WPBN: As part of the American Rescue Plan Act, President Biden signed the Butch Lewis Emergency Pension Relief Act into law on March 11, 2021.
Over a million pensioners and employees in roughly 200–225 faltering multiemployer pension systems will have their pensions protected and restored by this law.
The act is the result of years of resolute work by unions, employers, and other activists, as well as by thousands of retirees and national organizations that represent workers, retirees, and consumers.
An outline of the law’s coverage and exclusions is given in this fact sheet.
To whom would the new law be advantageous?
Four different kinds of underfunded multiemployer pension systems are supported under the new law. These plans are eligible to apply for funding to restore previously decreased benefits and to keep paying the pensions they promised. The law probably could help you if your strategy fits into one of these areas. But it’s crucial to understand that in order for the plan trustees to access these assets, they must apply to the government, and they have to do so by the end of 2025.
For a minimum of 30 years, government-assisted programs for all four categories must provide full payments to retirees, widows, widowers, and divorced spouses who qualify for benefits.
Where Will Benefits Funds Come From? How Are They Going to Be Distributed?
The U.S. Department of the Treasury will transfer funds to the federal pension insurance program, the Pension Benefit Guaranty Corporation (PBGC), for retiree payouts and other payments. These funds will thereafter be disbursed as one-time lump sum payments by the PBGC to qualified plans.
The monies must be kept in a separate account and invested exclusively in investment-grade bonds or other authorized assets by the plans that receive them. Benefits and associated costs are the only uses for this funding.
The law stipulates that the PBGC must finish all payments to plans by September 2030 at the latest. $97 billion is the expected total payout to plans; however, this amount may vary based on actual needs. The amount could end up being bigger or lower because there is no cap on it.
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How Soon Will Decreased Benefits Be Restored, and When Will Plans Get Funds?
The Pension Benefit Guaranty Corporation (PBGC) is required by law to publish regulations outlining the process for plan trustees to request for financial aid.
The deadline for the issuance of these rules was July 9, 2021, 120 days after the bill was enacted on March 11, 2021.
The statute permits the PBGC to give priority to specific programs within the first two years due to the large volume of anticipated applications:
- Plans whose benefits were cut due to insolvency or the 2014 MPRA law.
- Within five years, plans are expected to run out of funds.
- Plans that, in the absence of aid, might cost the PBGC more than $1 billion.
During this first two-year period, the PBGC may also decide to give other programs priority. After this period, plans that do not fit into these categories will be eligible to apply.
The PBGC has 120 days from the time a plan files its application for assistance to decide whether to accept, deny, or ask for changes. The application is automatically deemed authorized if the PBGC takes no action during that time.
The PBGC is required to disburse all money granted to programs under this law by September 2030 at the latest.
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Can Requirements for Plan Trustees Be Set by the Government?
The PBGC can set conditions when it distributes cash to pension schemes, if it so desires. These could include limitations on benefit increases in the future and retroactive benefit enhancements.
Additionally, the PBGC has the authority to lower employer contributions, restrict how plans spend their money, and move assets between employee benefit plans.
Furthermore, the PBGC has the authority to create fair guidelines for determining how much an employer must pay when they withdraw from a partially funded plan.
The statute, however, prohibits the PBGC from establishing guidelines for the administration of plans, including determining who is eligible to act as a consultant or trustee.
Additionally, the interest rates that plans should employ to project future funding levels cannot be dictated by the PBGC.
