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The U.S. Treasury Department on Wednesday named veteran attorney and arbitrator Ken Feinberg to review applications of financially troubled multiemployer pension plans to cut benefits promised to plan participants.
Those cutbacks were authorized by legislation Congress passed late last year amid numerous warnings by federal agencies that without such action, dozens of multiemployer plans would fail, with the promised but unfunded benefit liabilities shifting to the federal Pension Benefit Guaranty Corp.
In turn, the weight of assuming those massive liabilities could bankrupt the PBGC's insurance program that guarantees a portion of participants' benefits.
A U.S. Government Accountability Office report issued prior to the passage of the 2014 legislation warned that without congressional action, the PBGC's insurance program, funded in part by premiums paid by the plans, would go broke in the next 10 to 15 years.
To prevent that from happening, the 2014 law allows participants' benefits to be cut if certain financial tests are met, such as a plan being projected to become insolvent during a current plan year or any of the next 14 years.
However, the law requires plans to submit their benefit reduction applications to federal regulators and show that the reductions are necessary to keep the plans afloat.
Mr. Feinberg, whose title will be special master, will oversee the review of those applications.
Mr. Feinberg “has a proven track record of approaching these matters in an even-handed and thoughtful way, and he will oversee an open and balanced process for reviewing these applications,” Treasury Secretary Jacob Lew said in a statement.
Mr. Feinberg's past assignments have included overseeing the Sept. 11 and BP Deepwater Horizon victim compensation funds.
This new assignment, Mr. Feinberg said at a briefing, will be “difficult and challenging,” but also one, he said, that he is “pleased and honored to accept.”
Currently, there are about 1,400 multiemployer plans with about 10.4 million participants, according to the PBGC.
While experts may disagree on the strength of the Pension Benefit Guaranty Corp.’s insurance program for single-employer pension plans, there is a broad consensus that lawmakers had to act last year to prevent the collapse of big, underfunded multiemployer pension plans, and with that the PBGC’s multiemployer insurance program.