The Pension Benefit Guaranty Corp. has finalized an interim rule on partitioning assets in the most troubled pension plans in its Multiemployer insurance program.
Among other statutory provisions, the Multiemployer Pension Reform Act of 2014 created a new framework of partition rules intended to help PBGC sequester portions of assets in plans expected to go insolvent.
By partitioning some assets, PBGC can reduce the exposure it would otherwise face if a plan goes insolvent.
Recommended For You
When PBGC partitions some assets, it effectively funds a portion of a pension plan.
Before the MPRA was passed, PBGC had partition authority, but it was limited to situations involving the bankruptcy of a multiemployer plan's sponsors.
In that former context, if a plan had assets partitioned, participants' benefits were automatically reduced.
Under the new provisions in MPRA, sponsors of troubled plans can apply for partition.
MPRA establishes five criteria for partition: plans must be in critical and declining status, meaning they are expected to be insolvent in 20 years; applying plans must have already made maximum benefit reductions; partition will have to both keep the plan solvent and reduce PBGC's long-term liabilities; partition must not impair PBGC's obligations to other multiemployer pension plans; and the cost of partition must be paid for by assets from the multiemployer insurance program.
According to a release issued in June when the interim new partition rules where published, PBGC's ability to approve partition applications will be limited by financial resources. It did not say how much money was currently available to fund partitioned assets.
About 1 million of the 10 million participants in multiemployer plans insured by PBGC are in plans that are on a path to insolvency, according to PBGC data.
Information on the final rules is available at the Office of the Federal Register here.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
