MARP (9) Withdrawal Liability Rules

The Technical Explanation of the Multiemployer Pension Recapitalization and Reform Plan (MARP) proposes changing the calculation of withdrawal liability because:

Rules governing withdrawal liability are complex and vary by industry. Assessed withdrawal liability very seldom represents the unfunded liabilities of a withdrawing employer. As a consequence, insufficiencies of withdrawal liability have been recognized since the enactment of the MPPAA in 1980 as creating a disincentive for new employers to join a multiemployer defined benefit plan. (pages 48-9)

Being bankrupt might be more of a disincentive but, anyway, here is what would change.

Determination of Withdrawal-Liability Payment

100 percent of the employer’s highest contribution base units in the last 20 years, multiplied by its highest contribution rate in the last 10 years, but in no event less than the highest amount that the employer has contributed in the past 20 years.

Underfunding Measurement

On the same basis as the plan liabilities reported on the annual funding notice and as modified under minimum-funding standards described in Part A of Title II above. [6%]

Withdrawal-Liability Payment Schedule

  • 140 percent or more funded: no withdrawal liability.
  • 100 percent to 139 percent funded: no withdrawal liability if the plan has a policy of immunizing or annuitizing a share of the plan’s benefit liabilities equal to the employer’s share of the plan’s five-year contribution history.
  • 90 percent to 139 percent funded: five years of payments based on the employer’s share of the plan’s five-year contribution history.
  • For every two percentage points below 90-percent funded: one additional year of payments.
  • 80-percent funded: 10 years of payments.
  • 70-percent funded: 15 years of payments.
  • 60-percent funded: 20 years of payments.

2 responses to this post.

  1. Posted by Tough Love on December 2, 2019 at 12:13 pm

    Quoting …………..

    “Determination of Withdrawal-Liability Payment – 100 percent of the employer’s highest contribution base units in the last 20 years, multiplied by its highest contribution rate in the last 10 years, but in no event less than the highest amount that the employer has contributed in the past 20 years.”

    Not sure about MEP Plans, but Single-employer Corporate Plan sponsors occasionally make a HUGE ONE-TIME pension contribution when the company has had a great financial year and the additional funds to do so are available.

    Look at the last part of the above quote, specifically ………” but in no event less than the highest amount that the employer has contributed in the past 20 years.”

    Sounds that that would put in place a big DISINCENTIVE for participating MEP Employers to makes such LARGE ONE-TIME contributions even if the funds to do so are available.

    Reply

  2. It would be interesting to do a comparison of what UPS actually paid to leave Central States, and how much this rule would require (approximately, obviously)

    Reply

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