AFL-CIO President Trumka chaired a labor retirement summit on December 18, 2012. Most AFL-CIO affiliates were represented. The Building Trades and most other unions that sponsor multiemployer pension plans have come together in the Retirement Security Commission to propose major changes to ERISA and an extension of the Pension Protection Act for multiemployer plans. Check NCCMP.org next month, for a copy of the Commission report.
Unions that heavily participate in single employer plans find PPA an anathema, but proposed solutions for these workers are not clear. One approach – lift all boats – would create a national retirement plan, or expand social security or some such. Others would focus on improving member benefits and leaving the larger debate for what’s best for society to another time.
More to come after the new year.
The often quoted Pogo line “We have met the enemy and he is us” comes to mind in the Retirement Security Commission deliberations. For the original Pogo strip go http://en.wikipedia.org/wiki/Pogo_(comic_strip). Current law is replete with restrictions on what trustees, even joint labor-management boards of trustees, can do to adjust benefits. The Commission is struggling with whether or not to give Trustees greater power to adjust benefits, even for those in pay status.
Many union trustees say that even if they had the power, they would not adjust benefits of retirees in pay status. Others say, don’t give me the power because I might be tempted to use it, or the employer trustees will push me to use it.
Similarly, management trustees say don’t leave benefit cuts up to the Trustees, make the plans make them. They say this because (a) they don’t belive they could persuade their union counterparts to make necessary changes or (b) they don’t trust their own trustees to vote for hard choices.
If the US were a pension plan it would indeed be underfunded. Like and underfunded fund, it will need more contributions (revenues) or less benefits. It might be indirectly helped by investments, which would increase the revenue side. But how are liabilities measured for the nation? I confess I don’t know.
In the event of a US downgrade, interest rates will go up. When they go up, pension liablities might go down. But then equities might suffer and fixed income too, so no earnings… Well that is certainly no earnings over a 7 to 7.5% assumed rate.
I’ve worked for funds co-sponsored by labor and management for 28 years. During this period, the value of data processing and IT to productivity is without question. Yet, our friends in labor are often slow to adopt. If an organization has a website, check for hyperlinks, often rare. Databases are even rarer. Want to know whose a union friendly provider, some trades have such a list, many do not. Refer stakeholders to the website and hear “I don’t do computers.”
The DOL’s recent foray into redefining or reinvigorating the definition of fiduciary brought my attention back to another issue impacting multiemployer plans.
Many attorneys have advised their fund clients to seek to impose personal liablity on company principals for delinquent contributions. The theory is that contributions become plan assets when due. The principal controls what bills are paid. When the principal does not pay the fund, he exercises control over the plan’s assets and should be personally liable.
When I was a full-time delinquency litigator, I looked for an edge like this. Heck, I even wrote a law review article on it.
But now, I ask these lawyers this question? How do you report the transaction between the plan and the party-in-interest? And I ask Trustees, is this the way to attract new employers or retain existing ones?
Today, March 9 is Mrs. ERISANation’s birthday, but I digress. This morning I viewed the Financial Accounting Standards Board’s webinar on proposed financial reporting rules for employers that participate in multiemployer plans. Some Board members continue to decry the alleged lack of transparency or “paucity” of data about an employer’s obligations to multiemployer plans. Saying it don’t make it so.
There was some indication that a portion of the proposed solution – disclosure of meaningless stuff about Trustee structure, demographics and other “qualitative stuff” might be rethunk. Let’s hope so. Let’s also hope that the FASB’s thinking will continue to be further informed by employee benefits professionals. FASB staff optimitically targets late June 2011 for reissuance. The effective date will be “debated at a later date.”