A hearing was conducted today by the Subcommittee on Select Revenue Measures of the House Ways and Means Committee on the topic of “Funding Rules for Multiemployer Defined Benefit Plans in H.R. 2830, the Pension Protection Act of 2005.” The announcement for the hearing sets forth the purpose of the hearing as follows:
More than 9.8 million workers participate in multiemployer defined benefit plans, which are collectively bargained pension arrangements involving unrelated employers, usually in a common industry. The Pension Benefits Guaranty Corporation (PBGC) estimates that multiemployer pension programs are underfunded by more than $150 billion; that is, these pension programs have promised $150 billion more in benefits than they have assets to pay according to current funding levels in the plans.To address the current underfunding in these plans, Education and Workforce Chairman, John A. Boehner (R-OH), Chairman Bill Thomas (R-CA) and Rep. Sam Johnson (R-TX) introduced H.R. 2830 on June 9, 2005. Provisions included in this legislation create a structure for identifying multiemployer pension plans that may be facing funding problems and providing quantifiable benchmarks for measuring efforts to improve the plan’s funding. Plans that are between 65 and 80 percent funded are classified as “yellow zone” plans that are in intermediate financial problems. Trustees of yellow zone plans would be required to adopt a program that will improve the health of the plan by one-third within 10 years. Trustees would be prohibited from increasing benefits that could cause the plan to fall below the 65 percent funded status. Plans that are less than 65 percent funded and face significant funding problems would be classified as “red zone” plans. Trustees would be required to develop a plan to exit the red zone funding status within 10 years, among other requirements. Additionally, H.R. 2830 requires increased reporting and disclosure requirements for all plans.
In announcing the hearing, Chairman Camp stated, “This bill seeks to address the shortfalls in the pension funding requirements that have led to the underfunding of many of our Nation’s pensions programs. The changes will help increase the transparency of the funding status of multiemployer pension plans and provide new tools to enable troubled plans to regain their financial health.”
The TaxProf Blog points out:
In connection with the hearing, the Joint Committee on Taxation has issued Present Law And Background Relating To Multiemployer Defined Benefit Pension Plans And Related Provisions Of H.R. 2830, The “Pension Protection Act Of 2005” (JCX-49-05) (47 Pages).