What could be in the next stimulus bill in response to the COVID-19 pandemic? Congress reportedly is working on a bill (dubbed “Stimulus 3.5”) that includes additional funding for the Paycheck Protection Program created by the CARES Act.  Will the new stimulus bill address long-awaited reforms to the multiemployer pension plan system?

The imminent collapse of the multiemployer pension system is well-documented. A recent report found that 114 multiemployer defined benefit plans (out of approximately 1,400 nationally), covering 1.3 million workers, are underfunded by $36.4 billion. Absent a legislative solution, most of these plans are projected to be bankrupt within the next five to 20 years. Moreover, the federal agency that backstops pension benefits — the Pension Benefit Guaranty Corporation (PBGC) — is projected to become insolvent in five years.

There have been numerous reform bills introduced in the past few years. Most recently, Senate Republicans introduced the Multiemployer Pensions Recapitalization and Reform Plan on November 20, 2019. The Democratic solution is called the Rehabilitation for Multiemployer Pensions Act of 2020, which was originally included in the House version of the CARES Act but was excised before the CARES Act was enacted on March 27, 2020.

The Republican Multiemployer Pensions Recapitalization and Reform Plan focuses on increasing the amount of the PBGC’s benefit guarantee (the maximum guaranteed benefit would increase by nearly 80 percent). Funding would come from a combination of increased PBGC premiums for multiemployer plans, and contributions from stakeholders (unions, participating employers, and retirees.) The Democratic Rehabilitation for Multiemployer Pensions Act, on the other hand, would create and fund a Pension Rehabilitation Administration within the Department of the Treasury. The agency would make loans to certain underfunded plans for 29 years on an interest-only basis. PBGC also would receive additional appropriations as needed to provide additional financial assistance to troubled plans, which would be available in addition to the above-mentioned loans.

The bills sharply diverge on withdrawal liability. Under the Republican approach, more employers would ultimately end up paying withdrawal liability; the bill would provide for five years of withdrawal liability payments for plans that are up to 139-percent funded. The mass withdrawal rules would be repealed, and the maximum withdrawal liability payment period (for terminated plans and plans in critical and declining status) would be 25 years.

Under the Democrat proposal, all employers who withdraw from a plan within 30 years of the date the plan received a loan would be treated as having withdrawn in a mass withdrawal; such employer would be subject to potentially infinite withdrawal liability payments.

This is a fluid and evolving situation. We will continue to monitor and report developments. If you have questions, please contact a Jackson Lewis attorney.

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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.