More than 100 multi-employer pension plans are at risk of becoming insolvent over the next twenty years. Participants in these troubled pension plans could face a substantial reduction in the benefits they receive. If you belong to one of these plans, here is important news for you.
The Butch Lewis Emergency Pension Plan Relief Act
On March 11, 2021, the Butch Lewis Emergency Pension Plan Relief Act (EPPRA), part of the American Rescue Plan Act of 2021, was signed into law to help address this issue. EPPRA provides approximately $86 billion in funds that will be disbursed to eligible pension plans by the Pension Benefit Guaranty Corporation (PBGC). The EPPRA allows eligible plans to use these funds to reimburse participants for any benefits lost due to cuts over the past several years, as well as to reinstate present and future benefits.
These funds are grants, not loans, and eligible plans will not be expected to repay any funds that they may receive.
Criteria for pension plans to be eligible for funds
There are several criteria that will determine whether a multi-employer pension plan is eligible to receive this funding, including:
- A plan’s status as “critical” or “declining”
- Whether a plan has already approved and implemented suspensions of benefits
- Whether the plan has a funding percentage of less than 40% and more inactive than active participants
Estimates suggest that around 10% of multi-employer pension plans will be eligible to receive enough funds to pay all promised benefits through 2051. Pension plans have until 2025 to apply for relief.
Guidance about restrictions for participating pension plans
The PBGC, responsible for administering EPPRA, is in the process of releasing guidance on the restrictions placed on plans receiving EPPRA funds, including a requirement to segregate all funds received from the plan’s present funds and limiting the type and nature of the investments in which these funds can be invested. Ultimately, while there are questions on exactly how the PBGC will administer EPPRA, it’s a clear win for plan participants, managers and employers, as the retirement assets of millions of Americans will be secure and protected from the potential insolvency of their pension plans.
If you are a participant in a multi-employer pension plan and have legal questions about your benefit, Trellis’ Upper Midwest Pension Rights Project may be able to help. Contact us at 866-783-5021 or pensions@trellisconnects.org.
Disclaimer: This blog is not legal advice but contains general information not applicable to specific matters. No attorney-client relationship is formed by access to this information.
