Statement of National Coordinating Committee for Multiemployer Plans

The National Coordinating Committee for Multiemployer Plans ("NCCMP") is writing on behalf of the Multiemployer Pension Plan Coalition ("Coalition") in response to your request for public comment on H.R. 3361, as introduced on August 3, 2007, which includes technical corrections to the Pension Protection Act of 2006 (the "Act").  The Coalition has previously submitted technical corrections that are needed regarding the multiemployer pension plan provisions in the Act, some of which were included in the introduced bill.  We appreciate the work of you and your staff on the multiemployer pension plan issues and the inclusion of these issues in the bill.

Below we describe some of the other issues from our original submissions that were not addressed in the introduced bill.  Although we continue to believe that the issues highlighted in our earlier submissions that were not included in the introduced bill should be addressed, we want to bring the issues described below to your attention as you work on passing technical corrections legislation before the new multiemployer plan funding and disclosure rules take effect next year. 

We appreciate the opportunity to provide these comments and look forward to working with you and your staff on these issues.

1.One Required Schedule in the Yellow Zone.  ERISA section 305(c)(1)(B)(i)/IRC section 432(c)(1)(B)(i) (PPA sections 202/212).  Delete subparagraph (II), to clarify that only one schedule (the default schedule) is required for endangered status plans, as reflected in the lead-in language in (i) requiring the sponsor to provide the parties with only "1 or more" schedules.  This clarification would conform the endangered status rules with the critical status rules and confirm that plans (typically smaller plans) that for administrative reasons only offer one benefit and contribution schedule are not required by the Act to offer an additional schedule.

2.Yellow Zone Seriously Endangered Benchmarks.  ERISA section 305(c)(4), (5)/IRC section 432(c)(4), (5) (PPA sections 202/212).  Remove the possible shift back and forth between benchmarks and funding improvement periods -- i.e., a plan that is or becomes seriously endangered should remain subject to the 15-year/20% benchmarks and not shift back to the 10-year/33% benchmarks in the middle of the funding improvement period when it is too late to meet them.  A plan that is or becomes seriously endangered should be subject to the 15-year/20% benchmark regardless of its funded ratio and should remain in that status regardless of future funding fluctuations or actuarial projections. Otherwise, a plan with a funding improvement plan designed to improve funding over the 15-year/20% benchmarks could find itself subject to stricter funding benchmarks and a shorter (and possibly impossible) timeframe to meet the stricter benchmarks many years into the plan's funding improvement period.  If these changes are made, a new requirement could be added under which a seriously endangered plan could not leave endangered status until it is projected not to have a funding deficiency for the next 10 years -- the same emergence rule that applies to critical status plans.  All of the other requirements (e.g., funding improvement plan, schedules, updates), benefit and other restrictions, and penalties, would continue to apply as long as the plan is in endangered status.

3.Red Zone Surcharges.  ERISA section 305(e)(7)/IRC section 432(e)(7) (PPA sections 202/212).  To encourage early corrective action, provide that employer surcharges end, and that those surcharges already paid may be credited against the employer's contribution requirements under a rehabilitation plan, if the trustees determine that an applicable collective bargaining agreement that provides for a contribution increase that became effective no earlier than 24 months before the plan year in which the plan went into critical status conforms to the contributions required by a schedule under the rehabilitation plan.  Without this clarification, employers whose collective bargaining agreement expires before the rehabilitation plan is adopted and/or rehabilitation period has begun may have no incentive to agree to contribution increases in the next agreement because any such contribution increase could simply increase the surcharge and will not count toward the rehabilitation plan/schedules until a subsequent agreement is negotiated during the rehabilitation period.  This clarification will also reduce the need for formalistic, non-substantive steps such as re-opening and then immediately re-adopting an existing collective bargaining agreement that already complies with the rehabilitation plan and schedules.

4.Notice of Critical Status Adjustable Benefit Reductions.  ERISA section 305(e)(8)(C)/IRC section 432(e)(8)(C) (PPA sections 202/212).  Provide that the notice of critical status reductions in adjustable benefits does not have to be provided to participants and beneficiaries who are in pay status and do not have adjustable benefits that could be cut.  Without this change, a plan would be required to notify retirees in pay status of impending cuts in their adjustable benefits even where those retirees are protected from such reductions by statute. 

5.Excise Tax on Contribution Failures.  IRC section 4971(g)(2) (PPA section 212(b)).  Clarify that the excise tax on any employer that fails to make a contribution required under the funding improvement plan or rehabilitation plan applies solely to contributions required by a default schedule that is imposed on the bargaining parties under a funding improvement plan or rehabilitation plan in the absence of a compliant collective bargaining agreement.  As currently written, the provision is ambiguous but could be read to impose an excise tax in the case of -- and interfere with routine plan efforts to collect -- contributions required under the applicable collective bargaining agreement.  Many multiemployer plans have audit programs in place to ensure that owed contributions are being made, a right that has been upheld by the U.S. Supreme Court.  Moreover, plan fiduciaries already have the duty to collect all amounts due the plan, standards for which have been set out by DOL.   

6.Excise Tax Waivers.  IRC section 4971(g)(5) (PPA section 212(b)).  In the waiver of excise tax provision, change "may" to "shall" waive excise tax and change "unanticipated and material market fluctuations" to "unanticipated market fluctuations."  Otherwise, the tax could be applied even where the plan trustees and parties adopted an improvement/rehabilitation plan and took all required actions, but an unanticipated decline in the financial markets occurred.  The reference to "material" fluctuations -- especially when interpreted in light of the Joint Committee on Taxation staff's explanation of the Act -- could mean that only financial market drops of 10% or more would be considered for this purpose, even though even a small market decline means that the plan's earnings are much smaller than the assumed (typically 7-7.5%) rate of return. 

8.Individually Identifiable Information.  ERISA section 101(k) and technical correction in H.R. 3361, section 6(b).  Fix the provision and technical correction related to identification of investment managers, advisers and other fiduciaries preparing financial reports and the exception to the general protection from disclosure of individually identifiable information.  ERISA Section 101(k) requires multiemployer plans to provide participants and employers copies of certain financial reports prepared by an investment manager, advisor or other fiduciary, upon request.  Section 101(k)(2)(C)(i) prohibits disclosure, in this connection, of "any individually identifiable information regarding any plan participant, beneficiary, employee, fiduciary, or contributing employer …".   Read literally, that would prohibit the plan from disclosing the identities of the institutional investment managers and advisors whose performance is being reported on or evaluated.  Subparagraph (C)(i) was included to protect the privacy of individuals and employers associated with multiemployer plans.  Service providers' institutional interests are protected by subparagraph (C)(ii), which prohibits the disclosure of proprietary information. 

The technical correction in H.R. 3361 generally addressed this, but went too far by arguably removing the protection from identification from any person who prepared a financial report.  Depending on how this is interpreted, it could result in the required disclosure of individually identifiable information with respect to any plan employee who worked on such a report, without limiting that disclosure to information regarding that person's investment or financial activities on behalf of the plan.