The recent Multiemployer Pension Reform Act of 2014 (“MPRA”)
The MPRA of 2014 is a temporary fix but not a long term solution for a real problem. Many multiemployer plans are severely underfunded in declining industries. They do not have enough active workers to cover the costs of retirees who worked their lives expecting a pension. The guarantee from the PBGC for multiemployer plan participants is much less than the guarantees for other defined benefit plans.
Max. annual guaranty (pensioner with 40 years of service) $17,160
Max. annual guaranty (pensioner with 30 years of service) $12,870
Max. guaranty for non-multiemployer plan (regardless of service)
and if benefit level in effect for only 5 years $60,136
Under MPRA, if a multiemployer plan is in “critical and declining status” it may apply to the Treasury to suspend retiree pensions and to freeze future accruals for active participants. There are some limits – no cut-backs below 110% of the PBGC guaranty level, limited cutbacks for those age 75 or over, and no cutbacks for those over age 80 – but this is a hard knock. MPRA creates tension within a plan. Cutbacks can only go into effect if approved by a majority of participants and beneficiaries (not just a majority of those who vote). The interests of active employees who want to postpone insolvency may not be aligned with older and retired participants whose pensions will be cut when they do not have other income. Joint Boards of Trustees, charged with exercising fiduciary judgment for the plan and all participants, are in an unenviable position.
Note: MPRA contains a number of other rules unique to multiemployer plans which are not summarized here.
Individual owner personally liable for unpaid contributions to a multiemployer plan
An individual owner of a limited liability company has been found personally liable as a “fiduciary.” He did not pay required contributions to a multiemployer plan whose documents designated unpaid contributions as “trust assets.” The decision is tainted somewhat because he had been defaulted for not filing a timely answer, which required the court to examine the record on a basis that was most favorable to the plan. Nonetheless, the court’s holding that unpaid contributions can be “plan assets,” if designated that way in plan documents, should be considered. The decision is part of an emerging judicial trend. Not so long ago, unpaid contributions (unless they were withheld from employee paychecks) would not have been considered plan assets. Are all owners and officers of a delinquent employer now at risk that they will be tagged as fiduciaries? If they are in a decision-making position, and decide not to pay the required contributions, the answer is “yes,” under this line of cases, because most attorneys representing multiemployer funds will be sure that “plan asset” language is added to the plan terms.
Advice: Anyone with decision-making power who decides not to pay negotiated contributions to a multiemployer plan has personal risk. For trustees of multiemployer plans, be sure the plan spells it out: unpaid contributions are plan assets. The case is PlanBricklayers & Allied Craftworkers Local 2, Albany, N.Y. Pension Fund v. Moulton Masonry & Const., LLC, (2d Cir. Feb. 26, 2015).