Council Offers Suggestions to Bolster PBGC Multiemployer Plan Program

Among proposals are a change in PBGC premiums and changes in premium structure.

The Pension Practice Council of the American Academy of Actuaries has released a new issue brief that guides multiemployer plans, regulators, and policy makers in honoring the Pension Benefit Guaranty Corporation’s (PBGC)’s policy of guaranteed minimum payments for participants under its multiemployer program.

According to the Council, the program is projected to become insolvent in about eight years if necessary changes are not made.

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“Recent changes aimed at bolstering the multiemployer program’s financial condition may have improved its position going forward, but not nearly enough to support existing guarantees,” says Academy Senior Pension Fellow Ted Goldman. “None of the remaining choices available to ensure the guarantees is without disadvantages, and all of them require sacrifices.”

The Multiemployer Pension Reform Act (MPRA) increased per-participant program premiums, established a process for plans to apply for benefit suspensions, and made other program changes. The program continues to be challenged, however, by inadequate plan premium levels and employer withdrawal liability payments, plan contribution and investment strategies that have been a factor in lower-than-needed revenues, declining plan contribution bases, changes within multiemployer plan industries and the effects of the Great Recession.

The brief, Honoring the PBGC Guarantee for Multiemployer Plans Requires Difficult Choices, outlines opt ions for addressing the program’s financial condition.

It proposes a change in premiums. The paper reads, “To avoid insolvency over the 20-year projection period through further premium changes alone would necessitate, at a minimum, a six-fold increase in premiums, but increases could cause additional stress to distressed plans and motivate a shift toward defined contribution plans that weakens the program.”

It also suggests changes in premium structures. “If flexibility were enabled, premiums could change from a flat per-participant rate to another structure such as a variable rate or a withholding of premium from withdrawing employers or from payments made to participants. Each alternative structure has advantages and drawbacks.”

Furthermore, the Council proposes alternative legislative approaches. “Lawmakers could authorize general revenue, new targeted taxes on transactions, asset transfers from the single-employer PBGC program, or combination of the PBGC single employer and multiemployer programs, to address the multiemployer program’s financial condition. Each of these options introduces controversial issues that would impact various stakeholders in different ways.”

The issue brief can be downloaded by clicking the “Public Policy” tab at actuary.org

PNC to Take on Fiduciary Role

PNC Retirement Solutions will offer 3(21) and 3(38) investment services.

PNC will now offer investment fiduciary services to its defined contribution (DC) clients through its PNC Retirement Solutions platform.

“With the Department of Labor’s continued focus on fee transparency and fiduciary responsibilities, we are helping our retirement plan sponsor clients mitigate their risk by taking on the fiduciary role of advising on or managing investment lineups and providing fund options and services suitable for the particular needs and abilities of their workforce,” says Bonnie Fawcett, managing director for PNC Retirement Solutions.

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PNC will offer a non-discretionary 3(21) investment advisory service and a discretionary 3(38) investment management service. The first will provide assistance with selecting and monitoring the investment options to be offered to plan participants, while allowing the plan sponsor to maintain discretion over the plan’s investment lineup. The 3(38) investment management service built for different plan demographic profiles will assume full discretion over fund selection, monitoring, and replacement.

Fiduciary Investment Services is aimed at clients using the firm’s Vested Interest bundled DC solution and not working with independent fiduciaries. These services will also be offered on a stand-alone basis to plan sponsors that do not wish to change their current plan recordkeeper at this time. Vested Interest will continue to offer bundled DC plan services without Fiduciary Investment Services to plan sponsors who have appointed a third-party investment adviser. 

“We have introduced a refined level of fund screening and monitoring that will assist plan sponsors in meeting their obligations under ERISA and ensure that their employees are well served as they invest and plan for retirement,” says Fawcett. 

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