The U.S. Department of the Treasury released proposed and temporary regulations to implement the suspension of benefits provisions of the Multiemployer Pension Reform Act of 2014 (MPRA).
In MPRA, Congress established a new process for multiemployer pension plans to propose a temporary or permanent reduction of pension benefits if the plan is projected to run out of money.
A multiemployer pension plan sponsor that believes benefit reductions are needed must submit an application to the U. S. Department of the Treasury showing that reductions are necessary to keep the plan from running out of money. The temporary and proposed regulations and related guidance outline the process for multiemployer pension plans to apply for a reduction of pension benefits. Participants in these plans will be notified of any application to reduce benefits and will have the opportunity to comment on the application.
The law requires that the application be reviewed by the Treasury Department, in consultation with the Pension Benefit Guaranty Corporation (PBGC) and the Department of Labor (DOL), to determine whether it meets the requirements set by Congress. If it does, the application will be approved, and plan participants and beneficiaries will then have the right to vote on the proposed benefit reductions before they can take effect.
The Treasury Department explained that most of the more than 10 million participants in multiemployer pension plans will not see their benefits reduced. According to PBGC, about 10% of participants are in plans that are projected to run out of money at some point in the future. Many of these plans are taking other actions to postpone plan insolvency or improve their financial condition.
Under MPRA, multiemployer pension plans can consider reducing benefits only after they have taken all reasonable measures to address their financial problems. Even within plans that seek to reduce benefits, some plan participants cannot have their benefits reduced, including retirees 80 years of age and older (partial protection beginning at age 75), and participants receiving disability benefits.
In addition to issuing the proposed regulations, Treasury Secretary Jacob J. Lew appointed Kenneth Feinberg as a Special Master to help provide a dedicated, impartial and informed review of applications proposing to reduce pension benefits. Feinberg will oversee Treasury’s implementation of MPRA, including the review of applications to determine whether they meet the requirements set by Congress. He will also ensure that affected stakeholders have a single point of contact dedicated to this process.
Feinberg is an attorney and an expert in mediation and alternative dispute resolution. His prior federal appointments have included serving as Special Master for Trouble Asset Relief Program (TARP) Executive Compensation following the financial crisis, Administrator of the Gulf Coast Claims Facility following the Deepwater Horizon oil spill, and Special Master of the Federal September 11th Victim Compensation Fund. He also administered victim compensation and memorial funds following the Boston Marathon bombings and the Virginia Tech shootings.
Text of the proposed regulations is here.