This is another article in our series addressing the continued deterioration and downward spiral of multi-employer defined benefit pension funds and the resulting impact upon participants, unions and most importantly on employers.

As the American public focuses on January 20, 2017 as the beginning of the Trump administration, the day may also have historical significance for employee benefits law as the date on which a reduction in core pension benefits was permitted. Since the enactment of ERISA more than forty (40) years ago, a revered tenet of employee benefits law has been that core benefits once earned could never be reduced.

By January 20th,  all participants in the Iron Workers Local 17 Pension Fund are required to have cast their ballots whether or not to reduce core benefits under the Multiemployer Pension Reform Act of 2014 (“MPRA”).  The reductions were approved by the Department of Treasury in December which left the ultimate decision to a vote of the fund’s participants.

Although the voting process at first glance appears to be facially neutral, it seems to favor acceptance of the cuts for several reasons; the most significant reductions were directed to a minority of the participants, the younger employees. Moreover, unlike typical votes, the rescue proposal will be approved unless specifically rejected by a majority of plan participants.  If a participant does not cast a ballot, he will be deemed to have voted in favor of the rescue reduction.

Based upon the demographics of the fund it is predicted that the reductions in core benefits will be approved.

The significance of this historical vote should not be lost on employers. The reductions will fall most heavily upon active participants, your current work force.  Importantly, the reductions in benefits will not mean a reduction in contributions nor in the calculation of potential withdrawal liability.  It simply means that your employees will receive a diminished benefit from your contributions.  This fact should impact upon an employer’s negotiating strategy.  If other pension funds are also successful in reducing core benefits, the incentive for employers and their work forces to remain as contributing employers will be further diminished.  This is another reason for employers to adopt and begin to implement an exit strategy from these funds.

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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.