Treasury Notes

 We Received Central States’ Pension Benefit Reduction Application – Now We Need Your Input

By: Kenneth Feinberg
10/15/2015

In the Kline-Miller Multiemployer Pension Reform Act of 2014, Congress established a new process for certain multiemployer pension plans to propose a temporary or permanent reduction of pension benefits if the plan is projected to run out of money. Under the law, a multiemployer pension plan sponsor that believes benefit reductions are needed must submit an application to the Treasury Department showing that reductions are necessary to keep the plan from running out of money. The law requires the Treasury Department to approve an application if it meets the conditions established by Kline-Miller.
 
The Treasury Department has received an application regarding proposed pension benefit reductions from the Central States, Southeast and Southwest Areas Pension Plan (Central States Pension Plan) under the new Kline-Miller law. The proposed reductions are now available online for public comments and review.
 
We’re committed to ensuring an open and fair process. Multiemployer pension plans are a source of financial security for millions of American workers and their families, who depend on the benefits that have been promised to them. We understand that any reductions in benefits resulting from this application under the Kline-Miller law will have a real impact on people’s lives. We’re focused on ensuring that the voices of those affected are heard. We encourage plan participants to provide feedback on this application, as we review it to determine whether it meets the requirements set by Congress.
 
The Treasury Department, in consultation with the Pension Benefit Guaranty Corporation (PBGC) and the Department of Labor, has until May 7, 2016 to review the Central States Pension Plan application to determine whether it meets the requirements established by Congress.  Participants in these plans must be notified of any application to reduce benefits by the plan sponsor.
 
Benefits cannot be reduced until after the following actions take place:
 
·     The plan sponsor must notify participants and beneficiaries of the application for a benefit reduction and provide them individualized estimates of reduced benefits;
 
·     Participants and beneficiaries must have an opportunity to comment on the application;
 
·     Treasury must review and, if the application satisfies all of the Kline-Miller requirements, must  approve the application; and
 
·     Participants and beneficiaries must have an opportunity to vote on the benefit reduction.
 
If a plan is determined to require PBGC assistance valued at more than $1 billion if reductions in benefits are not implemented, Kline-Miller deems it to be a “systemically important plan.”  For these large and financially troubled plans, even if a majority of the plan’s participants and beneficiaries vote against the proposed benefit reductions, the Treasury Department is required by Congress to permit the implementation of the benefit reductions or a modified version of the reductions.
 
Under Kline-Miller, benefits under a plan can be reduced only if the plan sponsor has taken all reasonable measures to address the plan’s financial problems. Kline-Miller provides that, even in seeking to make benefit reductions, some plan participants cannot have their benefits reduced, including retirees 80 years of age and older (partial protection beginning at age 75), and participants receiving disability benefits.
 
Most of the more than 10 million participants in multiemployer pension plans will not see their benefits reduced. According to PBGC, about 10 percent of these participants are in plans for which the plan sponsor is eligible to propose Kline-Miller benefit reductions.  Many of these plans are taking other actions to postpone plan insolvency or improve their financial condition.
 
Plan participants, beneficiaries of the Central States Pension Plan as well as contributing employers, unions, and other interested parties, including other members of the public, are encouraged to review the application from the Central States Pension Plan and provide comments by visiting www.treasury.gov/mpra.
 
Kenneth Feinberg is the Special Master for the Treasury Department’s implementation of the Kline-Miller Law
Posted in:  Kline-Miller Multiemployer Pension Reform Act
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