read this article, very important!
Committee on Ways and Means
H.R. 2830, THE PENSION PROTECTION ACT OF 2005
Chairman’s Amendment Summary
Chairman Bill Thomas (R-CA) Page 9 of 11
Committee on Ways and Means
November 8, 2005 3:15 p.m.
4. FUNDING REFORMS FOR MULTIEMPLOYER PENSION PLANS
Current Law. Multiemployer pension plans are maintained by two or more employers in the
same industry that pool their assets and liabilities to form a pension plan for workers in the
industry. The plan is governed by a board of trustees comprised of an equal number of
employers and union representatives. Benefit and contribution levels are set by the terms of
collectively bargained agreements. Employers that withdraw from the plan must pay
withdrawal liability, and the remaining employers in the pool are liable for the benefits of
workers and retirees that remain in the plan. The PBGC maintains a separate insurance program
for multiemployer plans and acts as a lender of last resort if the plan cannot pay promised
benefits.
H.R. 2830. The bill creates a structure for identifying financially troubled plans by creating two
zones.
1. Plans in the “yellow zone” are less than 80 percent funded and considered to be endangered.
Plan trustees must adopt a financial plan to improve funding by one-third within 10 years. If
the plan is between 65 and 70 percent funded, or if the plan’s actuary certifies that the one-
third benchmark cannot be met, then the plan must provide for a one-fifth improvement
within 15 years. Benefits cannot be increased if the plan is less than 65-percent funded.
2. Plans in the “red zone” are less than 65 percent funded and considered to be in critical
financial condition. Plan trustees must adopt a reorganization plan to exit the red zone
within 10 years. The plan must include increased employer contributions, restrictions on
future benefit accruals, expense reductions, and funding relief measures to help the plan exit
the red zone.
In addition, H.R. 2830 includes two reforms that apply to all multiemployer plans. First, most
amortization periods are reduced from up to 40 years under current law to 15 years. Second, the
maximum tax-deductible contribution is increased from 100 percent of the full funding limit
under current law to 140 percent of current liability.
