The Social Security Committee released an issue brief focusing on implications of COVID-19 reflected in the annual Trustees Reports from 2020 and 2021. 1850 M Street NW, Suite 300, Moreover, the mandated interest rate used for calculating the amount of special financial assistance a plan receives assumes a 5.5% return. (Except Federal Holidays), Missing Participants (Standard/Distress Terminations Only), Federal Register Notices Open For Comment, ERISA Section 4044 Retirement Assumptions, Reportable Events & Large Unpaid Contributions, PBGC Issues Final Rule on Special Financial Assistance, American Rescue Plan Special Financial Assistance Program, Federal Register Notices Open for Comment. "The PBGC has taken great strides to achieve the goals of the statute, but the goals of the statute are to retain solvency till 2051," he said. These plans are insured by a federal agency, the Pension Benefit Guaranty Corporation. The Social Security Committee released an issue brief on the 2022 Social Security Trustees Report examining the social insurance programs long-term solvency issues. That set off a wave of complaints from employers and unions that feared those limits could sabotage the economic recovery Congress had promised. Password (at least 8 characters required). 130 E. Randolph St. Without this Special Financial Assistance, the pension benefits of many hardworking union members and their families, through no fault of their own, were in danger. The Multiemployer Plans Committee submitted a comment letter to the Pension Benefit Guaranty Corporation (PBGC) regarding its Interim Final Rule on Special Financial Assistance pursuant to the American Rescue Plan Act of 2021. PBGC designed the final rule to ensure that no MPRA plana group of fewer than 20 multiemployer plans that remained solvent by cutting benefits pursuant to the Multiemployer Pension Reform Act of 2014was forced to choose between restoring its benefit payments to previous levels and remaining indefinitely solvent. Site Map | Privacy Policy | Terms of Use | Editor Login 2022 American Academy of Actuaries. Prior to the launch of the Special Financial Assistance program under the ARP, a typical worker whose multiemployer plan became insolvent would see their expected pension benefits slashed substantially. The aid, which has been operating on an interim basis, has already protected nearly 130,000 individuals pension benefits across some 560 businesses. Clarifies the conditions applicable to a plan that merges with a plan that receives SFA. For example, one change addresses the amount of Special Financial Assistance needed to better achieve the goal of allowing plans to remain solvent until 2051. A senior agency official said these plans can submit a supplemental application for additional assistance, and may be eligible to receive more funds. The final rule makes thoughtful improvements to the interim final rule and puts severely underfunded pension plans on stronger financial footing.. Choose your news we will deliver. President Joe Biden speaking about the economy and the final rule implementing the American Rescue Plans Special Financial Assistance program, protecting multiemployer pension plans. Click here to login, 2022, Portfolio Media, Inc. | About | Contact Us | Legal Jobs | Advertise with Law360 | Careers at Law360 | Terms | Privacy Policy | Cookie Settings | Help | Site Map, Enter your details below and select your area(s) of interest to stay ahead of the curve and receive Law360's daily newsletters, Email (NOTE: Free email domains not supported). [The American Rescue Plan] creates perverse incentives for further mismanagement and underfunding and leaves the taxpayer holding the bag., President Joe Biden speaks at Max S. Hayes High School, Wednesday, July 6, 2022, in Cleveland. PSP Investments appoints new president/CEO, Florida State Board adds $250 million to in-state private equity fund, San Mateo County Employees posts -4.7% return for fiscal year, above benchmark, The Institutional Investors Guide to ESG Investing, Climate Change: The Inescapable Opportunity, 2022 Defined Contribution East Conference, the final rule for a new federal assistance program, PBGC's multiemployer assistance rule loosens investing restrictions, issued an interim final rule in July 2021, American Rescue Plan Act that Democrats passed in March 2021, PBGC OKs special assistance for union multiemployer plan, Multiemployer plans show big funding improvements, Milliman says, PBGC's multiemployer outlook greatly improves after help from Congress. Allows plans to invest up to 33% of their SFA funds in return-seeking investments (e.g., publicly traded common stock and equity funds that invest primarily in public shares); with the remaining 67% restricted to high-quality fixed income investments. Our Spectrum News app is the most convenient way to get the stories that matter to you. 685 Third Avenue "Compared to most pension investments it's a bit conservative still; however, compared to the interim final rule, it's notably superior.". Biden administration, Bobby Scott, Multiemployer plans, Patty Murray, PBGC, the Special Financial Assistance program, 702 King Farm Boulevard, Suite 400, Rockville, MD 20850 / +1 212-944-4455 /. Moreover, plans that have suspended or cut benefits under the Multiemployer Pension Reform Act of 2014 may also see larger percentage increases aimed at recovering suspended benefits and keeping plans solvent, Mr. Pridgen added. Additional information, including a fact sheet, is available on PBGCs American Rescue Plan Special Financial Assistance Program webpage. Today President Bidens American Rescue Plan fulfilled the promise of a secure retirement for millions of Americas workers for decades to come, said U.S. Secretary of Labor Marty Walsh, Chair of the Pension Benefit Guaranty Corporation Board of Directors. All rights reserved. According to supporters of the program, the Special Financial Assistance program, which is already operating on an interim basis, will protect millions of workers in stressed multiemployer union pension plans who previously faced the possibility of significant cuts to their benefits. Share sensitive information only on official, secure websites. In the legal profession, information is the key to success. "Allowing a third of the SFA to be invested in return-seeking investments is an excellent result," Mr. Millard said.
Generally, the provisions of the final rule apply to new applications and are available to plans that previously submitted SFA applications under the interim rule if the plan submits a revised or supplemented application under the final rule. By Justin Alex and Robert Projansky (July 18, 2022, 5:53 PM EDT) -- The American Rescue Plan Act of 2021 created a significant new special financial assistance program administered by the Pension Benefit Guaranty Corporation for certain troubled multiemployer pension plans. The speech showcased a final rule tied to his $1.9 trillion coronavirus relief package from last year.
This page has not been translated. Fax 202-872-1948 Senator Patty Murray, D-Washington, issued a similar statement. Please go to PBGC.gov'sSpanish home page for more information available in Spanish. Provides a different methodology for the calculation of SFA for plans that implemented benefit suspensions under the Multiemployer Pension Reform Act of 2014 (MPRA). The SFA Program was enacted as part of the American Rescue Plan Act of 2021 (ARP).
They called for long-term structural reforms to the management of multiemployer pension plans.. (AP Photo/Evan Vucci). Multiemployer plans are insured by the PBGC, which will also get a boost through the SFA program. Copyright 2022 Asset International, Inc. All Rights Reserved. As noted in a statement issued by the Biden administration, multiemployer union pension plans are created through agreements between employers and a union, with plans typically involving multiple employers in a single industry or related industries. It will provide nearly $97 billion to dozens of eligible plans, according to the Pension Benefit Guaranty Corporation, the agency that oversees the SFA Program. Please see our Privacy Policy. Based on these updates, PBGC estimates that the likely range of total SFA to be distributed to plans is $74 billion to $91 billion. Sen. Patty Murray, D-Wash., chairwoman of the Senate Health, Education, Labor and Pensions Committee, said in a statement that the final rule will ensure the SFA Program "can serve even more struggling pensions, help all plans by getting the entire multiemployer pension system on stronger footing, and protect even more workers from having their hard-earned benefits cut at the worst possible time. According to PBGC leadership, these changes collectively ensure that all plans that receive SFA are projected to be solvent and pay full benefits through at least 2051. PLEASE NOTE: A verification email will be sent to your address before you can access your trial. Sen. Sherrod Brown (D-Ohio), said hes been working for years to ensure the plans remain solvent. Suite 3200 (Except Federal Holidays), For Employers & Practitioners1-800-736-2444 People around the country wake up every day wondering whether they're saved enough to provide for themselves and their families before theyve stopped working, the president told union workers and retirees gathered at a high school in Cleveland. The Retirement System Assessment and Policy Committee released an issue brief, Retirement Policy: Potential for Changing Roles of Employers in Retirement Programs, which considers aspects of decouplingshifting retirement plan responsibilities and related liability to a third-party entity and away from employers. WASHINGTON, D.C. The Pension Benefit Guaranty Corporation (PBGC) today announced a final rule implementing changes to the Special Financial Assistance (SFA) Program for financially troubled multiemployer pension plans. How Has 2022's Carnage Reshaped Global Stock and Bond Markets? More than 80,000 workers and retirees had already had their benefits cut under a 2014 law that allowed pension plans trim plans in order to remain financially secure. "I think through successful investment strategy, there's good reason to think that 2051 should be achievable for most, if not all, plans. The Intersector Group released notes from its February 2022 virtual meeting with the Pension Benefit Guaranty Corporation(PBGC). The other 67% of SFA funds must be invested in investment-grade fixed-income products. The program provides funding to severely underfunded multiemployer pension plans and will ensure that millions of Americas workers, retirees, and their families receive the pension benefits they earned through many years of hard work. PBGC is directly responsible for the benefits of more than 1.5 million participants and beneficiaries in failed pension plans. The private-sector pension insurer protects some benefits of about 10.9 million workers and retirees, according to the White House fact sheet. Get hyperlocal forecasts, radar and weather alerts. Secure .gov websites use HTTPS The Multiemployer Insurance Program is financed by insurance premiums. Law360 takes your privacy seriously. Multiemployer pension plan stakeholders are much happier now that the final rule for a new federal assistance program has loosened investing restrictions and adjusted the way aid awarded to struggling plans is calculated. PBGC Finalizes Rescue of Ailing Multiemployer Pension Plans, millions of workers in stressed multiemployer union pension plans, American Rescue Plan Act. The series also discusses possible changes in plan design to broaden access and participation in retirement plans to better enable workers to retire with a secure lifetime income. The Intersector Group published notes from its May 2022 conference call with the Treasury Department and Internal Revenue Service. The Pension Committee published an issue brief highlighting public policy considerations involved in potential modifications to single employer pension plan funding rules. Can Sustainable Labeling of Financial Products Prevent Greenwashing? The agency estimated that under current conditions, the program will assist about 200 financially troubled plans, according to the rule. I am grateful that the Biden administration adopted many of the suggestions I made during the notice and comment period, and produced a strong program that will protect these plans for decades to come.. The Social Security Committee released an issue brief on the 2021 Social Security Trustees Report examining the social insurance programs long-term solvency issues. The rule allows troubled multi-company pensions to be made financially whole, ensuring full benefits for 2 million to 3 million workers and retirees. Todays announcement from the Biden Administration will ensure we continue to build on that progress so this program can serve even more struggling pensions, help all plans by getting the entire multiemployer pension system on stronger footing, and protect even more workers from having their hard earned benefits cut at the worst possible time, said Senate Health, Education, Labor and Pensions Committee Chair Patty Murray (D-Wash.) in a written statement. Por favor vaya a la pgina principal del sitio de espaol de PBGC para ver informacin disponible en espaol. The final rule also makes changes to several conditions applicable to plans that receive SFA: In addition, PBGC adopted changes that address stakeholder comments on the application process, including changes that facilitate plans SFA calculations and the preparation of SFA application materials. Biden administration, Dalio, Making the Case for Pessimism, Has Thrived This Year by Selling Short, Canadian Pension Giant Makes Its First Foray Into Colombian Private Equity, MSCI Launches Global Real Estate Asset Index, CFA Signs Up 40 Firms to Follow Its Diversity, Equity and Inclusion Code, Allocators Still Skeptical That ESG Can Deliver Good Returns. The SFA Program requires plans to demonstrate eligibility for SFA and to calculate the amount of assistance pursuant to ARP and PBGCs regulations. PBGC published an interim final rule last July that set strict limits on the ways plans could invest the money they receive. The final rule is expected to take into account those concerns, using twoinstead of onediscount rates in their calculations to ensure that the approved assistance money, which is restricted, is more realistic given the investment limitations on these funds, according to a White House fact sheet. But the reality is, for so many people, the goalposts keep moving, he added. ARPA creates perverse incentives for further mismanagement and underfunding and leaves the taxpayer holding the bag.". Democrats instead chose a deeply flawed bailout of a select group of privately managed retirement plans, they said in the statement. The final rule is scheduled for publication in the Federal Register July 8, and will take effect Aug. 8. To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market. Loosening investment restrictions and providing two separate interest assumptions "combined really should, on paper, help plans get to 2051, but certainly allowing return-seeking access brings a level of risk," Mr. Benjaminson added. Under the program, a multiemployer plan is eligible for assistance if it satisfies one of four criteria: it has been in critical and declining status in any plan year beginning in 2020 through 2022; it has had its benefits suspended as of March 11, 2021; it is in critical status, has a modified funding ratio below 40% and has a ratio of active-to-inactive participants of less than 2-to-3; or it became insolvent after Dec. 16, 2014, but as of March 11, 2021, it had not been terminated. Log In to MyPBA (For Workers & Retirees)Log In to My PAA (For Practitioners)Multiemployer Insurance Program FactsAnnuity or Lump Sum, Annual ReportsFederal Register Notices Open for CommentLaws and RegulationsPBGC Data SetsReducing Regulatory Burden, For Workers & Retirees1-800-400-7242 On Capitol Hill, as has been the case since the Special Financial Assistance Program was established, Democrats welcomed the PBGC's final rule while Republicans blasted it. Originally expected to be underwater by 2026, new funding will keep its insurance program afloat until 2055. The changes are responsive to public comments received on PBGCs interim final rule and will better protect the pensions earned by workers and retirees covered by multiemployer plans eligible for assistance. "This change aligns the interest rates used to calculate SFA with reasonable expectations of future investment returns on plans' SFA assets, addressing the interest rate mismatch issue identified in public comments," the fact sheet said. "The statute created a tension between how you calculate the liabilities and how you invest the funds, and the PBGC listened well to advice about how to make a better balance between those competing goals.". In the immediate wake of the passage of the ARP, the PBGC issued an interim final rule implementing the program in July 2021. Biden on Wednesday criticized Republicans who have said investing taxpayer money in these pension plans was a waste, specifically calling out the lead Republican on the House Education and Labor Committee, Virginia Foxx of North Carolina, who said the investment was like pouring money down a rat hole.. ", No matter how the next few decades play out, more work will be needed on this issue, Mr. Millard said. The Pension Practice Council (PPC) published an issue brief, The 80% Pension Funding Myth, which addresses a persistent misconception that pension plan health or soundness can be determined solely by referencing a supposed 80% funded ratio standard. Read the news release. Tenth Floor The assistance is known as the Special Financial Assistance (SFA) Program. This action will have a significant impact on the lives of workers and their families, and represents one of the most meaningful improvements in our nations retirement security in years., To contact the reporters on this story: Austin R. Ramsey in Washington at aramsey@bloombergindustry.com; Paige Smith in Washington at psmith@bloomberglaw.com, To contact the editors responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com; Genevieve Douglas at gdouglas@bloomberglaw.com, Learn more about a Bloomberg Law subscription, Log in to access all of your BLAW products, Photo Illustration: Jonathan Hurtarte/Bloomberg Law; Photos: Getty Images, (Updated with additional reporting throughout.). There's reason for "optimism and relief amongst both plan representatives and their members," Mr. Pridgen said about the final rule. You have to know whats happening with clients, competitors, practice areas, and industries. ", But Rep. Virginia Foxx, R-N.C., ranking member of the House Education and Labor Committee, referred to the SFA Program as "a taxpayer-funded bailout of a select group of failing and insolvent, privately managed multiemployer retirement plans. "What happens 29 years from now is anyone's guess.". ", Ms. Foxx added, "These pension plans failed to protect workers and retirees, and their trustees refused to make the changes necessary to make good on their promises. The PBGC as of July 6 has approved more than $6.7 billion in special financial assistance to 27 eligible plans that cover more than 127,000 workers and retirees. Biden announced a final version of the Special Financial Assistance Program, which will help keep pension plans above water for nearly 30 years or longer, preventing cuts from plans that were at risk of drowning in debts. Another change in the final rule allows up to 33% of SFA to be invested in return-seeking assets that are projected to allow plans to receive a higher rate of return on their investments than under the interim final rule, subject to certain protections. The Social Security Committee released anissue brief examining the potential effects of increasing the Social Security normal retirement age, which it has identified as likely to bea keycomponent of any legislationconsidered to restore Social Securitys long-term financial health. Since that time, unions, employers and other key stakeholders have provided comments that the PBGC and the three Cabinet agencies that constitute its board of directorsthe Labor, Treasury, and Commerce Departmentsconsidered in developing the final rule. Charles E.F. Millard is glad the PBGC will permit a third of SFA funds to be invested in return-seeking assets.