Tag Archives: Senate

What does the multiemployer pension funding crisis look like?

On Friday, July 13th, the Joint Select Committee on the Solvency of Multiemployer Pension Plans will hold its 5th public hearing as it seeks to investigate issues around the operations and solvency of multiemployer pension plans. Friday’s hearing focuses on what’s at stake for current workers and retirees.

In light of the Congressional work around this subject, Milliman has put together an infographic that visually explains some of the complexities underlying the multiemployer pension funding problems. The data is taken from Milliman’s Spring 2018 Multiemployer Pension Funding Study, which reports on the estimated funding status of all U.S. multiemployer plans.

Source: Milliman Spring 2018 Multiemployer Pension Funding Study

 

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

OMB approves PBGC 2015 premium filing instructions
The Office of Management and Budget (OMB) has approved 2015 premium filing instructions. The My Plan Administration Account (My PAA) website of the Pension Benefit Guaranty Corporation (PBGC) has been updated and is now ready to accept electronic premium fillings for plan years beginning in 2015.

For more information, click here.

IRS updates 403(b) listing of required modifications package
The Internal Revenue Service (IRS) has updated its Section 403(b) plan listing of required modifications (LRM). Also updated was a marked-up version showing changes to the 403(b) plan LRM from 2013. The package contains sample plan provisions that satisfy certain specific Internal Revenue Code requirements applicable to Internal Revenue Code Section 403(b) plans.

For the 403(b) plan LRM and information package (3-2015), click here. For the marked-up version showing changes to the 403(b) plan LRM (3-2013, revised 3-2015), click here.

Senate finance letter addresses affordable retirement advice
Chairman Lamar Alexander (R-Tenn.) led a group of eight Republicans on the U.S. Senate Labor Committee in a letter recently cautioning OMB Director Shaun Donovan on the potential negative impact of approving the proposed rule of the U.S. Department of Labor (DOL) to redefine and expand the term “fiduciary” if the current proposal has not changed significantly from the proposal the DOL offered in 2010.

To read the entire letter, click here.

PBGC study: Multiemployer guarantee
The PBGC has published a new study entitled “Multiemployer guarantee.” The study found that more than half of the people in terminated multiemployer plans running out of money in the near future face a reduction in benefits under current PBGC guarantees. This compares to 20% of workers and retirees who saw reduced benefits under plans that have already run out of money and are relying on PBGC financial assistance.

To download the entire study, click here.

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

IRS updates FAQs on retirement plan terminations and plan participant rights and plan events
The Internal Revenue Service (IRS) has updated its frequently asked questions (FAQs) regarding retirement plan terminations. An employer can terminate a plan for various reasons including bankruptcy, merger, or voluntary termination. Questions and answers are provided on terminating a retirement plan and partial plan terminations.

The second updated posting provides an explanation of plan events that may trigger retirement plan participant rights, what notices retirement plan participants should receive based upon these plan events, and when these notices should be issued.

To read the updated web page about retirement plan terminations, click here.
To read the updated web page about retirement plan participant rights, click here.

Senate HELP Committee approves bill making ERISA clarifications
Senator Tom Harkin (D-IA), chairman of the U.S. Senate Health, Education, Labor, and Pensions (HELP) Committee, issued S.2511 after the committee approved the bill on July 23.

S.2511 will bring clarity to the pension downsizing liability rules and will ensure that there is a workable mechanism to protect pension benefits when employers show symptoms of financial distress. The bill will now be considered by the full Senate.

To read the entire provision, click here.

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

Supreme Court rules in retirement plan fiduciary presumption of prudence in stock drop case
The U.S. Supreme Court has unanimously ruled that the fiduciaries of an ERISA-covered retirement plan that includes employer stock as an investment option are not entitled to any “presumption of prudence” in the investment decisions made by the plan administrator (Fifth Third Bancorp v. Dudenhoeffer (no. 12-751, 6/25/2014)). In overturning the 2012 ruling by the U.S. Court of Appeals for the Sixth Circuit, the high court said that the fiduciaries are subject to the same duty of prudence that generally applies to fiduciaries under ERISA.

The Supreme Court remanded the case, directing the Sixth Circuit to reconsider whether the participants stated a claim under precedents established by the high court. The Supreme Court said that a fiduciary’s conduct should be evaluated in the context of publicly available information and that fiduciaries cannot be found imprudent for failing to buy or sell stock in violation of insider-trading securities laws. In addition, the high court said that a complaint must plausibly allege an alternative action that the defendant could have taken when plaintiffs state a claim for fiduciary imprudence.

Retirement plan and other provisions moving in transportation/highway trust fund bill
Senate Finance Committee Chairman Ron Wyden (D-OR) has modified his proposed transportation/highway funding legislation, which now includes changes to the retirement plan required distribution (“stretch IRA”) provision. The revised bill alters the beginning date for employees who become 5% owners after age 70-1/2 and eliminates rules in the earlier proposal relating to rollovers of distributions from employer-sponsored plans with a delayed effective date, i.e., governmental plans and collectively bargained plans.

Currently, the Internal Revenue Service (IRS) has indicated that a plan under which a participant’s normal retirement age changes to an earlier date upon completion of a stated number of years of service typically will not satisfy vesting and accrual rules. According to the Joint Committee on Taxation’s description of this provision:

An applicable plan is a defined benefit plan that currently provides such a normal retirement age. A plan is generally an applicable plan only with respect to an individual who (1) is a participant in the plan on or before January 1, 2017, or (2) is an employee at any time on or before January 1, 2017, of any participating employer and who becomes a participant in the plan after January 1, 2017.

A plan does not fail to be an applicable plan solely because the normal retirement age described above currently applies only to certain plan participants or certain employers participating in the plan. In addition, subject to the limitation described above relating to participation or employment on or before January 1, 2017, if application of this normal retirement age is expanded to additional participants or participating employers, the plan will be treated as an applicable plan with respect to those participants and participating employers.

Finance Committee members have proposed dozens of amendments in advance of the markup. Among them are changes that would:

• Extend the parity for employer-provided transit benefit with parking benefits
• Allow for the continuation of a normal retirement age (NRA) of 30 years in service for currently existing defined benefit pension plans
• Require appropriate worker/independent contractor classifications in professional services organizations
• Temporarily repeal the Davis-Bacon “prevailing wage” rates for highway projects

Census Bureau: Summary of quarterly survey of public pensions for the first quarter 2014
This quarterly survey of public pensions provides national summary data on the revenues, expenditures, and composition of assets of the largest defined benefit public employee retirement systems for state and local governments. This survey currently consists of a panel of 100 retirement systems, which comprise 89.4% of financial activity among such entities, based on the 2007 Census of Governments.

To access the survey, click here.

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

Senate strikes bipartisan deal on unemployment benefits; pensions affected
Senators Jack Reed (R-RI) and Dean Heller (R-Nev) have penned a bipartisan proposal that would extend federal unemployment benefits for five months and allow for retroactive payments to December 28, 2013. The program expired on December 28, 2013.

The deal, which was crafted from both Republican and Democratic proposals, would pay for the $10 billion cost by including the pension offset provisions from the 2012 highway bill (MAP-21), which were set to be phased-out this year. The proposal also would:

• Allow single-employer defined benefit pension plans to prepay their flat rate premiums to the Pension Benefit Guaranty Corporation (PBGC).
• Extend customs user fees through 2024.
• End federal unemployment insurance (UI) payments to any individual whose adjusted gross income in the preceding year was $1 million or more.
• Strengthen reemployment and eligibility assessment (REA) and ReEmployment Services (RES) programs. In an effort to help get job seekers back into the workforce, individuals receiving emergency unemployment compensation will be eligible for enhanced, personalized assessments and referrals to reemployment services when they begin their 27th week of UI (Tier I) and 55th week of UI (Tier III).

DOL issues proposed rule that would require service providers to furnish disclosure guide to pension plans
The Employee Benefit Security Administration of the U.S. Department of Labor (DOL) has issued a proposed rule that would require certain retirement plan service providers to disclose information about the service providers’ compensation and potential conflicts of interest. The proposed rule would amend the DOL’s final rule on fee disclosures to require covered service providers to furnish a guide along with the initial disclosures to help fiduciaries if the disclosures contain multiple or lengthy documents.

To read the entire proposed rule, click here.
The DOL has also released a fact sheet to accompany the proposed rule.

PBGC issues final rule on premium rates, payment of premiums
The PBGC has issued a final rule making its premium rules more effective and less burdensome. Based on its regulatory review under Executive Order 13563, PBGC proposed to simplify due dates, coordinate due dates for terminating plans with the termination process, make conforming and clarifying changes to the variable-rate premium rules, give small plans time to value benefits, provide relief from penalties, and make other changes.

On January 3, 2014, PBGC published a final rule moving the flat-rate premium due date for large single employer and multiemployer plans (500 or more participants) to the variable-rate premium due date for single-employer plans, starting with the 2014 plan year. This final rule finalizes the rest of the proposal.

PBGC has now completed the process of simplifying the due-date rules by making small plans’ premiums due at the same time as large and mid-size plans’ premiums. However, because of a transition rule that gives small plans more time to adjust to the new provisions, the due dates will not be completely uniform until 2015.

To read the entire final rule, click here.

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Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

Sen. Harkin proposes bill aimed at small employers, but with other retirement system reforms
Sen. Tom Harkin’s USA Retirement Fund draft bill language has now been released and it contains provisions that extend beyond the “small employer that does not offer a retirement plan” arena. The draft bill (not yet introduced, and no number available) also includes sections on “defined contribution plan reforms,” “defined benefit system reforms,” and “other systemic reforms” that will be of interest to employers that currently offer retirement plans.

For a “snapshot” of the bill, click here.
A summary of the bill is available here.
Also, a frequently asked questions (FAQs) sheet is available here.

GASB issues guidance for implementing pension standards
The Governmental Accounting Standards Board (GASB) has published an implementation guide for the new GASB standards regarding accounting and financial reporting for pensions. The Guide to Implementation of GASB Statement 68 on Accounting and Financial Reporting for Pensions is an authoritative resource designed to assist preparers and auditors of state and local government financial statements as they implement the Statement, which is effective for periods beginning after June 15, 2014.

The implementation guide for Statement 68 answers key questions about putting the new standards into practice. Topics addressed in the guide include:

• The scope and applicability of GASB Statement No. 68, Accounting and Financial Reporting for Pensions
• Considerations regarding the identification of special funding situations
• Measurement of defined benefit pension liabilities of employers and nonemployer contributing entities
• Pension expense and deferred inflows and outflows of resources related to pensions
• Note disclosures and required supplementary information
• Unique issues related to cost-sharing employers and certain nonemployer contributing entities
• Transition to the new standards

To read the entire implementation guide, click here.
Read the GASB’s news release here.

PBGC issues proposed rule on multiemployer plans; valuation and notice requirements
The Pension Benefit Guaranty Corporation (PBGC) has issued a proposed rule to amend its multiemployer regulations to make the provision of information to PBGC and plan participants more efficient and effective and to reduce burden on plans and sponsors. The amendments would:

• Reduce the number of actuarial valuations required for certain small terminated but not insolvent plans
• Shorten the advance notice filing requirements for mergers in situations that do not involve a compliance determination
• Remove certain insolvency notice and update requirements

To read the proposed rule, click here.

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