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By Sean Forbes
Aug. 2 — Attempts to save struggling multiemployer pension plans could be halted by proposed rules issued by the Pension Benefit Guaranty Corporation, according to the grocery-chain Kroger Co. and a coalition of food and dairy companies.
The proposed rules (RIN:1210-AB31) are intended to help plans that are in “endangered,” “critical” or “critical and declining” status to merge with or transfer their assets to healthier plans to prevent—or, in some cases, merely postpone—insolvency.
The rules would “prevent mergers and transfers that are in the best interests of plan participants and that lessen the risk to the PBGC for guaranteed benefits,” the Cincinnati-based company said in its July 28 comment letter to the PBGC.
Venable LLP, on behalf of the Association of Food and Dairy Retailers, Wholesalers and Distributors, echoed Kroger's comments in a separate letter. The association's members include Aramark Corp., ConAgra Foods Inc., Kellogg Co., Kroger, Supervalu Inc. and several other companies.
The agency’s proposal is a product of the Multiemployer Pension Reform Act of 2014, which gave the PBGC the authority to aid plan mergers once the agency determines a merger will benefit the participants of a plan without harming the participants and beneficiaries of the healthier plans involved. Kroger is a member of the National Coordinating Committee for Multiemployer Plans, which lobbied for the MPRA. The food and dairy association also supported the MPRA.
The MPRA also introduced the term “critical and declining” status to describe the plans most at risk of collapse. A plan may be considered to be in this status if it’s projected to become insolvent within 15 years, or 20 years if the inactive-to-active participant ratio is more than two to one or if the plan is less than 80 percent funded. Plans in this status may cut benefits for certain retirees, including those in pay status, subject to certain limitations.
Under the proposal, a merger or transfer is allowed only if each plan that exists after the transaction isn’t reasonably expected to be insolvent. The requirement can be met by either a general test or a plan solvency test.
Under the latter, plans that are “significantly affected” would need to have assets after the merger or transfer that:
The definition of significantly affected plan also would apply to endangered or critical status plans that engage in non-de minimis transfers.
The proposal suggests that an endangered or critical plan in a proposed transfer could meet the plan solvency test, Kroger said. However, plans with a projected funding deficiency wouldn’t be able to meet the test “as a practical matter,” Kroger said.
Kroger suggested the PBGC add a provision to the proposal to permit mergers and transfers involving struggling plans that can’t meet either of the two proposed tests, but which would:
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The Kroger comment letter is at http://src.bna.com/fwK.
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