In the wake of the JSC’s demise, Rep. Richard Neal (D-Massachusetts) and Rep. Bobby Scott (D-Virginia) have reintroduced the so-called “Butch Lewis” Act. Titled “The Rehabilitation for Multiemployer Pensions Act,” the legislation would establish a federal loan program for critical and declining (“red zone”) multiemployer pension plans administered through a newly-created federal agency, the Pension Rehabilitation Administration (PRA).
Under this proposed legislation (a complete summary of which is available here), the PRA would issue bonds that would finance loans to critical and declining multiemployer pension plans, plans that have suspended benefits under the Multiemployer Pension Reform Act, and recently insolvent plans receiving financial assistance from the PBGC. Eligible plans could apply for a loan in an amount needed to fund the plan’s obligations for the benefits of participants and beneficiaries in pay status at the time the loan is made. Plans that receive a loan would then be required to fund the plan’s obligations to those in pay status in one of the following ways:
- Annuity Purchase: purchasing annuity contracts from an insurance company
- Cash Matching or Duration Matching Portfolio: investing the loan proceeds in a cash or fixed income (bond) portfolio designed to match the specific benefit liabilities
- Treasury-Specified Portfolio: invest in some other portfolio prescribed by the Secretary of the Treasury in regulations
Under the proposal, the annuity contracts and fixed income portfolios purchased with the loan proceeds would not be taken into account in determining an employer’s withdrawal liability, but the benefits covered by the annuity contracts would be. Further, if an employer withdraws from the plan during the term of the loan, the employer’s withdrawal liability would be determined under the mass withdrawal rules, such that the 20-year cap on the number of withdrawal liability payments would not apply and the withdrawing employer would be required to pay any additional reallocation liability.
Because of the strong support of two key House members—the chairmen of the Ways and Means and Education and Labor Committees—it is very likely that the Butch Lewis Act will see action in the House in 2019. The bigger question is whether the Senate will take up the legislation or develop an alternative proposal similar to the “partition” proposal first developed by the JSC in 2018. We will stay tuned and continue to update you on these developments.