After 18 months of deliberation, the National Coordinating Committee for Multi-Employer Plans’ Retirement Security Review Commission – comprised of stakeholders from both business and labor groups, including AGC of America – publicly released a comprehensive proposal to safeguard retirement security for multi-employer plan participants that protects employers and taxpayers and spurs economic growth on Feb. 19. The Commission’s recommendations are included in a report, “Solutions not Bailouts: A Comprehensive Plan from Business and Labor to Safeguard Multiemployer Retirement Security, Protect Taxpayers and Spur Economic Growth.”
The chief executive officer of the Associated General Contractors of America, Stephen E. Sandherr, issued the following statement in response to the release of the proposed plan for preserving, remediating and innovating multi-employer retirement plans, “The Commission’s plan represents a pragmatic, reasonable and – most importantly for taxpayers – self-sufficient approach to preserving and protecting nearly half a trillion dollars worth of multi-employer retirement plans. These retirement plans, many of which are funded by construction firms, are needed to ensure long-term security for tens of thousands of construction workers. As important, the retirement plans’ funds provide a vital source of capital for domestic investments in everything from small businesses to major infrastructure projects. The steps outlined in the Commission’s plan give employers and their workers the tools they need to protect their retirement plans.”
The Commission recognized that legislative changes are needed to give plan trustees and bargaining parties more tools to correct funding shortfalls and to distribute costs more equitably among all stakeholders in the plan – not just current active employers and employees. The recommendations fall into three areas: preservation, remediation and innovation.
- Preservation: Proposals to Strengthen the Current System. Some of these proposals represent technical refinements to the Pension Protection Act (PPA), while others address shortcomings of the system outside of PPA. These recommendations are designed to provide additional security for: (a) the majority of plans that have successfully weathered the recent economic crises; (b) those that are on the path to recovery as measured against the objectives set forth in their Funding Improvement and/or Rehabilitation plans; and (c) those that, with expanded access to tools provided in the PPA and subsequent relief legislation, will be able to achieve their statutorily mandated funding goals.
- Remediation: Measures to Assist Deeply Troubled Plans. Under current law, a small minority of deeply troubled plans are projected to become insolvent. For the limited number of plans that, despite the adoption of all reasonable measures available to the plans' settlors and fiduciaries, are projected to become insolvent, the Commission recommends that limited authority be granted to plan trustees so that they may take early corrective actions, including the partial suspension of accrued benefits for active and inactive vested participants, and the partial suspension of benefits in pay status for retirees. Such suspensions would be limited to the extent necessary to prevent insolvency, but in no event could benefits go below 110 percent of the PBGC guaranteed amounts. To protect participants against potential abuse of these additional tools, the Commission further recommends the adoption of special protections for vulnerable populations including PBGC oversight and approval of any proposed actions, taking into consideration certain specified criteria.
- Innovation: New Structures to Foster Innovative Plan Designs. To encourage innovative approaches that meet the evolving needs of certain plans and industries, the Commission recommends the enactment of statutory language and/or promulgation of regulations that will facilitate the creation of new plan designs that will provide secure lifetime retirement income for participants, while significantly reducing or eliminating the financial exposure to contributing employers. While the development of new flexible plan designs including, but not limited to, variable annuity and "Target Benefit" plans that would permit adjustment of accrued benefits. In order to protect plan participants from this risk, these models would impose greater funding discipline than is required under current defined benefit rules.