With the sun setting of certain provisions of The Pension Protection Act of 2006 (PPA) and the expected insolvency in the PBGC’s insurance program due to growing significant operational deficiencies, Congress issued, on December 16, 2014, the above reform act making a number of key changes governing multi-employer pension plans. An overview of certain highlights of the Act, generally effective after December 31, 2014, follows:
Technical modifications of the PPA and certain other rules applicable to multi-employer plans.
• The established funding rules for the three zones – seriously endangered (orange), endangered (yellow), and critical (red) are now a permanent feature of ERISA, and a new zone – critical and declining has been established,
• Other provisions: (a) Electing to go into the red zone early; (b) rule changes to prevent red zone plans from emerging then re-entering the red zone; (c)
allowing green zone plans, who may temporarily slip into a lower zone, to remain in the green zone under certain conditions; (d) changes in the calculation of
withdrawal liabilities; (e) qualified pre-retirement joint and survivor annuity benefits are retroactively guaranteed by the PBGC under certain conditions,
• Employee representatives, employers, and participants may now receive, with certain limitations and if requested in writing, the current plan document and
SPD, the trust agreement, participation agreements (employers only), Form 5500s, audited financial statements, investment manager reports, the annual funding notices, actuarial reports, funding waiver requests, the latest funding improvement or rehabilitation plan, and contribution schedules.
PBGC premium increases:
• Multi-employer plans premiums will increase from $13 to $26 per participant, effective in 2015, with inflationary increases in the future.
Critical and declining zone plans, as mentioned above, are allowed to design a benefits suspension program using certain guidelines:
• A critical and declining zone plan (red) is projected to become insolvent within 15 years, or is projected to become insolvent within 20 years if either the Plan’s
ratio of inactive to active participants is greater than 2-to-1 or the Plan is less than 80% funded.
Plan mergers and partitions:
• Plan mergers will be facilitated by the PBGC upon request provided the merger is in the best interest of all interested parties,
• Partitions affect plans in critical and declining status.
There are more provisions not listed above. Please consult your Plan professionals for additional information.