Multiemployer Pension law frees union to cut benefits, avert fund insolvency

The U.S. Treasury Department has certified the results of an election in which Iron Workers Local 17 (Cleveland) Pension Fund participants have approved benefit cuts now to avoid a projected fund insolvency in 2024. Votes were cast 2 to 1 in favor of approving a plan that calls for accrued benefit reduction plus elimination of early retirement subsidies and extra benefit credits.

The Trustees appreciate that a majority of the participants understood that the suspension plan,” Local No. 17 officials informed members and fund participants. “At the time of the projected insolvency in 2024, the Pension Fund would have been in line with many other insolvent plans seeking to share the scarce financial assistance available from the Pension Benefit Corporation.”

Enabling the election was the Kline-Miller Multiemployer Pension Reform Act of 2014, establishing a new process to propose a temporary or permanent reduction of pension benefits if a plan is projected to run out of money before paying all promised benefits. Kline-Miller requires the Treasury Department, in consultation with the Pension Benefit Guaranty Corporation and the Department of Labor, to review a multiemployer pension plan’s application to reduce benefits and determine whether it meets the requirements set by Congress.

Under Kline-Miller, Treasury is responsible for determining whether the application for a reduction of benefits meets the requirements set by Congress. Benefits cannot be reduced until after these actions take place:

  • The plan sponsor must notify participants and beneficiaries of the application for a benefit reduction; provide an individualized estimate of reduced benefits; and, open application for comment.
  • Treasury must review and, if the application satisfies all of the Kline-Miller requirements, must approve the application prior to participants and beneficiaries’ vote on benefit reduction.