Actors' Equity is urging all union members who reside in California, Florida, Illinois and New York States to write to members of the Senate Finance and the Senate Health, Education, Labor and Pension Committees* to support the Multiemployer Plan Emergency Investment Loss Proposal - Section 2 of S. 1610 (Bayh/Kerry); and Sec. 708 of J.R. 1776 (Portman/Cardin).

The proposal would give multiemployer pension plans (such as AEA, AFM, AFTRA, SAG and the WGA) more time to absorb and respond to recent investment losses, by modifying funding regulations to allow the amortization of investment losses over a 30 year period.

Please fax or e-mail this letter to your Senator. For more information about the proposal, see text below.

Contact Information for Senate Finance and Health, Education, Labor and Pensions Committees*
*Committee members also include: Alabama, Arkansas, Arizona, Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Missouri, Montana, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, and Wyoming

Senate Finance Committee
Phone: (202) 224- 4515
http://finance.senate.gov

Senate Health, Education, Labor and Pension Committee Phone: (202) 224- 6770 http://labor.senate.gov

MULTIEMPLOYER PLAN EMERGENCY INVESTMENT LOSS PROPOSAL

Background

Multiemployer plans are maintained pursuant to collective bargaining agreements between unrelated employers - generally within the same industry - and unions. Contribution rates, typically measured by the work of covered employees, are negotiated and set forth in collective bargaining agreements, which may run for up to six years.

By pooling the costs, multiemployer plans enable small employers to sponsor defined benefit plans for their employees. They also provide mobile employees with "portability" to earn continuous benefits as they go from job to job within the same industry.

Multiemployer plans have a long history of sound, conservative funding. They typically are more conservatively invested and funded than single employer plans. Their fortunes are not tied to the fate of a single corporation, but instead rest on a broad base of contributing employers.

Multiemployer plans have never been a problem for the Pension Benefit Guaranty Corporation (PBGC). They are covered under their own distinct PBGC pension guarantee program that is structurally very different from the PBGC's single-employer termination insurance program. In the 27-year history of the PBGC multiemployer program, only 31 plans have received PBGC assistance, and the program has a long-standing and growing surplus. Multiemployer premiums have been set at $2.60 per participant for over 20 years.

Problem

Over the past three and a half years, there has been an almost unprecedented drop in the stock market. This decline in equity values has affected all investors, including multiemployer plans. This has particularly disturbed the funding equilibrium of the many "mature" multiemployer plans. These plans, which have large numbers of older and retired participants, rely especially on investment returns to augment contributions generated by active participants' work.

Internal Revenue Code ("Code") deduction limits have added to the plans' current dilemma. During the 1990s, multiemployer plans (like other investors) generally achieved investment gains that far out-paced projections. At the same time, the robust economy meant more work for participants, which yielded extra contributions. As assets in these plans grew, many contributing employers risked becoming subject to excise taxes on previously bargained-for contributions that suddenly exceeded Code deduction limits. To avoid these excise taxes, the bargaining parties were forced to increase benefits or, in some cases, cut back on required contributions. When the stock market plummeted and the economy contracted, the plans had little cushion to absorb the losses.

Now, some multiemployer plans are facing ominous near-term funding problems. Actuaries working with multiemployer plans report that approximately one-third of the plans could face funding deficiencies, as measured by the rules in ERISA and the Code, in the next several years. For these plans' contributing employers, this would trigger significant excise tax penalties plus mandatory additional pension contributions -- on top of the contributions agreed to through collective bargaining.

These plans have plenty of cash to pay benefits. Given the opportunity, the bargaining parties can come up with sustainable solutions for the longer term by adjusting benefits and/or contributions going forward (benefits already earned cannot be reduced). The alternative - sudden and drastic changes in benefits and/or contributions and the possible imposition of harsh penalties on the employers - could be catastrophic both for the plans and for the industries that support them.

Proposed Solution

The multiemployer plan emergency investment loss proposal (Sec. 2 of S. 1610, as introduced by Senators Evan Bayh and John Kerry; and Sec. 708 of H.R. 1776, as introduced by Reps. Rob Portman and Ben Cardin) would give multiemployer plans more time to absorb and respond to recent investment losses. Specifically, the provision would modify the ERISA and Code minimum funding rules to give multiemployer plans a one-time option to amortize investment losses incurred between July 1999 and the end of 2003 over 30 years instead of over 15 years. All other funding rules would remain the same.

This proposal is analogous to refinancing a mortgage. It would not excuse any plans from paying promised benefits, or in any way reduce benefit liabilities and the obligations of the parties to finance them. And because the PBGC's multiemployer guarantee program is financially sound, giving the plans this extra opportunity would not imperil the PBGC's financial condition. The proposal simply provides time for the parties to solve their own problems.

to news & events home...