Pensions Take Center Stage As The Multiemployer Funding Rules Under The Pension Protection Act Sunset
Since the passage of the Pension Protection Act in 2006 (“PPA”), multiemployer defined benefit plans have been applying complicated pension funding provisions in order to test the zone status of the plans pursuant to PPA parameters. The 2008 recession impacted every pension plan across the country, and as a result, the government passed further pension relief to assist plans in lengthening the amortization time for the unprecedented losses to the plans.
Each year, multiemployer plans’ actuaries must certify the zone certification of the plan within 90 days after the start of the plan year and report the zone certification to the government. For calendar year pension plans, the PPA certification is due no later than the end of March. Multiemployer pension plans are certified as endangered, seriously endangered (both commonly referred to as “yellow”), critical (“red”) or neither endangered nor critical (“green” or “safe”). If a plan is either “yellow” or “red”, the plan must notify the participants and develop either a funding improvement plan or rehabilitation plan, which is presented to the collective bargaining parties. The funding improvement and rehabilitation periods generally last 10 years.
When will PPA multiemployer funding rules sunset? Absent any legislative action, PPA sunsets as of the first plan year after December 31, 2014. For calendar year multiemployer pension plans, PPA sunsets on January 1, 2015, so that the last year a calendar year plan must have its actuary certify the status of the multiemployer pension plan is the 2014 plan year. There is, however, one exception to this rule, which depends upon the zone certification in the 2014 plan year. If the multiemployer pension plan was certified as either endangered, seriously endangered or critical for the 2014 plan year, the pension plans must continue to operate under its funding improvement plan or rehabilitation plan until the end of the funding improvement plan or rehabilitation plan period. Multiemployer pension plans should figure out the exact date PPA sunsets for their plans.
The U.S. Department of Labor, Department of the Treasury, and the Pension Benefit Guaranty Corporation (PBGC) were supposed to release a study on the effects of the PPA on multiemployer plans along with legislative recommendations to Congress by December 2011. The study, however, has not yet been issued. We do not know what the future holds, but we do know that lobbying has already begun to address the sunset of the multiemployer funding rules in 2015. When the study is released, Weinberg, Roger & Rosenfeld will post an update. For specific questions about your plan, please contact your Trust Fund counsel.
Author: Linda Baldwin Jones
