§1322a Multiemployer Plan Benefits Guaranteed

Summary

The pension insurance corporation must pay all nonforfeitable benefits under a multiemployer pension plan that the law covers if the plan becomes insolvent. Benefits that have been in effect for less than 60 months are not covered. Months when the plan was already insolvent or terminated do not count toward that 60-month test. The date a benefit first takes effect is the later of when the paperwork was signed or the benefit’s effective date. Time under a successor plan counts toward the 60 months. If a benefit was cut by a plan amendment, the 60-month rule is measured before the year the cut is counted for minimum contribution rules. The guaranteed monthly amount is worked out from an “accrual rate” times years of credited service. The accrual formula pays 100 percent of the accrual up to $11, plus 75 percent of the smaller of $33 or the part of the accrual over $11, and then multiplies that by the participant’s years of credited service. The accrual rate equals the eligible monthly benefit divided by years of credited service, but it cannot exceed what the plan would pay at normal retirement age as a single life annuity, and certain statutory reductions are ignored for this calculation. Years of credited service include full years, fractions of years used for benefit accrual, and service that a plan might otherwise ignore. If a benefit has been reduced under the law cited for plan reductions, the corporation guarantees the smaller of the reduced benefit or the amount from the accrual formula. Qualified preretirement survivor annuities are not treated as forfeitable just because the participant was alive when the plan became insolvent. Every five years, starting no later than five years after September 26, 1980, the corporation must study and report to Congress on what premiums are needed to keep these guarantee levels and whether guarantees can be raised without raising premiums. If the study shows a premium increase is needed, the corporation must send proposed new guarantee and premium schedules to Congress by March 31 of the year action is requested; Congress may approve changes by joint resolution, and if it does not approve a premium increase the corporation’s revised guarantee schedule goes into effect on the first day of the second calendar year after submission. The corporation may also create rules for a voluntary supplemental program to cover benefits that otherwise would not be eligible. Those rules had to be proposed within 18 months after September 26, 1980, with coverage available by January 1, 1983. Plans choosing the supplement must keep paying required premiums and usually must meet an asset test equal to 15 times the plan’s annual benefit payments unless the corporation says otherwise. Benefits added under the supplemental program are treated as nonbasic benefits. Special rules protect nonforfeitable benefits accrued as of July 29, 1980, for people already receiving payments or within 36 months of normal retirement age, except after a plan year in which the plan terminated or most employers withdrew.