It’s no secret that defined-benefit pension plans have struggled with funding issues over the past several years. Lower-than-anticipated investment returns and extremely low interest rates, combined with demographic shifts resulting from retirees living longer and workers holding off on retirement, have left many defined-benefit pension plans with fewer assets than are needed to meet their accrued obligations. Perhaps no group of benefit plans has suffered more from these issues than multiemployer pension plans.
Multiemployer pension plans (sometimes referred to as Taft-Hartley plans) cover collectively-bargained employees and are defined-benefit retirement plans jointly sponsored by representatives of the union and participating employers. Under federal rules passed in 2006, multiemployer pension plans experiencing funding issues or problems with liquidity must notify participants and companies of this status. If a multiemployer pension plan is in critical status under these rules, it may be forced to reduce benefits and discontinue lump-sum distributions (to the extent permitted under the plan). Plans in critical and endangered status must also adopt programs, which may include requiring employers to increase contributions, to restore financial health.