This is the ninth edition of the survey for which we have published a report.  Prior editions can be found below:

​On May 12, 2020, House Democrats introduced the “Health and Economic Recovery Omnibus Emergency Solutions Act” (HEROES Act) to address the ongoing health and economic crises brought on by the COVID-19 pandemic.  The broad reaching stimulus package provides funding for a wide range of groups, and includes significant relief provisions for multiemployer pension plans.  The provisions that would apply to multiemployer pension plans are summarized below.

• Special Partition Relief.  The bill creates and appropriates funding for a special elective partition program for distressed plans, similar in concept to the partition program introduced in the Multiemployer Pension Recapitalization and Reform Plan on November 20, 2019 by Senate Republicans, and originally considered by the Joint Select Committee in November, 2018.  (As noted below, the more onerous portions of these prior proposals are not included in the HEROES Act.)
  • Eligibility:  Eligible plans include (1) plans in critical and declining status, (2) plans in critical status with a current liability funded percentage less than 40% and an active to inactive participant ratio less than 2 to 3, and (3) plans that previously suspended benefits under MPRA 2014.  The eligibility criteria must be met between 2020 and 2024.
  • Amount of Partition: The PBGC would assume liabilities in an amount needed to restore the plan to solvency and project a funded percentage of 80% within 30 years.  The amount of assistance would be adjusted every 5 years.
  • Conditions: The PBGC would have authority to issue regulations imposing conditions on partitioned plans, however, PBGC would be prohibited from requiring benefit reductions and interfering with plan governance or funding.

 

• Funding Relief.  The bill provides funding relief similar to the relief provided by WRERA 2008 and PRA 2010 for plans that do not meet the eligibility criteria for a partition.
  • Zone Status Delay:  Plans could elect to retain their zone status for plan years beginning March 1, 2019 through February 29, 2020 for the 2 succeeding plan years beginning March 1, 2020 through February 28, 2022.
  • FIP/RP Extensions:  Plans in endangered or critical status in 2020 or 2021 (after application of the zone status delay) could elect to extend their funding improvement period or rehabilitation period by 5 years.
  • Asset Smoothing:  Plans could elect to smooth investment losses incurred in the 2-year period from March 1, 2020 through February 28, 2022 over 10 years rather than 5 in the actuarial value of assets.
  • Credit Balance:  Plans could elect to amortize investment losses incurred in the 2-year period from March 1, 2020 through February 28, 2022 over 29 years rather than 15 for purposes of the Funding Standard Account (FSA) credit balance.
  • Restrictions on Benefit Improvements:  Plans that optionally elect any combination of asset smoothing or credit balance relief would be restricted from making benefit improvements for 2 years following the asset method change or establishment of an extended FSA base.

 

• PBGC Guarantee Increase.  The bill would increase the PBGC’s maximum guaranteed annual benefit for a career employee with 30 years of service from $12,870 to $24,300.  The increased guarantee would apply to all plans that became insolvent on or after December 16, 2014.
  • Current Benefit Guarantee:  100% of the monthly accrual rate up to $11.00 plus 75% of the next $33.00 of monthly accrual rate multiplied by years of service.
  • Proposed Benefit Guarantee:  100% of the monthly accrual rate up to $15.00 plus 75% of the next $70.00 of monthly accrual rate multiplied by years of service.

 

• Repeal of MPRA Benefit Suspensions.  Benefit suspensions under MPRA would be unavailable to critical and declining plans going forward.  As noted above, plans that previously suspended benefits could apply for a special partition.  Such plans would be required to reinstate any benefits that were suspended, and repay previously suspended benefits either in a lump sum or in equal installments over 5 years.

 

• Composite Plans.  The bill would give plans the option of adopting composite plan designs.  Composite plan designs were initially considered as a part of the “Solutions Not Bailouts” proposal leading up to MPRA 2014 and were reintroduced as a part of the “Giving Retirement Options to Workers Act” (GROW Act) in February, 2018.
  • Funded Percentage Target:  Composite plans are required to project a funded percentage of 120% within 15 years or they are subject to a “realignment program” as described below.
  • Realignment Program:  A realignment program is similar to a funding improvement plan or a rehabilitation plan, but also provides for a reduction in accrued benefits if other options to improve funding are not sufficient to achieve the funded percentage target noted above.
  • PBGC Premium/Guarantee:  Composite plans would not be covered by the PBGC, nor would they be required to pay PBGC premiums.
  • Legacy Plan:  Benefits would be frozen.  Contribution requirements, PBGC guarantees/premiums, and PPA funding rules would continue to apply.

 

• Notable Exclusions.  Perhaps as important as the above provisions that were included in the bill are the below provisions that were NOT included.
  • PBGC Premium Increases:  The bill does not include any changes to the amount or structure of current PBGC premiums.
  • Discount Rate Limitation:  The bill does not include any limitation on the actuarial discount rate used to calculation plan liabilities.
  • Funding Rule Changes:  There are no significant changes in the funding rules other than those noted above.

 
HORIZON ACTUARIAL COMMENTARY:  The bill provides significant relief for multiemployer plans and goes a long way towards securing the retirement benefits for millions of hard working men and women and their families.  Absent relief similar to that provided in the HEROES Act, a few large multiemployer plans would fail. The failure of these plans would cause the PBGC to become insolvent (currently projected in 2025), and would result in participants receiving pennies on the dollar of their promised benefits.  The ultimate outcome would be an increased reliance on social safety nets, significant employer failures, and a potential cascade of negative effects for the multiemployer system and broader economy. 

Importantly, the bill does not include any PBGC premium increases and does not limit the actuarial discount rate assumption, both of which would be counterproductive to the goal of securing worker benefits and providing meaningful retirement income to the more than 10 million participants and beneficiaries in the multiemployer system.  While not everyone will agree with all provisions of the bill, it provides necessary relief at a critical juncture for all multiemployer pension plans.

Please contact your Horizon Actuarial consultant or use the "contact us" page if you have any questions.

The United Association of Journeymen and Apprentices of the Plumbing, Pipefitting and Sprinkler Fitting Industry of the United States and Canada (United Association), Mechanical Contractors Association of America, Inc. (MCAA), and Horizon Actuarial Services, LLC have partnered to conduct an analysis of the multiemployer pension reform proposal released by Senators Charles E. Grassley (R-IA) and Lamar Alexander (R-TN) on November 20, 2019.

This analysis focuses on two key changes in the proposal – increases in PBGC premiums and limitations on discount rates, and their implications for UA multiemployer plans. Each of the proposed changes would significantly increase contribution requirements.  The report also opines on the proposed changes to the calculation of employer withdrawal liability.
​
The report can be viewed below.

Please contact your Horizon Actuarial consultant if you have questions about the report or how the proposal might impact your plan.

On November 20, 2019, Senators Charles E. Grassley (R-IA) and Lamar Alexander (R-TN) released a proposal to address the immediate financial challenges faced by a subset of multiemployer pension plans and also to secure the multiemployer pension system over the long term — the “Multiemployer Pension Recapitalization and Reform Plan.”  The proposal generally follows the outline of the reform principles considered by the Joint Select Committee in November, 2018. 

​While the proposal does provide significant relief for some of the most troubled multiemployer plans via enhanced liability partitions to the PBGC and increases in PBGC guaranteed benefits, it also imposes strict funding standards that would be harmful for participants and employers in the majority of plans that are likely to remain healthy under current law.
 
Our high-level summary of the proposal is linked below.

​Please contact your Horizon Actuarial consultant for more details including an analysis of how the proposal could affect your plan.

 ​The Joint Select Committee on Solvency of Multiemployer Plans (the “Committee”) was formed in Congress in February 2018 to address the issues facing multiemployer plans today. The Committee is comprised of eight members each from the House and the Senate, has equal representation from Democrats and Republicans, and is slated to propose legislation by November 30, 2018.
 
While the looming insolvencies of plans in critical & declining status and the Pension Benefit Guaranty Corporation (PBGC) have received most of the headlines, the Committee is also considering measures that would impact all plans – even healthy plans in the green zone. 
 
One of the measures under consideration is to mandate the use of discount rates based on corporate bond or treasury yields for minimum funding purposes. In our view, such a measure would dramatically overstate pension costs and is not in any way appropriate for multiemployer pension plan funding. 
 
In order to educate lawmakers on the devastating consequences this action would have for nearly all multiemployer plans, we prepared the following report and handout.

​As detailed in the report, the use of alternative discount rates would drastically increase unfunded liabilities, contribution requirements, and contribution volatility. The impact would be significant, and would likely lead to further destabilization of the entire multiemployer system.
 
Please contact your Horizon Actuarial consultant for more information on the report, the Committee, or how this may affect your pension fund.

On February 9, 2018, President Trump signed the Bipartisan Budget Act of 2018 into law. While the primary purpose of the legislation was to fund the federal government through March 23, 2018, the Act also provided for the establishment of a joint committee tasked with improving the solvency of multiemployer pension plans and the Pension Benefit Guaranty Corporation (PBGC).
 
The joint committee will be composed of 16 members – 8 from each chamber of Congress – and will include an equal number of Democrats and Republicans.  The legislation requires that the committee hold at least 5 public meetings or hearings, including 3 public hearings. Ultimately, the committee must vote on (I) a report detailing its findings and recommendations, and (II) proposed legislation to carry out its recommendations by November 30, 2018. 
 
The legislation also outlines procedures for an expedited vote in the Senate to occur no later than the last day of the current congressional term (January 3, 2019).
 
Please stay tuned for more on this developing story and contact your Horizon Actuarial consultant for more information on how this may affect your pension fund.

President Trump signed a short-term spending bill into law on January 22, 2018 after its passage in the House and Senate. While the primary purpose of the bill was to end the Federal government shutdown and fund government operations through February 8, 2018, the bill also included several provisions related to broader health policy:
 
A.  The Children’s Health Insurance Program (CHIP) is extended for six years.  Federal funding had previously ceased on September 30, 2017.
 
B.  Three health taxes created under the Affordable Care Act are temporarily suspended or delayed:
 
1.  Excise Tax on High-Cost Health Coverage:
The effective date of the 40% excise tax on health coverage exceeding certain thresholds (commonly referred to as the Cadillac Tax) is postponed from January 1, 2020 to January 1, 2022.  The multiemployer threshold for computing the excise tax was set at $27,500 per year based on a January 1, 2018 effective date and is expected to be adjusted for inflation.
 
Both fully insured and self-funded health funds, including retiree only funds, are subject to this excise tax.  Projected retiree medical liabilities that included this tax for 2020 and 2021 will now be lower, as the tax amounts for these years will now be removed from the liability calculation.
 
2.  Health Insurer Fee for Fully Insured Plans:
This bill suspends the insurer tax for calendar year 2019.  The insurer fee, which began in 2014, was temporarily suspended in 2017 before being re-implemented for 2018.  As a result, fully insured funds with 2019 renewals should see lower premium levels than they would otherwise have seen. 
 
3.  Medical Device Tax:
The 2.3% medical device excise tax began on January 1, 2013 and is imposed on manufacturers and importers of certain medical devices. The tax was suspended for 2016 and 2017 and was slated to return for 2018.  This bill further suspends the tax for calendar years 2018 and 2019.

The Internal Revenue Service (“IRS”) issued an advance version of Rev. Proc. 2017-43 which revises the procedures for applying for suspension of benefits under the Multiemployer Pension Reform Act of 2014 (“MPRA”).  The revenue procedure revises and updates the procedures previously set forth in Rev. Proc. 2016-27 to take into account the experience of the Department of Treasury in processing applications to date.
 
The revised procedures apply to applications submitted on or after September 1, 2017.