The Multiemployer Pension Reform Act of 2014 (MPRA) provides two options that plan trustees and participants can use to keep severely underfunded multiemployer plans (“critical and declining plans”) from running out of money (becoming “insolvent”) and having to reduce benefits to PBGC-guaranteed amounts. These options are:
- Benefit suspension – for which a plan applies to the U.S. Department of Treasury, and
- Partition – for which a plan applies to PBGC.
Partition transfers financial responsibility for a portion of the benefits under a critical and declining plan to PBGC so that the plan can remain solvent.
In a partition, some of a plan’s PBGC-guaranteed benefits are transferred to a new “successor plan” that will receive financial assistance from PBGC to pay those benefits. The successor plan will be administered by the same fund office as the original plan. The current administrators of the original plan will continue to maintain the records, answer questions, process all the paperwork and pay benefits for both plans.
Benefit suspension amounts in both plans will be determined through the process required by the Multiemployer Pension Reform Act.
For a plan to be eligible for a partition, the plan must be in critical and declining status. The plan must show that it has taken all reasonable measures to avoid insolvency, including maximum benefit suspensions under the law, and that partition is necessary for the plan to remain solvent.
No. If a plan can avoid insolvency with benefit suspensions alone (and no financial assistance from PBGC), the plan would apply only to the Treasury Department to suspend benefits. If a plan needs both benefit suspensions and partition financial assistance from PBGC to remain solvent, the plan would apply to the Treasury Department for benefit suspensions and to PBGC for a partition.
The Treasury Department has authority under the law to approve benefit suspension requests in consultation with PBGC and the Department of Labor. PBGC has sole authority to approve partition requests. PBGC and the Treasury Department coordinate with one another when a plan applies for both benefit suspensions and partition.
PBGC will make its approval of partition conditional on Treasury approval of suspensions and vice versa. Similarly, if Treasury denies a plan’s benefit suspension request, PBGC cannot approve partition of the plan.
Partition is just a way to provide early financial assistance to a plan. However, to be eligible for a partition, a plan must make maximum benefit suspensions as determined by Treasury. The maximum amount of benefit suspensions is subject to limits in the law:
- No reductions are allowed for retirees age 80 and older (as of the effective date of the benefit suspension); reductions for those aged 75-80 are less than allowed for younger participants.
- No reductions are allowed to benefits based on disability (as defined under the plan).
- Any benefits above 110% of the PBGC guarantee must be reduced to 110% of the PBGC guarantee (except as noted above).
PBGC’s Multiemployer Insurance Program is projected to run out of money by the end of fiscal year 2025, with considerable risk that it could run out before then. If the program becomes insolvent, unless Congress acts to provide more resources, PBGC will be unable to meet all of its financial assistance obligations to insolvent plans and plans created by a partition order.
The future financial condition of PBGC’s insurance programs is described more completely in its annual Projections Report.
Under MPRA, PBGC is permitted to approve a new partition only if the partition will not impair PBGC’s ability to meet its existing obligations to provide financial assistance to other plans insured under the Multiemployer Program.
- Partition Withdrawal Request - On January 25, 2017, the Bricklayers and Allied Craftworkers Local 5 New York Retirement Fund Pension Plan withdrew its June 24, 2016, application to PBGC for partition.
- Partition Application
- Road Carriers Local 707 - News Release and FAQs
- On June 10, 2016, PBGC issued its decision on the Road Carriers Local – 707 Pension Fund application for a partition under the Multiemployer Pension Reform Act of 2014. The plan’s application was denied because it failed to meet the legal requirement that the plan would remain solvent following a partition. View the notification letter.
- Partition Application (See Exhibits 7A-7M)
- United Furniture Workers – News Release and UFW FAQs
- On August 31, 2017, PBGC issued an order partitioning the United Furniture Workers Pension Fund A. PBGC issued this order after finding that the plan’s application for partition, dated February 28, 2017, satisfied all the requirements for partition under the Multiemployer Pension Reform Act of 2014. The order is effective as of September 1, 2017. View the Partition Order and Appendix.
- On July 20, 2017, PBGC issued its decision on the United Furniture Workers Pension Fund A application for a partition under the Multiemployer Pension Reform Act of 2014. PBGC has conditionally approved the plan’s partition application. View the notification letter.
- Resubmitted Partition Application
- Partition Withdrawal Request - On February 21, 2017, the United Furniture Workers Pension Fund A withdrew its August 11, 2016, application to PBGC for partition. View the Partition Application letter (withdrawn).
- Partition Application