The State of New York has enacted a new law that should ease the transition away from US dollar LIBOR for legacy financial contracts that are governed by New York law but do not contain modern benchmark fallback provisions. A similar federal law is in the works, which if passed would apply nationwide.
EPPRA takes a far more direct approach to the problem than prior proposals. Under EPPRA, eligible plans can receive financial assistance from a new Treasury-backed PBGC fund. The available financial assistance will be sufficient for eligible plans to pay all benefits for 30 years. This includes any benefits previously suspended under the Multiemployer Pension Reform Act of 2014 (MPRA), which must be restored by plans that apply for assistance under EPPRA. EPPRA’s special financial assistance will not, however, cover adjustable benefits that have been cut under a rehabilitation plan.
The assistance is payable in a single lump sum without any repayment obligation. To qualify for assistance, a multiemployer pension plan must meet one of four conditions:
1. Be in critical and declining status
2. Have previously imposed a benefit suspension under MPRA
3. Be in critical status, have a modified funded percentage of less than 40% on a current liability basis, and have a ratio of active to inactive participants of less than 2 to 3
4. Be insolvent
The PBGC may prioritize plans that are insolvent, that require more than $1 billion of assistance, or that have suspended benefits under MPRA.
Author(s): Timothy P. Lynch, Daniel R. Salemi, Benjamin T. Kelly
There’s an improved chance Congress will pass legislation over the next year or two to prevent multiemployer pension plans and the Pension Benefit Guaranty Corporation (PBGC)’s multiemployer insurance program from becoming insolvent, according to law firm Morgan Lewis.
In a blog post on the firm’s website, Morgan Lewis Senior Director Timothy Lynch and Partner Daniel Salemi wrote that the biggest factor that could lead to a legislative solution is the fact that the Democratic Party controls the White House and both houses of Congress. They also say the Biden administration may see greater urgency in moving for a solution due to the major economic fallout that would occur if PBGC’s multiemployer program were to become insolvent in 2026, as is currently projected.