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Republicans Propose Wholesale Reform of Multiemployer Pension Plan System

In a white paper and technical explanations, Republican Senators Charles E. Grassley (Chairman of the Senate Committee on Finance) and Lamar Alexander (Chairman of the Senate Committee on Health, Education, Labor and Pensions) have proposed reforms to the multiemployer pension plan system.

If implemented, the proposed reforms (not yet introduced as a bill) would represent dramatic and far-reaching changes to the multiemployer pension plan system. The white paper describes the current system as “in crisis” and warns that failure to act now will leave over 1.3 million multiemployer pension plan participants without the pension benefits they have been promised and earned.

The proposed reforms would attempt to finance improvements and strengthen the Pension Benefit Guaranty Corporation (PBGC) (the federal agency that guarantees certain pension benefits) by creating a new premium structure, including increasing the annual per-participant premium from $29 to $80 and imposing a copayment on active employees and most retirees.

Among other things, the proposed reforms would:

  • Expand PBGC’s authority to partition plans to carve out liabilities attributable to employers who have exited a plan without paying their full share of liabilities;

  • Increase the level of benefits guaranteed by PBGC from $12,870 a year to approximately $20,000 a year;

  • Require plans to use more conservative interest rate assumptions to value liabilities for funding, capped at six percent;

  • Require plans to use these funding assumptions for withdrawal liability determinations;

  • Increase the annual withdrawal liability payment amount (essentially, by using a 20-year lookback);

  • Replace the 20-year cap with a sliding scale based on funding status, but in no event over 25 years of payments; and

  • Eliminate mass withdrawal liability.

The proposed reforms would drastically affect the withdrawal liability of most contributing employers. While many believe it unlikely these proposed reforms will be enacted, some of the proposed reforms could become part of the Rehabilitation for Multiemployer Pensions Act (also called the Butch Lewis Act) that was passed by the House of Representatives on July 24, 2019, and introduced to the Senate.

Jackson Lewis P.C. © 2020National Law Review, Volume IX, Number 344


About this Author

Robert R. Perry, Jackson Lewis P.C., labor, employment, benefits, lawyer

Robert R. Perry is a Principal in the New York City, New York, office of Jackson Lewis P.C. He has more than 20 years of experience in the area of employee benefits law.

Mr. Perry’s practice includes counseling clients on all aspects of employee benefits and executive compensation. Mr. Perry also advocates on behalf of clients in benefits-related disputes, as well as in administrative proceedings before the Internal Revenue Service, the United States Department of Labor and the Pension Benefit Guaranty Corporation.