Little noticed among all the public furor over the budget appropriations legislation, another new law allows multiemployer pension plans like the Teamster Central States Fund to reduce benefits for retirees.
The Multiemployer Pension Reform Act of 2014, signed by President Obama on Dec. 16, creates a new funding status category for these funds termed “critical and declining status.” Plans that acquire this status can suspend benefits for both active and retired participants.
Among the retirees who could be affected are those who worked for UPS, ABF Freight System and YRC Worldwide. This is because they are among the 400,000 retirees covered by the Teamsters Central States Fund, which is one of up to 150 multiemployer pension plans that fall into the critical and declining status category.
Because of the decline of the unionized less-than-truckload trucking industry following deregulation in 1980, the Central States Fund today pays out annually about $3 billion but only takes in about $650 million in employer contributions. Although many UPS retirees remain covered by Central States, the company paid a withdrawal liability of more than $6 billion in 2007 to exit the fund.
The law defines a plan that is in critical and declining status as a fund projected to become insolvent in the current year or any of the 14 succeeding plan years; or in the current year or any of the 19 succeeding plan years. The plan also must have the ratio of inactive to active participants that exceeds two to one, or the plan is less than 80% funded.
The law permits the Pension Benefit Guaranty Corp. (a government-created corporation that insures these plans) to approve a company’s withdrawal from a fund in the absence of a bankruptcy or strike.
PBGC also now has increased authority to facilitate plan mergers, including providing financial assistance to do so. In addition, the new law raises PBGC premiums from the $12 to $26 per capita beginning in calendar year 2015.