Provisions in the Pension Protection Act of 2006 affecting multiemployer plans that are set to expire at the end of this year are one step closer to being extended through 2015.

This week, the U.S. House of Representatives passed the Tax Increase Prevention Act of 2014, which extends more than 50 business and individual tax breaks scheduled to expire.

Among them are extenders relating to most severely underfunded multiemployer defined benefit pension plans, which were established in the 2006 legislation.

Endangered, or yellow zone plans, which are either less than 80 percent funded or projected to meet minimum contribution requirements in seven years, will continue to be required to adopt a funding improvement plan that is projected to reduce underfunding by one-third over ten years.

Seriously endangered, or orange zone plans, which are both less than 80 percent funded and projected to not make required minimum contributions, will be required to develop a plan to reduce underfunding by one-fifth over 15 years.

Critical, or red zone plans, which are less than 65 percent funded and projected to be unable to meet minimum funding requirements within four to 10 years, must adopt a plan to emerge from critical status in 10 years, and use all “reasonable” measures to postpone insolvency.

Yellow and orange zone plans are prohibited from increasing benefits or reducing contributions. Under the PPA, red zone plans are allowed to cut some vested benefits, like health care coverage.

The extension provision also gives multiemployer plans the ability to take an additional five years to amortize shortfalls, in addition to the standard 15-year period.

Some proponents of multiemployer plans say Congress has to go further and give trustees the authority to cut pension payments for existing retirees, if the most critical plans are to have a chance of remaining solvent.

A statement issued by the House Education and Workforce Committee said “members are still discussing the details about a possible legislative solution to the multiemployer pension crisis, and remain hopeful Congress will act before the end of the year.”

Instant Insights /

Multiemployer provisions one step closer to being extended

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