The Treasury Department on Wednesday released proposed and temporary regulations for implementing the Multiemployer Pension Reform Act of 2014, which among other things, allows severely distressed plans to reduce benefits and allows the Pension Benefit Guaranty Corp. to partition some plans to save parts of them.
The agency will publish an interim final rule Friday, a PBGC official said on background during a joint press conference call Wednesday.
Treasury officials also announced the appointment of Kenneth Feinberg as a special master to oversee implementation of the new law. Mr. Feinberg will function as the single point of contact for affected participants. Mr. Feinberg is an attorney who has overseen several sensitive issues, including the federal compensation fund for victims of the 9/11 attacks and the Boston Marathon bombing. Sen. Bernie Sanders, Ind.-Vt., and Rep. Marcy Kaptur, D-Ohio, will introduce legislation Thursday to repeal the new law's provisions allowing benefit cuts.
The law gives Treasury officials the authority to review applications from plans seeking to reduce benefits after exhausting all other measures. Treasury officials will consult with the PBGC and Department of Labor before granting a request.
PBGC officials projected 10% of participants are in plans that could run out of money at some point. Plan participants can vote on proposed benefit reductions, but government officials must override those votes if the plan poses too large a financial threat to the PBGC.
A Treasury official speaking on background said on the press call that troubled plans did not become distressed overnight. “It will take time to address them. This is a difficult, enormously challenging and painful process,” the official said.
Applications will not be approved until the regulations are finalized after a public comment period, said the official, who declined to give a timeline.
Under the new PBGC partition rules, a plan in danger of becoming insolvent may apply to transfer a portion of its liability into a new successor plan that would be funded by PBGC payments, under several conditions. Allowing for partitions “is less costly than becoming responsible for all plans when they run out of money,” the PBGC official said. In preparing for the new law, PBGC officials estimated that they could process up to $60 million worth of partitions, with as many as six plans per year seeking it.
The PBGC will also issue rules later this year implementing new authority to facilitate plan mergers.