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Member, Beacon International Group, Ltd.
A group of Senate Democrats is asking the U.S. Treasury Department to develop guidance on a 2014 federal law that allows trustees of financially troubled multiemployer pension plans to cut participants' benefits.
While plans that are projected to become insolvent can cut benefits, “no standards for this projection are provided” in the law, according to the letter signed last week by Sen. Ron Wyden, D-Ore., the ranking member of the Senate Finance Committee, as well as six other Senate Democrats.
“Therefore, to assist plan actuaries in determining whether a plan is projected to become insolvent, Treasury should issue guidance, including specifics on what assumptions must be made,” the letter said.
Congress passed the multiemployer legislation last year amid numerous warnings detailing the dire financial condition of dozens of multiemployer plans and the threat they pose to the federal insurance program that partially guarantees participants' benefits.
The Pension Benefits Guaranty Corp., for example, reported in 2014 that the looming insolvency of several massively underfunded multiemployer plans led to a fivefold increase in just one year to a $42.43 billion deficit in its multiemployer benefits insurance program.
Those insolvencies eventually would overwhelm the agency's insurance program, which in 2014 collected just $122 million in premiums from multiemployer plans.
The average funded level of multiemployer pension plans was largely unchanged in 2014, but funding levels of individual plans varied significantly, according to a new survey.