Continue to Monitor Enable Multi-Employer Pension Plans to Ensure They Weather Market Downturns

Background:

• Multi-employer pension plans (MEPPs) are employment-based retirement plans sponsored by multiple employers in accordance with one or more collective bargaining agreements and are common in the unionized sector of the construction industry. These plans allow employers to offer workers a defined benefit plan that gives them “portability” to earn continuous benefits as they go from job to job within the same industry. As a result of the contraction of the investment markets that occurred from 2000 to 2002 that threatened both the plans and their contributing employers, AGC and a coalition of stakeholders produced a consensus agreement that contained a framework for securing the retirement income of participants that formed the foundation of the multi-employer provisions of the Pension Protection Act of 2006 (PPA). Beginning in 2008, the worldwide financial crisis has resulted in an unprecedented and precipitous drop in the plans’ invested assets (20 percent or more), giving rise to concerns for the projected need for exponential contribution increases and/or correspondingly deep cuts in covered benefits.

AGC Message:

• Protect MEPPs through Emergency Measures While Preserving Fundamental Goals of PPA. AGC remains committed to the fundamental goals of the PPA to ensure that plans are sufficiently funded to pay all promised benefits when they are due, but due to the exigencies of the global economy, the rules must be made more responsive to the current crisis. AGC supports modest, short-term relief based on providing additional time to plans to gauge the severity of the market contraction and lessen its adverse impact on employment and benefit security in the short-run. The proposed relief must be adopted immediately.
• Without Remedial Action, Contribution Increases Would Make Contributing Employers Non-Competitive. To meet the ambitious funding requirements of the PPA, contributing employers are projected to face contribution increases in the double-digit percentage range. This could jeopardize the employers’ financial viability, require deep cuts in employee retirement benefits and wages, and result in massive job losses.