The long-awaited multiemployer pension reform legislation championed by MCAA, the UA and virtually the entire organized construction community has been introduced in the House by Representative Dr. Phil Roe (R-TN). The legislation, H.R. 4997, the Giving Retirement Options to Workers Act of 2018 (GROW Act) is now pending in the House Education and Workforce Committee, and has been referred to the House Ways and Means Committee as well.
Dr. Roe was formerly the Chair of the House Education and Workforce Committee Pension Subcommittee, and was instrumental in pension reform issues over the past many years.
The Composite Plan measure has had a tortuous history over the past several years. It was originally one of the three parts of the NCCMP/MCAA/industry consensus measure called Solutions Not Bailouts, a legislative proposal that was enacted in December 2014 as the Kline-Miller Multiemployer Pension Reform Act (MPRA). The Composite Plan part of the proposal was held back from the law in 2014 because of committee jurisdictional conflicts, with a Congressional leadership commitment (at that time) for relatively quick enactment in 2015. But, circumstances changed in a variety of ways, and MCAA has been working doggedly since then to redeem that promise of action on the basic Composite Plan reform.
The Composite Plan is an option for trustees to consider (not a mandate) to convert their traditional defined benefit plan to the new Composite Plan model. If the trustees choose to convert, the old plan – the Legacy Plan – is frozen, and further benefits accruals under that plan are stopped. New benefits under the Composite plan are accrued going forward upon the conversion, with required minimum contributions being paid back to the legacy plan to remedy any underfunding as called for the 2006 Pension Protection Act’s Red, Yellow and Green one funding rules.
The new Composite Plan must be overfunded at 120% at a minimum, and annual and 15-year funding projections and adjustments to meet the overfunding standards are called for to forestall deep funding problems before they develop. The substantially reduced risk of underfunding is further ameliorated by a set of graduated benefits adjustment options in cases of projected shortfalls (increased contributions, cuts in future accruals, adjustments of ancillary benefits, and then core benefits suspensions only as a last resort) much along the lines of the Pension Protection Act and the MPRA law to forestall the development of serious funding shortfalls as are possible under the traditional plan funding model.
This new, equitable risk sharing model is designed to further ensure plan sustainability by stemming the loss of contributing employers from the traditional plans, and allowing for organizing of new employers into the new risk sharing model plan. This new plan model is predicted to be much more attractive to plan participants as it provides the best features of a traditional defined benefit plan – lifetime benefits, shared longevity risk, professional asset management and safeguards against early withdrawals. For contributing employers, the risk of overall plan underfunding and consequent individual employer withdrawal liability is substantially removed over time – stanching the retreat of employers from traditional plans and allowing new employer entrants without risk of uncontrollable contingent funding liability.
Pension Benefit Guaranty Corp (PBGC) insurance premiums are still payable on legacy plan benefits; whereas new benefit accruals under the Composite Plan are not PBGC insured. However, the annual projections and mandatory overfunding safeguards more than substitute for that premium security , and are a better guaranty against ultimate plan insolvency than was provided under the traditional model, where the possibility of falling into critical and declining funding status with a diminished PBGC payment are becoming ever more prevalent possibilities.
MCAA is working to line up co-sponsors for the GROW Act on both sides of the aisle, and is striving to gain enactment in the waning days of the 115th Congress – a heavy lift for sure – but our ardent goal. MCAA continues to lobby Administration officials at the Labor, Treasury and Commerce Departments and White House policy councils to gain their support for enactment of Composite Plan legislation, hopefully this year.
MCAA has long taken the position that Composite Plan reforms are an essential and separate reform apart from various proposals to provide additional resources to shore up critical and declining plans in other industries that themselves immediately threaten the long-term solvency of the PBGC. MCAA also is working with select MCAA affiliates to reach out to specific lawmakers on key committees to press for passage of reform this year.
Go to: www.saveourfutures.com for further details on the GROW Act and a link to Congressional outreach.