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Omnibus Spending Bill Pension Provisions
The information below is from the Congressional Research Service. It outlines some of the details of the multiemployer pension bill which was part of the recently passed Federal Omnibus Spending Bill. We will post other information as it comes available.
The following are features of the provisions for benefit reductions under H.R. 83, as amended:
Only plans that are in "critical and declining" status may cut benefits. One criterion for a plan to be in critical status is that the plan's funding ratio must be less than 65% (a funding ratio of 65% means the plan has assets to pay 65% of promised benefits). A plan is in declining status if the plan actuary projects the plan will become insolvent within the current year or within either the next 14 years or the next 19 years, as specified in law. The Secretary of the Treasury, in consultation with the PBGC and the Secretary of Labor, may reject a plan's application to reduce benefits if the plan sponsor's determination of the need for benefit reductions is "clearly erroneous." Participants in most plans are able to vote to reject the reduction of benefits, if a majority of all participants and beneficiaries vote to do so. However, plans deemed to be "systematically important" are able to reduce participants' benefits without a vote. A systemically important plan is one in which PBGC would pay $1 billion or more in benefit payments if the benefit reductions were not implemented. There are likely only a handful of plans that are systematically important. Individuals could not have their benefits cut below 110% of the PBGC maximum guarantee. Because the maximum guarantee is $12,870 per year, a participant whose benefit is suspended would have to receive a benefit of at least $14,157. Disabled individuals and retirees aged 80 or older may not have their benefits reduced. Individuals between the ages of 75 and 80 may not receive the maximum benefit reduction. Benefit reductions must be distributed equitably. The amendment lists a number of factors that a plan sponsor may consider in making determinations. These factors include the age and life expectancy of participants; the length of time an individual has been receiving benefits from the plan; and the years to retirement for participants who are currently working. Benefit reductions in certain plans are to be ordered, first, among participants who worked for an employer that withdrew and failed to pay, in full, the required payments to exit the plan (known as withdrawal liability); and second, among other participants except those who worked for an employer that (1) withdrew from the plan, (2) fully paid its withdrawal liability, and (3) established a separate plan to provide benefits in an amount equal to benefits reduced as a result of the financial condition of the original plan. For example, this third exclusion applies to participants who worked for United Parcel Service and are in a trucking industry multiemployer plan.
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