Multiemployer Plan Insolvency and Benefit Payments
I just received a “notice of insolvency.” What does this mean?
A notice of insolvency is provided to you when your multiemployer pension plan has determined that it may soon run out of money to pay full plan benefit levels. This means that the plan will not have enough money to pay your full benefit that was originally promised to you.
The notice of insolvency describes the plan’s assets (for example, cash, stocks, bonds, real estate) compared to its debts for the next plan year.
Why is my plan running out of money?
There are various reasons why plans might run out of money. Contributing employers may gradually stop funding a plan for economic reasons, or a major employer in the plan may go bankrupt. As workers retire and receive benefits from the plan, they might not be replaced by younger workers for whom contributions are made. Also, because plan assets are invested, they are vulnerable to losses in the financial markets.
Contact your plan trustees or union officers for details on the cause of your plan’s decline. Every plan’s funding status is also publicly available and updated every year at EFAST Form 5500 Search.
What will happen to my benefit?
Your benefit payments may be reduced. You will receive information on your specific benefit amount in the notice of insolvency, or in a separate notice called a “notice of insolvency benefit level.” Your plan is required to notify you before any change to your benefit.
What is a “notice of insolvency benefit level”?
This letter is sent by the plan to individuals receiving benefits. It describes your current monthly benefit payment before any reduction, and the monthly benefit payment you can expect to receive in the coming plan year due to the plan’s insolvency.
I was notified that my plan will pay out benefits at the “resource benefit level.” What does this mean?
To conserve the plan’s assets, the plan’s trustees may be able to reduce benefits to the “resource benefit level,” which is the highest level of benefits that the plan can pay out of the plan’s assets, without going down to PBGC-guaranteed benefit levels.
This means that your plan has less money than it needs to pay full plan benefits, but more money than is required to pay benefits at the PBGC-guaranteed level.
Is this resource benefit level my new pension amount?
It will likely be your benefit for at least that year. Your plan will need to re-evaluate the amount of its available assets at the beginning of every plan year. Any adjustments to your benefit will be shown in a new “notice of insolvency benefit level” that the plan sends you.
Typically, after a plan reduces benefits to the resource benefit level, the plan runs out of money to pay benefits above the PBGC-guaranteed levels. The plan then applies to PBGC for financial assistance to pay guaranteed benefits.
What is my PBGC-guaranteed benefit?
Your benefit amount will never fall below your PBGC-guaranteed benefit. PBGC’s benefit guarantees are set by law. When a plan runs out of money, PBGC’s multiemployer insurance program will ensure that your plan has enough money to pay your guaranteed benefit.
Your plan by law will communicate your specific PBGC-guaranteed benefit to you. However, you can calculate your benefit by using the PBGC guarantee calculations. Examples are found here. To use this calculator, you will need to know your credited years of service under your plan and your full, unreduced benefit amount at normal retirement age.
I was notified that my benefits will be reduced to the PBGC-guaranteed level. What should I expect?
Although your benefit may be reduced, you will continue to receive payments from your fund office at the same frequency, typically monthly. Contact your fund office if you have questions. PBGC’s Multiemployer Program Division will audit your plan to verify the plan’s accounts and calculations.
Didn’t Congress pass a law to help multiemployer plans?
Yes. In December 2014, the Kline-Miller Multiemployer Pension Reform Act (informally known as “MPRA”) became law. Troubled plans may apply to use certain options under this law.
For further information on MPRA, please review the guidance the Department of Treasury and PBGC have published at Treasury Guidance; PBGC guidance; Partition Regulation FAQs. If your plan applies for any form of relief under this law, you are required to be notified.