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The American Rescue Act Brings Solutions to the Multiemployer Funding Crisis

Special Financial Assistance for Multiemployer Pension Plans

Perhaps the most significant provision in the multiemployer pension plan crisis within The American Rescue Act (Act) is special financial assistance funding to eligible plans to be used to pay for benefits and necessary operating expenses of eligible plans. Plans are eligible for this special assistance if any of the following apply to the plan:
  1. The plan is in critical and declining status.
  2. A suspension of benefits was previously approved.
  3. In any year beginning in 2020 through 2022, the plan is certified by the plan actuary to be in critical status, has a modified funding percentage of less than 40%, and has a ratio of active to inactive participants less than 2:3.
  4. The plan became insolvent after December 16, 2014, has remained so and has not been terminated.

There is no maximum amount that eligible plans may receive, and the amount will not be subject to repayment obligations. Along with special assistance granted to qualified and approved plans, benefits previously suspended will be reinstated.

Further details related to financial assistance to eligible multiemployer benefit plans can be found within the bill’s text. Additional requirements include the definition of the modified funding percentage, temporary priority of applications, considerations of actuarial assumptions used in determining eligibility and assistance amounts, among others.

Other Significant Provisions

A few other significant multiemployer pension plan provisions contained in the bill include:

  1. Temporary delays to the designation of a multiemployer pension plan as endangered, critical, or critical and declining status.
    Eligible benefit plans can elect the first plan year starting between 3/1/20 and 2/28/21 or the succeeding plan year to be the same status as the previous year.
  2. For plans in endangered or critical status for a plan year beginning in 2020 or 2021, the Rehabilitation Period can be extended by 5 years.
  3. The PBGC premium rate is increased to $52 per participant for plan years beginning December 31, 2030.

Furthermore, other changes that impact plans are included in the Act. These changes include adjustments to the funding standard account rules, extended amortization and pension funding stabilization percentages for single-employer plans, special rules for community newspaper plans, and expanded limitations on excessive employee remuneration.

Closing Remarks

What should be on your mind now while we wait for the administrative details and processes to come together? If your plan is in or close to endangered, critical, or critical and declining status, talk with your plan advisors or us to become very familiar with the details of the bill, identify those provisions applicable to your plan, and prepare accordingly. Your multiemployer benefit plan may be eligible for special assistance, and if so, you should look for the launch of the application process. The PBGC is required to issue guidance for submitting applications within 120 days of the enactment of the Act.

Author: Ashleigh Hall, CPA, Senior Manager | ahall@withum.com

For further questions on how these changes might impact your plan, please contact one of Withum’s Multiemployer Benefit Plans Group members.

Multiemployer Benefit Plans Services

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