Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
An automotive industry pension plan is the latest to have its petition to cut benefits denied by the Treasury Department.
The decision brings to five the number of multiemployer plans that have had their petitions to cut benefits rejected. Only one multiemployer plan’s application has been approved.
The department, in a letter dated May 9, notified the board of trustees of the Alameda, Calif.-based Automotive Industries Pension Fund that its request to cut the benefits of its participants to stave off the fund’s insolvency had been rejected.
The plan filed its petition in September 2016, months after Treasury denied a rescue petition submitted by the 400,000-member Central States, Southeast and Southwest Areas Pension Fund but before the department rejected three other plan applications. Some industry observers thought that plans filing after Treasury’s rejection of these plans would learn lessons from those rejections and be better able to craft successful petitions.
“The decision demonstrates that, even with the change in administration, Treasury remains focused on evaluating the reasonability of each actuarial assumption against the standards outlined in the preamble and text of the final regulations,” Dominic DeMatties, a partner with Alston & Bird, told Bloomberg BNA in an email. He was referring to final rules issued under the Multiemployer Pension Reform Act of 2014, which allowed for the filing of benefit cut petitions.
It appears that the Automotive Industry fund’s trustees weren’t able to benefit from the Treasury’s rejection of Central States’ application.
The Central States decision may have been read by some as focusing on “assumptions that affect cash flow in the near term, such as the investment return assumption, DeMatties said. That assumption wasn’t “a basis for rejection in this case,” said DeMatties, who previously served as an attorney-adviser in Treasury’s Office of the Benefits Tax Counsel.
As all but one of the plans applying to Treasury to cut benefits have thus far been rebuffed, those who originally supported the MPRA, also know as the Kline-Miller Act, have expressed concern about the law’s process at Treasury.
Treasury’s latest ruling “will lead to even larger benefit reductions” for the plan’s participants when the plan goes insolvent, Michael Scott, executive director of the National Coordinating Committee for Multiemployer Plans, told Bloomberg BNA.
Treasury continues to review applications in a way that’s “inconsistent with the intent and purpose of the MPRA legislation,” Scott said. This means that technical corrections to MPRA are required to ensure that the law is a “viable tool for trustees to protect the maximum pension benefits of plan participants,” he said.
The NCCMP, a coalition of employers and unions, lobbied for passage of the MPRA.
To contact the reporter on this story: David B. Brandolph in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
Treasury's rejection letter is at https://www.treasury.gov/services/Responses2/Automotive%20Industries%20Notification%20Letter.pdf.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)