H.R. 409 by House Ways and Means Committee Chairman Richard Neal (D-MA) and
H.R. 423 by House Education and Labor Committee Chairman Bobby Scott (D-VA). The differences between those bills and the Act appear to be intended to allow the Act to comply with the limitations of the budget reconciliation process.
As discussed further below, the legislation is expected to come up for a House vote on February 26 and a Senate vote thereafter, with the goal of it being enacted into law before existing federal unemployment benefits expire on March 14.
Funding Changes for Single-Employer and Multiemployer Plans
Single-Employer Provisions
The Act provides that in the 2020 plan year, the minimum funding requirements for single-employer pension plans will be calculated by amortizing the entire unfunded liability over 15 years. Re-amortizing the unfunded liability in this fashion is often referred to as a “fresh start”. A 15-year amortization period will also apply to future changes in the
Michael H. Woolever Tax Attorney Foley & Lardner Chicago, IL focusing on executive compensation, ERISA Title I issues, ERISA class action litigation, and other employee benefit and federal income tax matters.
loans
cash grants to union-sponsored multiemployer pension plans that are otherwise headed toward insolvency.
About one in 10 multi-employer pension plans are in that situation thanks to stock market losses and declining numbers of active employees in the plans, and the wellbeing of up to 1.3 million union members and spouses is at stake. Butch Lewis would shore up declining pensions and restore benefits that were cut by some pensions in an effort to forestall insolvency.
If Congress does nothing, the Central States Teamster Pension is expected to run out of money in 2025. That would lead the Pension Benefit Guaranty Corporation (PBGC) itself to become insolvent. PBGC is a government insurance agency that guarantees pension benefits.
Could There Be a Renewed Interest in DB Plans?
There are plan designs that decrease the risk and volatility for plan sponsors, and defined benefit plans offer the guaranteed lifetime income participants desire.
Reported by
Art by Camilla Zaza
Over the years, the retirement plan industry has introduced new features for defined contribution (DC) plans to mimic the advantages participants received from defined benefit (DB) plans. It seems that although DB plan sponsors have been eliminating or offloading their obligations, the industry has recognized the benefits of a plan design in which employees automatically participate and receive guaranteed payments for life.
Should I Take the Lump Sum Option From My Pension?
Dear Carrie: I’m about to retire, and I have to decide between taking a lump sum or lifetime income payments for my pension. I’m leaning toward the lump sum. Is this a good idea? A Reader
Dear Readers: My first thought is to say congratulations! A pension in any form whether taken as a lump sum, as lifetime income (sometimes called a pension annuity) or as some combination of both, is a valuable and increasingly rare benefit. This is an important retirement decision. Take your time and weigh all the options carefully. A lump sum can seem alluring, no doubt, but consider tax implications as well as the potential benefits of spreading out payments over a longer period of time.