We cannot point to one thing that has contributed to our current multiemployer pension fund crisis. Still, one thing is clear — all of the reform measures passed have been done to counteract unforeseen shortcomings or mixed interpretations of the legislation. The Multiemployer Pension Reform Act or MPRA is one of these reforms. MPRA was passed in 2014 to provide additional tools and strategies for severely distressed plans and counter the anti-cutback rule established under The Employees Retirement Income Security Act of 1974 (ERISA). ERISA set minimum standards and provided protections for people enrolled in most private retirement and health plans.
MPRA allows distressed plan sponsors to reduce earned benefits voluntarily. Trustees’ ability to implement discretionary reductions to prevent insolvency and preserve long-term benefit levels was a significant departure from prior law. Under MPRA, the sponsor of a distressed plan that elects to suspend benefits must submit their application for review and approval to the US Treasury.
Unfortunately, MPRA rules are murky, and the Treasury’s interpretation of MPRA contributes enormously to our current pension fund crisis. Remember, MPRA is a tool to help plans in trouble; therefore, any fund or trustee applying for MPRA is doing so to save their retirement plan. What has happened is that 28 funds have submitted benefit suspension applications to the Treasury, and only 17 have been approved. Four applications have been denied, including one of the largest multiemployer and most troubled plans in the country, the Central States Teamsters Fund.
Blogger, pension advocate, and managing director at Ryan ALM, Russell Kamp, talked about MPRA when he was on the podcast last year:
“A Vicious Circle”
We continue to be locked into a vicious legislative circle. A reform is passed that is intended to help retirement plans in trouble, and then in the case of MPRA, due to the Treasury’s view on what constitutes a case for benefit suspension, the intent gets lost. Again, multiemployer plans are forced to seek additional legislative relief to save these plans and avoid a massive economic crisis.
We will discuss the most recent potential remedies proposed by the Health and Economic Recover Omnibus Emergency Solutions (HEROES) Act and the American Rescue Plan in a future post. We want to leave you with this quote by U.S. Senator Sherrod Brown, Ohio, at the Joint Select Committee on Solvency of Multiemployer Pension Plans on April 18, 2018:
“We need to remember what workers gave up to earn these pensions. Workers in these plans sat at negotiating tables. They gave up pay and other benefits in the short term today, money they could have used for their families, in order to guarantee a pension 10, 20, 30, 35 years later when they retired.”
On March 11, President Biden signed pension reform, The American Rescue Plan. I will be talking to guests for an analysis of this law on future podcasts. I hope to speak with experts to help make sense of this legislation; tell us what’s in the bill; what reforms didn’t get in; and whether or not the problems with MPRA are being addressed.
About The World of Multiemployer Benefit Funds Podcast
I created The ABCs of the Pension Crisis with clips from previous podcasts. In addition to Russell Kamp, my guests include retired chairman from Marco Consulting, Jack Marco; a senior vice president and actuary from Segal Consulting, Jason Russell; and John Elliot, a partner at New England Pension Consultants.
Listen to the full podcast with Traci Dority-Shanklin on The ABCs of the Pension Crisis, click HERE
Full podcast episodes of The World of Multiemployer Benefit Funds with union and client advocate, Traci Dority-Shanklin, are available on Apple Podcasts, or check out our full library on our website.
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