On March 6 the U.S. Senate approved multiemployer pension plan relief as part of the American Rescue Plan Act of 2021 (ARPA 2021). U.S. House is set to vote on the legislation on March 10, and it will likely be signed into law by President Biden shortly thereafter.
The bill contains multiemployer pension plan provisions of interest to union construction contractors.
- For failing plans, the legislation includes significant multiemployer pension relief through a Special Financial Assistance Program by providing a one-time lump sum payment to eligible plans to pay all benefits through 2051 (30 years) with no expectation of repayment.
- This Special Financial Assistance Program concept differs greatly from previously debated relief programs like an expansion of partitioning or loan programs.
- This new approach by Congress is meant to clear procedural rules to avoid a filibuster and improves the likelihood the relief is enacted into law.
- Under the Special Financial Assistance Program plans using 2020 assumptions that are “Critical and Declining” plans, and some “critical” plans and a few “endangered” plans would receive a onetime lump sum payment that is equal to the amount needed to pay benefits through 2051 (30 years). There is no concept of repayment for this assistance.
- The package would also include provisions similar to those in response to the 2008 stock market event:
- 2-year zone freezes;
- 5-year extension of funding improvement and rehabilitation plans;
- investment loss smoothing; and,
- man hour smoothing.
- It is estimated there are about 100 “critical and declining” plans, some “critical” plans and a few “endangered” plans in the construction industry that could be eligible for some relief.
- Teamsters Central States Pension Fund (among many other Critical and Declining Plans) is expected to among the multiemployer plans that will receive relief.
- This Special Financial Assistance Program concept differs greatly from previously debated relief programs like an expansion of partitioning or loan programs.
- Starting in 2031 PBGC premiums would be increased to $52/year and indexed for inflation every year after for all plans and participants.
- Premiums are currently scheduled to be about $43 in 2031 because of indexing.
- None of the harmful public policy changes, that have been proposed in various bills over the last several years, are included the ARPA 2021. For example – the following are NOT included in the ARPA 2021:
- massive PBGC premium increases,
- employer assessments,
- participant benefit reductions,
- increased withdrawal liability and
- mandating lower assumption rates.
- However, at the same time a long AGC advocated policy change, authorization of Composite Plan design, which incorporates the best features of DB and DC plans by offering voluntary options to share risks, funding stability, lifetime income to participants, and limiting employer obligations to negotiated contributions only, without cost to the taxpayer was not included.
- AGC will make authorization of new plan design a priority and will ensure the implementation of the American Rescue Plan Act considers the impact on construction employers.
- Some other policy changes of note in the American Rescue Plan Act:
- New, 100% temporary subsidy of COBRA health benefits for unemployed workers through September 30, 2021.
- Voluntary tax credits under FFCRA for paid sick time and paid family leave credits through September 30, 2021. (there is no federal paid leave mandate)
- Extends the Employee Retention Tax Credit (ERTC) through December 31, 2021. Previously it was available through June 31, 2021.
- Extends federal pandemic unemployment benefits at $300 per week through September 6, 2021 along with tax treatment advantages. (a late change)
- Unfortunately, none of the $350 billion for state and local governments are dedicated to capital construction investment projects.
The actual legislative text for the pension language can be found beginning on page 477, COBRA on page 315 and the voluntary paid leave tax credits on page 407.
The situation has been very fluid over the last several weeks and AGC will be providing more information and resources soon.
More details on the pension provisions can be found in this Fact Sheet.