On October 28, 2015, we reported that the Central States Southeast and Southwest Area Pension Fund (“Central States”) — one of the largest multiemployer pension plans in the country — had filed an application with the Department of the Treasury (“Treasury”) seeking to reduce core benefits under the Multiemployer Pension Reform Act of 2014 (“MPRA”) and had sent a notice of the application to its approximately 400,000 participants. Central States was also required to provide participants with an individualized estimate of reduced benefits.

On January 8, 2016, the Iron Workers Local 17 Pension Fund (the “Iron Workers Fund”) — which operates from Cleveland, Ohio — became the second multiemployer pension plan to file an application with Treasury to reduce core benefits. In its application, the Iron Workers Fund trustees advised that the Fund’s actuary had certified that the Fund was in “critical and declining status” for the plan year beginning May 1, 2015. Moreover, without approval of the application, the Fund was projected to become insolvent by 2025.

The application stated that the Iron Workers Fund’s most recent Form 5500 for the plan year ending April 30, 2014 reflected assets of $85.7 million and liabilities of $223.2 million, which means that the Fund had approximately 38 cents to pay for every dollar of vested benefits.

This filing demonstrates that the underfunding plight impacts both large and smaller plans, as the Iron Workers Fund has 2,021 participants of which 641 are active.

With regard to the Central States application, the deadline for the MPRA-required opportunity on the part of participants and beneficiaries to submit comments has been extended until February 1, 2016.  In addition, Treasury has announced that public comment sessions would be conducted in regions that would be most impacted by any benefit reduction. Such sessions were scheduled in Greensboro, North Carolina on January 11, 2016 and in Peoria, Illinois on January 14, 2016, with members of the public invited to attend.

Before core benefits can be reduced, Treasury must review the application and has 225 days from the date of receipt of the application to reject it. Otherwise, the application will be considered approved. If Treasury were to approve the application, it would then have 30 days to administer a vote for the participants and beneficiaries on the benefit reduction.

This second filing within less than four months should underscore the need for employers with collective bargaining agreements requiring contributions to multiemployer defined benefit pension funds to be vigilant and proactive. Such employers should conduct an annual “benefits due diligence,” which should take two forms:  (1) a review of the pension fund’s annual Form 5500; and (2) an annual request to the pension fund seeking a written estimate of the employer’s withdrawal liability and an explanation of the methodology used in calculating any such withdrawal liability.

We will continue to advise concerning the progress of these two applications and other developing issues involving multiemployer defined benefit pension funds.

Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Paul A. Friedman Paul A. Friedman

Paul A. Friedman is a principal in the White Plains, New York, office of Jackson Lewis, P.C. His legal practice is focused on ERISA litigation, labor and Multiemployer Pension Plan Amendments Act (MPPAA) arbitrations and is well grounded in his earlier experience as…

Paul A. Friedman is a principal in the White Plains, New York, office of Jackson Lewis, P.C. His legal practice is focused on ERISA litigation, labor and Multiemployer Pension Plan Amendments Act (MPPAA) arbitrations and is well grounded in his earlier experience as outside counsel to numerous union pension funds. During years of litigating cutting-edge ERISA issues before the U.S. Department of Labor, U.S. district courts, bankruptcy courts and courts of appeal on behalf of employers, plan sponsors and ERISA plan fiduciaries, Paul sometimes finds his own prior landmark decisions cited to him.

For Paul, MPPAA has all the excitement of a trial – it is an intricate and counter-intuitive statute. He has first chair experience in more than 40 jury trials and has handled hundreds of arbitrations and bench trials on all aspects of ERISA. ERISA knows no organizational bounds and so Paul has defended cases for clients representing many industry sectors, including life sciences, financial services, energy, hospitality, and construction.

Paul has served as litigation counsel for numerous multi-employer and single-employer employee benefit plans in ERISA matters, where he:

  • Devotes his practice mainly to the defense of employers, plan sponsors, fiduciaries, and financial institutions against claims brought under ERISA by benefit funds, plan beneficiaries, and the U.S. Department of Labor. He handles issues related to breach of fiduciary duties, excessive plan expenses, benefit entitlement issues retiree health benefits, and functional fiduciary liability
  • Successfully represents companies as plan sponsors against claims of participants and qualified beneficiaries for violations of COBRA
  • Defends employers that have been assessed withdrawal liability under MPPAA or have experienced increased liability due to the passage of the Pension Protection Act of 2006
  • Performs employee benefits due diligence for buyers or sellers in mergers and acquisitions transactions, filling a knowledge gap between labor and financial counsel, ensuring that buyers and sellers price-in or mitigate against ERISA violations and potentially millions of dollars in liabilities
  • Conducts comprehensive strategic reviews of clients’ current operations to avoid or mitigate against exposure to ERISA enforcement and risk of civil and criminal charges brought against company executives, principals, and trustees

In the last decade, he has developed a business model for use by businesses across a broad spectrum of ERISA issues from the beginning of the ownership of these companies to their sale. He also provides benefits guidance to Mergers and Acquisitions counsel in complex transactions.

Outside of work, Paul is an ardent Civil War and World War I buff. He expressly enjoys traveling to Europe and touring World War I battlefields.