By Pension and Benefits Editorial Staff
The Department of the Treasury has released a letter, dated January 6, 2020, to the Board of Trustees of the Sheet Metal Workers Local Pension Fund that provides final authorization to reduce benefits under the plan pursuant to the Multiemployer Pension Reform Act of 2014 (MPRA).
On November 9, 2019, the Treasury Department notified the Sheet Metal Workers Local Pension Fund that its application for benefit reductions satisfied the requirements Code Sec. 432(e)(9)(C), (D), (E), and (F). A vote of eligible participants and beneficiaries to approve or reject the proposed benefit reduction was held from December 5, 2019 through December 30, 2019. Of the eligible voters identified by the Fund who received a ballot, 328 voted to reject the benefit reduction, 154 voted to approve the benefit reduction, and 1,079 did not return a ballot. The Treasury Department stated that, because a majority of eligible voters did not vote to reject the benefit reduction, the benefit reduction may go into effect.
Thus, the Treasury Department, in consultation with the Department of Labor and the Pension Benefit Guaranty Corporation, has issued a final authorization to reduce benefits as described in the application, which is effective May 1, 2020. However, this authorization is subject to certain conditions.
Under MPRA, the Fund’s ability to reduce benefits is conditioned on the Fund’s compliance with Code Sec. 432(e)(9)(C) and (E). Under Code Sec. 432(e)(9)(C), the plan sponsor must make an annual determination, in a written record to be maintained throughout the benefit suspension period, that the plan is still projected to become insolvent unless the benefits are suspended, despite all reasonable measures to avoid insolvency. If this annual determination requirement is not satisfied for a plan year (including maintaining the written record), then the reduction of benefits will expire as of the first day of the following plan year. Code Sec. 432(e)(9)(E) provides rules that apply to any benefit improvements that are made to the Fund during the period that the benefit reduction is in effect.
Source: Treasury Department letter.
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