PBGC Issues Guidance on Multiemployer Plan Mergers and Transfers
The Pension Benefit Guaranty Corporation (PBGC) is issuing rules to implement its authority to facilitate mergers and transfers between multiemployer pension plans, the agency announced
on Sept. 13. The final regulation updates the general requirements on plan mergers and transfers of plan assets and liabilities between multiemployer plans. The PBGC has the power to facilitate such mergers under certain conditions under the Multiemployer Pension Reform Act of 2014 (MPRA).
The PBGC argues that merging multiemployer plans can help protect workers’ and retirees’ benefits and extend the solvency of troubled plans. It says that mergers facilitated under this final rule will give troubled plans a chance to remain solvent. And that, in turn, will help preserve participants’ benefits, which may be reduced absent a merger. “Merged plans may save money from lower administration and investment expenses and provide greater stability by expanding the base of employers that contribute to the plan,” said PBGC Director Tom Reeder in a press release.
Help for the PBGC too
Merger assistance is one of the few tools by which the PBGC says it can help struggling multiemployer plans. Under the MPRA, if one or more of the plans involved in the merger is in critical and declining status (meaning, generally, a plan projected to become insolvent within 20 years), the PBGC may provide financial assistance for the merged plan to remain solvent.
But the PBGC notes that its Multiemployer Insurance Program does not offer a global solution to the funding crisis in the multiemployer pension system, since the program has limited resources. “Although we have limited resources to address the anticipated insolvencies of multiemployer plans, facilitated mergers under this final rule could help preserve retirement benefits for workers and retirees in some struggling multiemployer plans,” he continued.
The final rule on multiemployer plan mergers and transfers will be published
in the Federal Register
of Sept. 14, 2018 to implement procedural and informational requirements for facilitated merger requests.