Congress continues to push for emergency pension law

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Amid the clamor that surrounded the passage by the current administration of the American Rescue Act of 2021 (ARPA), discreetly hidden as Subtitle H is the Butch Lewis Emergency Pension Plan Relief Act of 2021 (Butch Lewis). Butch Lewis has unsuccessfully bounced around Congress since 2019. While Butch Lewis is long on rhetoric, at this point he lacks details or controls. Regulations for the Pension Benefit Guarantee Corporation (PBGC) will be published in July. In the meantime, it is important that employers remain vigilant about the actions of the PBGC.

As currently structured, Butch Lewis is a “logical” successor to the previously flawed efforts of Congress to “cure” the funding problems of the multi-employer benefit system. These efforts began in 1980 with the passage by Congress of the Multi-employer Pension Plan Amendments Act of 1980 (MPPAA) and continued with the passage of the Multi-employer Pension Reform Act of 2014 (MPRA).

WHAT IS KNOWN AND WHAT TRADE UNIONS WANT

Congress will provide approximately $ 86 billion to “critical and declining” financial assistance funds “… to pay all benefits due during the period beginning on the date of payment of the special financial assistance payment … and ending … in 2051 ”. Payments will be made to more than ninety funds. There is no cap on this payment, no repayment requirement, and funding forecasts will be made on a “deterministic basis”. The only requirement is that plans must reinstate suspended benefits and invest Butch Lewis funds in high grade bonds or other investments authorized by the PBGC.

The Butch Lewis part is also a clean canvas to be completed by the PBGC regulations. Unions use this clean canvas to “suggest” regulations that may harm employers.

Lump sum payment

Special financial assistance is to be paid as a lump sum of all plan obligations until 2051, not at present value. So $ 100 due in 2051 will be funded at $ 100, even though $ 100 paid in 2051 will be worth much less in 2021. Unions argue that “all benefits due during the period” are defined as the future cash flows of the company. payment of benefits, not just accrued benefits or an unfunded liability. This concept will cost well over $ 86 billion. The unions are also proposing that the funds retain their discretion as to when to pay from the lump sum payment and from the traditional asset account.

Responsibility for withdrawal

While Butch Lewis is silent on the impact of special assistance on takedown liability, unions are urging PBGC takedown liability rules that will work to the detriment of employers. Employers who opt out before the last day of the plan year ending in 2051 would not have the special assistance considered a plan asset in calculating the opt-out requirement. In addition, unions are asking that employers who withdraw before 2051 be subjected to treatment under a massive withdrawal scenario. Thus, employers who would normally make interim payments over a period of twenty years would be required to make these interim payments indefinitely!

In the absence of regulation from the PBGC, the only clear point for an employer is that despite the injection of billions of dollars from Congress into more than ninety plans, it appears that take-out liability obligations will not be. reduced.

Jackson Lewis PC © 2021Revue nationale de droit, volume XI, number 174


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