Tag Archives for " pensions "

Pension supercommittee edges toward deal

  • November 21, 2018

POLITICO PR) is reporting that the multiemployer pension “supercommittee” is edging closer to a bipartisan plan to shore up failing multiemployer plans, two sources with knowledge of the talks told POLITICO on Tuesday.

The tentative deal was reached last Friday, according to one source — though aides for both the Democratic and Republican co-chairs insisted negotiations are still in flux.

Details spilled into the open Tuesday when the Washington Post reported on a plan — one of several said to be under consideration — that would direct the Treasury Department to spend up to $3 billion annually to stabilize under-funded pensions. The congressional aides told POLITICO the document was not a final product.

The bipartisan committee assigned to resolve the pension crisis has until Nov. 30 to come up with a solution, leaving just four more working days to come up with a legislative fix or face the threat of bankrupting the Pension Benefit Guaranty Corporation. If at least 10 lawmakers — five from each party — agree on a solution, the bill will receive an expedited vote in both chambers of Congress.

The committee hasn’t officially met since July, but work has continued behind the scenes, the aides told POLITICO.

The committee has been deadlocked over whether to support the Butch Lewis Act, S. 2147 (115), which would create a new agency within Treasury that could authorize loans to troubled pension plans. The Democratic-backed legislation has earned support from some Republicans, such as Rep. Pete King (R-N.Y.), and been endorsed by the United Food and Commercial Workers International Union.

Multiemployer plans are pensions negotiated by labor unions with several different employers. Once thought to be sturdier than single-company plans, multiemployer plans for declining industries have struggled to remain solvent.

Lawmakers have urged the supercommittee to act quickly, noting that some of the largest multiemployer plans could go broke within four years and bankrupt the PBGC, which insures the plans.

As the committee deliberates, more multiemployer plans have applied to the Treasury Department for permission to cut benefits. Of the 10 benefit cuts to multiemployer pension funds approved by Treasury under a 2014 reform bill, part of H.R. 83 (113), six occurred this year. Another seven are under review.

Pension Benefit Guarantee Corporation: Multi-employer program will be insolvent by 2025

  • August 3, 2017

It’s not just the Central States Pension Plan that might go broke.  The federal agency that insures these disastrous plans is saying it will go broke in the next decade.

The Pension Benefit Guaranty Corporation said today that its multiemployer pension program is projected to go insolvent by 2026.

In 2014, Congress passed legislation that allowed trustees of financially troubled multiemployer pension plans to cut vested benefits if doing so would prevent the plan from going insolvent. So far, only one multiemployer plan has cut vested benefits.

According to the PBGC, if no plans choose to cut vested benefits or to partition, the PBGC’s average projected deficit will amount to $78.8 billion in nominal dollars by fiscal year 2026. Even if some plans chose to cut vested benefits or to partition, the projected deficit will still amount to $77.8 billion in nominal dollars by fiscal year 2026.

By contrast, the PBGC’s single employer program is expected to improve financially. The PBGC projects the program will eliminate its deficit by the end of fiscal year 2022 have a surplus of $9.6 billion in 2026, up $7 billion from the agency’s previous report.

Pension Formula Calculations are for Geeks ( and HR people)

  • February 27, 2016


Pension Formula Calculations are for Geeks

Unless you are an employer who is currently participating in a multiemployer pension plan, the issue of withdrawal liability is probably not something you will pay much attention to.  There are several reasons why you should –  especially if your company is involved in any kind of merger & acquisition activity that could involve existing union operations.

Kevin M. Williams, an attorney at Ford Harrison just published a excellent legal alert describing some internal rule changes these pension plans are using that could exponentially increase any withdrawal liability you might have.

Many multiemployer pension plans are struggling financially today, and, according to the PBGC, about 10 percent of the 1,400 plans are expected to become insolvent within the next 10-15 years. These looming insolvencies were in large measure the motivation behind the 2014 law that now allows plans in “critical and declining” status to cut vested benefits.

Some pension plans are taking a different tact to deter employer withdrawals and maximize the revenue from withdrawal liability assessments. They are changing the interest rate assumption used to determine the unfunded vested benefit liabilities of the plan which, in turn, is used to calculate withdrawal liability. The plans are setting up two sets of numbers and interest rate assumptions: (1) an extremely low rate using the PBGC long-term rate of about 3.30 percent, and (2) a higher assumed rate of return of 7 to 8 percent based on historical investment returns and future projections. This is the best of both worlds for the plans. It allows these plans to report a higher funding ratio of assets to plan liabilities, but also to maximize the withdrawal liability for the employers.

That all sounds very wonky and technical, so let me lay it out for you a different way.  In 1999, I worked for a company that made an acquisition of two companies and merged them into one operating division.  Some of those locations had existing union contracts, a few of which participated in the somewhat infamous Central States Pension Fund which recently cut pension payments in half for some retirees.   At the time of the acquisition, we asked for an estimate of withdrawal liability from the plan, and it was around $100,000.   Five years later, the 100 or so employees at that same location voted to decertify their bargaining unit, forcing a withdrawal from the pension plan.  Our final withdrawal liability payment was enormously higher, approaching seven figures.

Think about that for a second – nearly a 10x increase in just five years. I can’t count high enough to guess how much the liability for that same group would be today. That’s why you need to pay attention to wonky stuff like the interest rate formula for multiemployer employer plans.

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