Proposed Multiemployer Composite Plans: Background and Analysis (CRS Report for Congress)
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| Release Date |
Revised July 7, 2020 |
| Report Number |
R44722 |
| Report Type |
Report |
| Authors |
Topoleski, John J. |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
Multiemployer pension plans are sponsored by more than one employer in the same industry and
are maintained as part of a collective bargaining agreement. The challenges facing one type of
multiemployer plans—defined benefit (DB) plans, in which participants receive regular monthly
benefit payments in retirement—have led stakeholders to seek alternative pension plan designs
that could alleviate some of the concerns but retain some of the beneficial features.
On September 9, 2016, Representative John Kline, chairman of the House Committee on
Education and the Workforce in the 114th Congress, issued a discussion draft of a bill that would
authorize a new multiemployer pension plan called a composite plan. A composite plan would be
neither a DB pension nor a defined contribution (DC) pension (such as 401(k) plans, in which
participants have individual accounts that are the basis of income in retirement). Since composite
plans would be neither DB nor DC plans, authorizing legislation would be necessary to
implement the proposal.
The composite plan proposal is the third element of a proposal by representatives of an
organization of multiemployer pension and health plans to reform multiemployer DB pension
plans. The first two elements were adopted as the Multiemployer Pension Reform Act of 2014
(MPRA, enacted as Division O in the Consolidated and Further Continuing Appropriations Act,
2015; P.L. 113-235). These elements consist of (1) proposals to strengthen the current
multiemployer system and (2) measures to assist plans in very poor financial condition.
The main features of a composite plan include the following:
Employer contributions would generally be a stable amount and would not need
to increase in response to investment losses.
Participants would receive monthly benefits for the lifetime of the participant
(and spouse, if married).
Participants’ benefits could decrease if the plan’s assets experienced investment
losses.
Composite plans would not be covered by Pension Benefit Guaranty Corporation
(PBGC) insurance and would not receive financial assistance from PBGC if a
composite plan were to become insolvent and unable to pay participants’
benefits.
Composite plans would not feature withdrawal liability, which is an exit fee
employers in underfunded multiemployer DB plans must pay to leave the plan.
For employers, composite plans would offer several advantages over DB plans. For example,
employers would not have to pay withdrawal liability when leaving the plan and the plan would
not have to pay PBGC insurance premiums. In addition, the likelihood of stable contributions
likely would be an attractive feature.
Retired participants in composite plans would receive monthly benefit payments. However, the
benefit amounts could increase or decrease, depending on the investment experience of the plan.
The composite plan proposal contains a procedure to address situations in which plan assets fall
below 120% of plan liabilities, such as could occur if there were investment losses. This
realignment program includes proposed, though not mandatory, contribution increases and
mandatory benefit reductions.
