Many multiemployer pension plan trustees and advisers are familiar with the potential penalties associated with untimely adoption of a funding improvement plan (FIP) or rehabilitation plan (RP) for plans in endangered or critical status. Those who have worked with critical status plans are also probably aware that a failure to meet “scheduled progress” under an RP for three consecutive years can result in excise taxes.
However, many may be less familiar with the rules providing potential excise taxes and/or civil fines for failing to meet the FIP’s or RP’s goals by the end of the prescribed period. This could result in a new and sudden reality for some plans due to the impact of the coronavirus on the stock market and employment levels.
Once the FIP/RP period begins, the plan sponsor is required to annually review the FIP/RP and update it if necessary. There could be a wide range of reasons for needing an update, many that are outside the control of the plan sponsor, including lower investment returns and/or contributions than expected. Milliman consultant Bill Wade provides more perspective in this Multiemployer Review.