ERISA Benefits Consulting, Inc. by Mark Johnson provides benefit consulting and advisory services and does not engage in the practice of law.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.For specific technical or legal advice on the information provided and related topics, please contact the author.

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