Tag Archives: multiemployer

Retirement plans: Key dates and deadlines for 2017

Milliman has published 2017 retirement plan calendars for single-employer defined benefit (DB) plans, multiemployer DB plans, and defined contribution (DC) plans. Each calendar provides key administrative dates and deadlines.

2017 single-employer DB calendar
2017 multiemployer DB calendar
2017 DC plans calendar

Along with downloading each calendar, be sure to follow us at Twitter.com/millimaneb where we tweet upcoming dates and deadlines for plan sponsors.

Milliman brings sustainability to multiemployer plan

In this article, Milliman consultant Victor Harte discusses how the firm helped one multiemployer pension fund implement the Milliman Sustainable Income PlanTM (SIP) to address issues that were adversely affecting the fund’s employers and retirees.

Here is an excerpt:

After reviewing numerous alternative plan designs, including shifting to a defined contribution plan, Milliman identified a solution that satisfied the trustees. Specifically, the trustees were looking for a way to:

• Continue to provide lifetime benefits to the members
• Eliminate potential withdrawal liability concerns for new employers
• Reduce the unfunded liability related to existing employers
• Provide retirees with a measure of cost-of-living protection
• Maintain the same level of benefits for existing and future participants

Milliman was able to help the trustees meet their goals by changing the plan to a Milliman Sustainable Income PlanTM (SIP) and by modifying the withdrawal liability procedures to make use of the direct attribution method….

…The trustees implemented the required changes for future accruals. The existing benefits are protected and will increase due to future increases in pay. The benefits provided under the new SIP are equal in value to those provided under the prior formula. Additionally, the SIP benefits for future retirees are expected to increase over time and are anticipated to provide some protection against inflation.

One of the larger contributing employers was recently sold as part of a potential bankruptcy. When these types of transactions occurred in the past, the acquiring entity refused to participate in the plan due to concerns about potential withdrawal liability. However, as a result of the plan design changes and the change in the withdrawal liability procedures, the acquiring employer agreed to participate in the plan.

To learn more about the SIP, watch the following video.

Central States ruling highlights the importance of communication

tenBroek_HeidiOn May 6, the U.S. Department of the Treasury denied the application of the Central States, Southeast and Southwest Areas (Central States) pension plan for benefit suspensions. According to Treasury, the plan’s proposal was fundamentally flawed in three ways. The first two reasons Treasury gave were that the proposed benefit suspensions were “not reasonably estimated to allow the plan to avoid insolvency” and were “not equitably distributed” (the plan did not explain to Treasury’s satisfaction the variations in the treatment of different classes of participants).

Poor communication is the third way the plan’s proposal failed to satisfy the requirements. According to Treasury, the plan’s notices to participants were “not written in a manner so as to be understood by the average plan participant.” Treasury explains:

• “The notices extensively use technical language without adequate explanation”
• “Critical terms used in the notices are not defined in the notices but only by cross-reference to other documents (e.g., the plan document and the rehabilitation plan document)”
• “The cross-referenced definitions in those other documents are not understandable to the average plan participant”

Few pension plans are getting the kind of attention that’s being paid to Central States. But many plans looking to the possibility of benefit suspensions in the future can take this opportunity to learn from Treasury’s issues with Central States’s application. Remember that good participant communications need to be included in your calculations.

For more perspective, read Tim Connor’s article “Central States Pension Plan and the Multiemployer Pension Reform Act.”

The Multiemployer Pension Reform Act and the Central States Pension Plan controversy: What is at stake?

Connor_TimThe Multiemployer Pension Reform Act of 2014 (MPRA) allows certain multiemployer plans that are projected to become insolvent to reduce benefits indefinitely. Ordinarily, when a multiemployer plan goes insolvent, it receives annual financial assistance from the Pension Benefit Guaranty Corporation (PBGC) to support payment of retiree benefits at maximum guaranteed levels. However, the PBGC program itself is in dire straits, recently projecting its own multiemployer program insolvency by 2025. At that point, the PBGC is essentially predicting it will not have enough money to provide the support needed to maintain retiree benefit levels. This means that retiree benefits in an insolvent plan could potentially be reduced below the PBGC-guaranteed levels because there wouldn’t be enough combined money available from the plan and the PBGC to support those levels.

The Central States, Southeast and Southwest Areas Pension Plan (Central States) reported that its own projected insolvency will occur in 2026 in its application to the U.S. Treasury Department in 2015 to implement MPRA suspensions. The plan has close to 400,000 total participants, roughly half of whom are retired. The MPRA cuts, some of which are as high as 70%, are actually designed to produce higher benefit amounts than would be paid if the plan actually went insolvent, although MPRA cuts would be effective July 1, 2016, instead of upon actual insolvency.

The Treasury is scheduled to approve or deny the Central States application by May 7, 2016. During the review, the Treasury has heard from participants and advocate groups that cuts were not designed in an equitable manner; steps were not properly taken by the plan to avoid the current situation; future projections are not based on reasonable assumptions; and, in general, the law is unjust and unfair to the participants involved. Ultimately, it would take Congressional action to address that last concern. In the present, the Treasury will have to review and decide if Central States followed the terms of MPRA in designing its solution to avoid insolvency. If the Treasury approves the application, it will go to a vote. However, even if the participants vote no, it may not matter because the Treasury is likely obligated by MPRA to override the vote and implement some form of suspensions anyway because Central States is likely deemed to be a “systemically important plan,” one which requires $1 billion or more of PBGC assistance.

For now, all eyes are on May 7, waiting to see how the Treasury proceeds. Multiemployer plan sponsors and participants will no doubt pay close attention and stay tuned to any whispers of potential success in attempts by various parties in repealing or changing MPRA in any material way, despite those attempts looking unlikely today. In the meantime, the task for other sponsors in keeping their plans healthy and adequately funded is more essential than ever, and needs to be continually executed with careful attention.

For more perspective, read Tim’s article “Central States Pension Plan and the Multiemployer Pension Reform Act.”

U.S. Supreme Court rules in favor of same-sex marriages and the Affordable Care Act subsidies

The U.S. Supreme Court has handed down decisions on two significant cases that have direct or indirect implications for employer-sponsored retirement and healthcare benefit plans. This Client Action Bulletin summarizes these cases of interest for employers that sponsor such plans.

Tools for multiemployer pension plans in critical and declining status

The Multiemployer Pension Reform Act of 2014 (MEPRA) was part of the Consolidated and Further Continuing Appropriations Act of 2015, which was signed by President Obama in December. One of the major changes MEPRA has made is the creation of a new status for very poorly funded plans called “critical and declining status.” In this Multiemployer Review, Milliman consultants Robert Behar, Nina Lantz, and Victor Harte define this new status and outline major rules and procedures related to plan mergers, plan partitions, and benefit suspensions.