By a large bipartisan majority, the U.S. House of Representatives last week passed tax-extender relief legislation that would, among other things, impact multiemployer pension plan funding.
The Tax Increase Prevention Act of 2014 (H.R. 5771) was supported by 202 Republicans and 176 Democrats — with 26 Republicans and 20 Democrats opposed (even the non-voting count was bipartisan, five members of each party did not vote on the measure). It contains tax relief provisions that expired either at the end of calendar year 2013 or during 2014, thus (according to its authors), “preventing tax increases on millions of families and businesses as the tax year 2014 filing season begins early next year.”
As for the impact on multiemployer plans (not to be confused with multiple employer plans, or MEPs), the bill would provide a one-year extension of the multiemployer pension plan funding rules in the Pension Protection Act of 2006 (PPA), rather than the more aggressive fixes on the table following the issuance of the 2014 Annual Report of the Pension Benefit Guaranty Corporation (PBGC), which highlighted the surge in the deficit for the PBGC’s multiemployer program to $42.4 billion, a sharp increase from 2013’s $8.3 billion (see “Good News, Bad News in PBGC 2014 Deficit Figures”).
Those proposals were the subject of a series of mainstream media articles headlining moves described as allowing pension plans to cut benefits for current retirees, though the proposals were specifically directed at the funding crisis affecting some of the nation’s 1,400 multiemployer pension plans. A multiemployer plan is a collectively bargained pension arrangement involving unrelated employers, usually in a common industry, such as construction, services, trucking, retail, textiles or coal mining.
As for the legislation just passed by the House, it would provide the following relief for multiemployer plans:
- Automatic amortization extensions. The legislation would change the deadline for applying to the IRS for extensions of amortization periods to Dec. 31, 2015. The PPA permitted plans to obtain automatic approval of amortization extensions for unfunded liabilities for up to five years, provided that the plan certifies to meeting certain criteria. The current PPA deadline for submitting applications is Dec. 31, 2014.
- Shortfall funding method approvals. The PPA provided for deemed approval of the adoption, use or cessation of the shortfall funding method for certain plans. The PPA allows for deemed approvals for plan years beginning before Jan. 1, 2015, and the legislation would change that cut-off to Jan. 1, 2016.
- Special funding rules for yellow, orange, and red zone plans. The legislation would extend the sunset of the rules that apply to endangered (yellow zone), seriously endangered (orange zone) and critical (red zone) status plans by changing the sunset from Dec. 31, 2014 to Dec. 31, 2015.
The bill, which also includes a provision that would extend through 2014 the ability of individuals at least 70½ years of age to exclude from gross income qualified charitable distributions from Individual Retirement Accounts (IRAs), as well as other tax extenders, now heads to the Senate.
More information about the legislation is available here and here. More information on the PBGC’s multiemployer insurance program is available here.
