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.