Congressional Hearing Focuses on the Future of Multiemployer Pension Plans

On Thursday, the Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing to discuss the financial crisis facing many multiemployer pension plans, collectively bargained plans that are maintained by labor unions and more than one employer. Several witnesses, including Phyllis C. Borzi, Assistant Secretary of Labor of the Employee Benefits Security Administration (EBSA) and Representative to the Board of the Pension Benefit Guaranty Corporation (PBGC), testified about the need to support such plans to ensure their viability for current and future retirees.

In a statement, Committee Chairman Tom Harkin (D-IA) claimed: “Congress has already taken steps to provide targeted, short-term relief to ease them through these tough economic times, and funding relief will surely help some of these plans remain afloat. But for a handful of multiemployer plans, short-term funding relief simply isn’t enough.” He further noted that the hearing – Building a Secure Future for Multiemployer Pension Plans – would focus on multiemployer plans that are in “dire straits.”

During the session, several panelists spoke in favor of legislation introduced by Sen. Robert Casey (D-PA) that would allow for a “qualified partition” of multiemployer pension plans. Partitioning allows employers and employees to transfer to the PBGC their benefit liabilities inherited from bankrupt firms that drop out of the plan without funding their withdrawal liability. As summarized in a press release, the Create Jobs and Save Benefits Act of 2010 (S. 3157) would, among other things, make the following changes to improve the solvency of multiemployer plans:

  • Enable multiemployer funds to combine resources for purposes of reducing administrative costs.
  • Update existing pension partition rules to allow certain qualifying funds to elect partition. If a plan satisfies certain requirements, the plan would transfer to a separate account (a) all benefit liabilities attributed to participants of employers who withdrew from the plan without paying withdrawal liability, and (b) assets equal to a maximum of five years of projected benefit payments. The PBGC would handle the initial application, drafting of partition agreement and monitor financial assistance to the plans, but would not provide notices, calculate benefits or otherwise administer the plan. The orphans benefit will be fully guaranteed as if the orphan was still receiving benefits from the multiemployer plan.

Other panelists testified that measures in addition to partition needed to be taken, such as increasing PBGC guarantees; proving additional emergency funding relief; permanently repealing the mandatory freeze on benefit accruals for plans that fall below a 60% funding level; and eliminating qualified supplemental executive retirement plans (Q-SERPs), which enable plan sponsors to amend qualified plans to create enhanced benefits for executives only.

A full list of hearing panelists and copies of their testimony can be found here.

Photo credit:  Kirby Hamilton

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.