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.