A bill has been introduced in Congress to create a Pension Rehabilitation Trust Fund that would be managed by a new Pension Rehabilitation Administration within the Department of the Treasury, to make loans to multiemployer defined benefit (DB) plans that are in critical or declining status or that are insolvent but not terminated. The bill is in line with a pledge by House and Senate Democrats to protect union multiemployer pensions.
The Secretary of the Treasury would have the power to transfer monies to the administration to cover the loans. A director, nominated by the president, would oversee the administration. The administration would work in collaboration with the Pension Benefit Guaranty Corporation (PBGC) and the Department of Labor (DOL).
Plans would be able to apply to the Pension Rehabilitation Administration for loans and have 29 years to repay the loans, plus interest. Plans that receive such loans would not be able to increase benefits, thereby allowing “any employer participating in the plan to reduce its contributions, or accept any collective bargaining agreement which provides for reduced contribution rates” throughout the loan period. Terminated plans would be required to reinstate benefits.
The administration would renegotiate the terms of the loan for any plan unable to repay it “and, if the Pension Rehabilitation Administration deems necessary to avoid any suspension of the accrued benefits of participants, forgiveness of a portion of the loan principal.”
To become eligible for such a loan, the DB plan would have to demonstrate the ability to repay it, as well as participant benefits. Plans would also have to reveal how they will invest the money and whether it involves any annuity purchases. If an annuity is purchased, it would need to be “rated A or better by a nationally recognized statistical rating organization, and the purchase of such contracts shall meet all applicable fiduciary standards under the Employee Retirement Income Security Act of 1974.”
Furthermore, “any investment manager of a portfolio [in the plan] shall acknowledge in writing that such person is a fiduciary under the Employee Retirement Income Security Act of 1974 with respect to the plan.”
Once an application is made, the administration would respond within 90 days.
If a plan is also applying for financial assistance from the PBGC, it would need to file both that application and the loan application to the administration jointly. Plans that are already receiving financial assistance from the PBGC would be given a simplified loan application from the administration.
The full text of the bill can be viewed here.