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Pomeroy and Tiberi Introduce Pension Relief Bill

10/29/2009

 
​On October 27, 2009, Congressmen Earl Pomeroy (D-ND) and Pat Tiberi (R-OH) introduced new legislation to provide funding relief to single-employer and multiemployer pension plans — the “Preserve Benefits and Jobs Act of 2009.”

As described on Rep. Pomeroy’s website, the Act will “enable employers to retain and grow their workforce” by providing “the funding relief necessary to help restore defined benefit pension plans to soundness over time, keeping employers from having to either freeze their pension plans or cut their workforce to make up for pension losses.”

Pomeroy’s website contains the full text of the bill along with a section-by-section summary. The bill was preceded by a discussion draft, presented by Rep. Pomeroy in August.  (Note: Full text may also be found here.)

The following is a summary of key provisions in the bill relating to multiemployer plans.

Section 201 of the bill eases statutory funding requirements for multiemployer plans, allowing them to fund investment losses incurred during 2008 and early 2009 over longer periods of time.  The provisions in this section will make it easier for some plans to remain in the so-called “green zone.”  They will also lower the funding benchmarks for plans in critical status or endangered status.  A plan that elects to utilize the relief described in this section cannot improve benefits for the current or next two plan years, unless the plan actuary certifies that the benefit improvements are funded through separate contribution increases.

(a) Allow 30-year amortizations in the funding standard account, either for the “combined outstanding balance” of all charges and credits or “certain investment losses” incurred during 2008 and 2009.  This relief is available upon election to plans that pass a solvency test.  Plans electing this relief must not improve benefits for two plan years following the election, unless the plan actuary certifies that the improvements were funded by separate contribution increases. [Note:  The restriction against benefit improvements was not included in the discussion draft that was presented in August.]

(b) Allow “automatic” extensions of amortization periods in the funding standard account of up to 10 years (as opposed to 5 years provided under PPA).  The bill also clarifies some details regarding the application and approval process for these amortization extensions.
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(c) Extend asset smoothing period to 10 years (as opposed to 5) and widen the asset smoothing corridor to 30% (instead of 20%).  This relief is only available for two plan years, beginning after August 31, 2008. [Note:  The provision for 10-year smoothing is a key addition to the bill, versus the discussion draft that was presented in August.]

Section 202 of the bill provides additional relief to multiemployer plans already certified in critical status or endangered status.

(a) Increase the duration of rehabilitation periods and funding improvement periods by up to 5 years (net of any 3-year extension utilized under “WRERA”), upon election.  This essentially allows plans to take longer to emerge from critical or endangered status, respectively.

(b) Simplify the definition of funding improvement periods for plans in seriously endangered status.

(c) Remove the restriction against paying Social Security level income annuities for plans operating in critical status.  [Note: The removal of this restriction was not included in the discussion draft that was presented in August.  The discussion draft removed a similar restriction on single-employer plans, but it did not affect multiemployer plans.]

(d) As a technical correction, remove the requirement that plans in endangered status must send a schedule to bargaining parties showing the contribution increases necessary to meet funding improvement plan benchmarks, while maintaining the current plan of benefits.  In other words, the only schedule that must be provided to bargaining parties will show the contribution increases necessary to meet funding improvement plan benchmarks,only after reducing benefits to the extent allowed under law.  [Note: This technical correction was not included in the discussion draft presented in August.]

Section 203 of the bill allows for multiemployer plan “alliances” and facilitates full mergers.  Alliances would allow plans to gain efficiencies with respect to administration and asset management.  Mergers could help extend the life of one or more plans approaching insolvency.  The Pension Benefit Guaranty Corporation (PBGC) may offer assistance — both administrative and financial — to facilitate mergers or alliances it deems likely to reduce its long-term losses with respect to the plans involved.
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Section 204 of the bill strengthens benefit protections for multiemployer plans.  One, it updates the maximum pension benefit guaranteed by the PBGC for multiemployer plan participants from about $13,000 per year to about $20,000 per year.  Two, it allows for a “qualified partition” of certain benefit liabilities for very troubled plans meeting very specific criteria.  Liabilities eligible for partitioning are those attributable to participant service with employers that have previously withdrawn from the plan and were unable to pay their withdrawal liability obligations in full.  Partitioned liabilities, along with assets attributable to applicable withdrawal liability payments received, would be transferred to a separate plan guaranteed by the PBGC.
The summary provided above is intended for general informational use only.  It does not represent legal, tax, or other professional advice.

IFEBP Orlando 2009: Horizon Speakers

10/29/2009

 
We are pleased to announce that four consultants from Horizon Actuarial will be presenting at the 55th Annual Conference of the International Foundation of Employee Benefits Plans (IFEBP).  The 55th Annual Conference will be held from Sunday, November 8 through Wednesday, November 11, 2009 in Orlando.  [Updated October 29, 2009]

Cary Franklin
Session 309: Beyond the Red Zone
This session addresses what happens when a plan is in serious trouble or has a mass withdrawal. The role and responsibilities of the PBGC in such circumstances are also discussed.
1 Tuesday, 1:15 – 2:30 p.m.
2 Wednesday, 9:00 – 10:15 a.m.
Open Forum 1: Ask the Actuaries/Consultants
Tuesday, 9:00 – 10:15 a.m.

Stan Goldfarb
Session 303: Plans in the Red Zone
One year, your plan is well funded. The next, you find immediate action is needed. What actions need to be taken? What implications does this funding label mean for trustees?
1 Monday, 10:45 a.m. – 12:00 p.m.
2 Tuesday, 7:30 – 8:45 a.m.
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Session 304: Followup Workshop – Red Zone Case Study
This workshop features a panel of plan representatives who will share their situation, and the steps they are taking as they face this funding status.
1 Monday, 1:30 – 2:45 p.m.
2 Tuesday, 9:00 – 10:15 a.m.

Jason Russell
Session 307: PPA Workshop on Funding Improvement Plans and Rehabilitation Plans
This session offers an interactive modeling session, with members of a mock board and the audience voting on various approaches to solving a funding shortfall.
2 Monday, 3:00 – 4:15 p.m. (Red Zone Plans)
4 Tuesday, 10:30 – 11:45 a.m. (Red Zone Plans)
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Aruna Vohra
Session 220: Essentials of Wellness and Disease Management Programs
One of the most promising results of managing health care costs is the ability to reduce demand—an area in which trustees can continue to have the greatest impact on lowering costs. This session reviews the necessary components and tips for implementing such programs, while other sessions will look at “real-life” examples.
1 Monday, 10:45 a.m. – 12:00 noon
2 Tuesday, 9:00 – 10:15 a.m

IRS Releases Final Regs for Single-Employer Plans

10/15/2009

 
The IRS has released long-awaited final regulations for sections 430 and 436 of the Code.  These regulations are effective October 15, 2009 and apply to single-employer pension plans only.  Specifically, the regulations pertain to the calculation of minimum funding requirements (section 430) and benefit restrictions for certain underfunded plans (section 436).  The final regulations are largely similar to the previously-issued proposed regulations, however, there are some important differences with respect to the treatment of funding balances and minimum required contributions.

Note that these regulations do not pertain to multiemployer plans.
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A copy of the final regulations, which was downloaded from the Federal Register Website, is posted here.

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​In Memory of Brian Dailey
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