Why You Should Care About MPRA
Whether you work with multiemployer pension plans or not, it’s worth taking a little time to learn about what has been happening over the past few years. In February 2013, the National Coordinating Committee for Multiemployer Plans published “Solutions not Bailouts: A Comprehensive Plan from Business and Labor to Safeguard Multiemployer Retirement Security, Protect Taxpayers and Spur Economic Growth.” The proposal was controversial because it would allow deeply troubled plans to suspend a portion of participants’ accrued benefits if the plan has taken all reasonable measures to improve funding, insolvency is still inevitable, and it is possible to avoid insolvency and preserve benefits above 110% of the PBGC maximum guarantee level.
As late as last year’s ASPPA Annual Conference, I said there was no way a proposal this significant and this controversial could become law before the end of the year. I was dead wrong. The Multiemployer Pension Reform Act of 2014 (MPRA) was included in the year-end “CROminibus” package. At least some on the Hill are still smarting from the way it was pushed through, and there is proposed legislation to repeal or modify that section of MPRA, but it is probably here to stay.
Why should you care? A few reasons:
- This is a really big deal, and as a pension actuary, you should be aware of it.
- Let’s be honest — “suspension” is likely to be permanent, or a way station on the downhill trail to the PBGC guaranteed benefit. The argument for permitting this suspension is to avoid, or at least substantially delay, the need to cut benefits to the PBGC guaranty, currently $12,870. It may be a compelling argument, or not, but it is now the law. An ongoing defined benefit plan is no longer required to pay promised defined benefits. That is a sea change, and not for the better.
- On September 25, the Central States Teamsters Pension Fund filed a “rescue plan” with Treasury, and has notified participants that there may be a suspension of benefits. According to the 2014 Annual Funding Notice, there are more than 400,000 participants in the teamsters plan. (Only about 65,000 are active; more than 200,000 are already receiving pension and disability benefits.) Employees covered by single employer plans you work with may well know a Central States participant, and you may need to explain why their plan is different.
Generally, MPRA provided the benefit suspension could only become effective if participants voted to approve it. There was a special provision for “systemically important” plans, allowing the Secretary of the Treasury to approve suspension of benefits even if participants vote “No.” Central States is a “systemically important plan” — likely to need more than $1 billion in assistance from PBGC — so participants can vote, but Treasury, and the plan, need not listen. Legislation introduced by two Republicans — Senators Portman and Burr — would make the vote binding. Some Democrats, including Senator Bernie Sanders, have introduced legislation that would strip out the ability to suspend benefits, and use general funds to pay benefits when necessary. I doubt either will pass, but give the Portman bill better odds. Of course, when it comes to predictions about multiemployer plan legislation, I’m 0-1, so best to watch and see how it unfolds.
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