U.S. Chamber of Commerce Comments on Suspension of Benefits Regs

On behalf of the U.S. Chamber of Commerce (the "Chamber"), we are writing this letter in response to a Request for Information on Suspensions of Benefits Under the Multiemployer Pension Reform Act of 2014 (MPRA) published in the Federal Register on February 18, 2015.¹

The U.S. Chamber of Commerce is the world's largest business federation representing the interests of more than three million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations, and dedicated to promoting, protecting, and defending America's free enterprise system. More than 96% of the Chamber's members are small businesses with 100 or fewer employees, 70% of which have ten or fewer employees. Yet virtually all of the nation's largest companies are also active members. Each major classification of American business -- manufacturing, retailing, services, construction, wholesaling and finance -- is represented. Also, the Chamber has substantial membership in all 50 states. Positions on national issues are developed by a cross-section of Chamber members serving on committees, subcommittees and task forces.

Chamber members also include sponsors of multiemployer pension plans. Consequently, the Chamber has been engaged in multiemployer pension reform including the reforms in the Pension Protection Act of 2006, Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010, and most recently the Multiemployer Pension Reform Act of 2014 (MPRA) contained in the Consolidated and Further Continuing Appropriations Act of 2015.

MPRA makes permanent the multiemployer provisions under the PPA; gives PBGC authority to promote and facilitate plan mergers; allows plan sponsors to apply to the PBGC to partition a plan; increases the PBGC premium for multiemployer plans to $26/person and bases future increases on the wage index; and allows for benefit suspensions in certain plans in critical status.

The enactment of the MPRA was welcomed by the Chamber and its employer members that contribute to multiemployer plans. The precarious state of underfunding by many multiemployer plans threatens insolvency for such plans and for the Pension Benefit Guaranty Corporation (PBGC) and is a serious threat to participating employers. A bold approach was necessary to permit the survival of plans in critical and declining status and the solutions offered by MPRA (partition by the PBGC and benefit suspensions by the underfunded plans) should be recognized as essential components of an overall approach to restoring financial stability to troubled plans. While the Chamber believes that more attention to the problem will be necessary, MPRA is a strong first step in addressing these issues.

All Proposals Must Balance the Interests Between Necessary Benefit Suspensions and Future Employer Contributions Levels. The concept of benefit suspensions is new. By necessity, the approaches taken by multiemployer plans in critical and declining status will evolve as will oversight by the Secretary of the Treasury (in consultation with the PBGC and the Secretary of Labor). An important but inherently unknown dynamic will be the balancing of interests between necessary benefit suspensions and the manner in which the plan will set future employer contribution levels and will even consider benefit improvements. Clearly, a plan that places its focus entirely on returning to financial stability and ignores the interests of current contributing employers may fail to compete with other options available to employers for providing retirement benefits to employees. Providing competitive benefit value in exchange for contribution dollars and setting required contributions at levels competitive with other retirement options such as 401(k) plans is another essential component of a return to financial stability.

Treasury and IRS Should Encourage Plans to Consider Employer-Related Concerns in this Process. The Chamber believes multiemployer plans should be encouraged to embrace employer-related considerations as are permitted by MPRA as such plans consider benefit suspensions. For example, in determining whether or not benefit suspensions are necessary for a plan, the plan sponsor is to take into account a number of factors. Among others, such factors include competitive and other economic factors facing contributing employers, the impact of benefit and contribution levels on retaining active participants and bargaining groups under the plan, the impact of past and anticipated contribution increases under the plan on employer attrition and retention levels, and measures undertaken by the plan sponsor to retain or attract contributing employers.²

The Chamber Urges Treasury and the IRS to Encourage Plans to Consider the Interests of Participants Supported by Contributing Employers and Participants Whose Employers Fully Settled Their Plan Liabilities. A very important consideration for employers participating in multiemployer plans is whether or not current and former employees will receive promised retirement benefits or at least be treated equitably if or when MPRA provisions are applied. For too long, contributing employers have seen much of their contributions used by underfunded multiemployer plans to pay for current benefits of individuals whose employers ceased operations and never paid their liabilities to the plans. Yet, employers recognize that a plan in critical and declining status must make decisions that will attempt to equitably apportion benefit suspensions among participants. The Chamber appreciates that Congress included language in MPRA that recognizes the interests of participants whose benefits continue to be supported by contributing employers and the interests of participants whose employers may no longer participate, but who have fully paid the amount of withdrawal liability or otherwise fully settled their liability with the plan. The Chamber urges that the interests of such employers and the participants and benefits associated with such employers be supported as an important part of encouraging continuing employer participation in multiemployer plans.

1. How should future guidance address actuarial and other issues, including duration, related to the following certifications and determinations:

• The actuary's certification under section 432(b)(3) that a multiemployer plan is in critical and declining status;

• The actuary's section 432(e)(9)(C)(i) projection of continued solvency (taking into account the proposed suspension and, if applicable, a proposed partition under section 4233 of ERISA); and

• The plan sponsor's section 432(e)(9)(C)(ii) determination that the plan is projected to become insolvent unless benefits are suspended?

The "clearly erroneous" standard of review is a compelling message to the Secretary of the Treasury. In fact, this standard of review is already found in ERISA and serves as the standard by which a plan sponsor's withdrawal liability determinations are reviewed by arbitrators.⁴ There, the provision reads that the plan sponsor's determination "is presumed correct unless the party contesting the determination shows by a preponderance of the evidence that the determination was unreasonable or clearly erroneous." In 1993, the United States Supreme Court issued its decision in Concrete Pipe and Products of California, Inc. v. Construction Laborers Pension Trust for Southern California, in which it questioned how to reconcile "three different concepts in identifying this burden: 'preponderance,' 'clearly erroneous,' and 'unreasonable.'"⁵ The Court thus complained that the language mixed "burdens of proof" with "standards of review."⁶ Under MPRA and the new language of Code section 432(e)(9)(G)(v) and ERISA section 305(e)(9)(v), however, Congress unequivocally established that the "clearly erroneous" standard would be the only standard of review.

In describing the "clearly erroneous" standard by itself, the Court in Concrete Pipe described that this standard of review is typically applied when a court reviews a decision of a lower court or a plan sponsor, often as to findings of fact, and the Court further stated "review under the 'clearly erroneous' standard is significantly deferential, requiring a definite and firm conviction that a mistake has been committed.'"⁷ The Court further described the clearly erroneous standard as requiring the person reviewing the plan sponsor's findings to accept them, "even if they were probably incorrect, absent a showing at least sufficient to instill a definite or firm conviction that a mistake had been made."⁸ It should be further noted under MPRA, that the "clearly erroneous" standard of review is granted not only as to the plan sponsor's determination of various facts, but also in its allocation of weight to many enumerated factors and circumstances that plan sponsors may consider in making their determinations.

In view of historical fiduciary responsibilities and discretionary authority recognized under prior applicable law and now under MPRA with respect to decision-making by multiemployer plan sponsors and their trustees, and in view of each plan sponsor being in the best position to understand the unique circumstances associated with each plan, the Chamber urges that the Internal Revenue Service have a very "light touch" in promulgating regulations, if at all, concerning determinations and certifications by plan sponsors and their actuaries.

3. For participants who have not yet retired:

• What practical issues should be considered as a result of the fact that their benefits are not yet fixed (for example, their benefits could as a result of future accruals, when they decide to retire and which optional form of benefit they select)?

• What practical issues should be considered in the case of a suspension of benefits that is combined with a reduction of future accruals or a reduction of section 432(e)(8) adjustable benefits (such as subsidized early retirement factors) under a rehabilitation plan?

4. For participants who have retired, what practical issues should be considered regarding the section 432(e)(9)(D)(ii) age limitations on suspensions, the application of the section 432(e)(9)(E) rules on benefit improvements, or other provisions?

The Chamber believes that Congress has already set forth in MPRA the concept that benefit suspensions be limited for retirees age 80 and older, somewhat limited for those between age 75 and 80, and not limited (except by the overall limits built into the general provisions of Code section 432(e)(9)(D) for those younger than age 75). In addition to the age limitations, plan sponsors are to "equitably" distribute suspension of benefits across the participant and beneficiary populations, taking into account a number of enumerated factors pertaining to such participants and beneficiaries.

We believe that such equitable allocation of the impact of benefit suspensions will be a subject of intense discussion among the trustees of plan sponsors and their actuarial and legal advisors and other consultants. Moreover, a plan with more than 10,000 participants must appoint a retiree representative, with the plan to pay reasonable actuarial and legal expenses associated with such representation,⁹ and ensure additional opportunities for comment by retirees are available. The Chamber believes that the group of retired participants and related beneficiaries will have an adequate voice and we do not believe that further regulation in this regard is necessary.

3. With respect to the section 432(e)(9)(F) requirement to provide notice of the proposed suspension to plan participants and beneficiaries concurrently with the submission of the application for approval:

• What suggestions do commenters have for the steps that are needed to satisfy the requirement to provide notice to the plan participants and beneficiaries "who may be contacted by reasonable efforts," including the application of that requirement to terminated vested participants?

• What practical issues do plan sponsors anticipate in providing individual estimates of the effect of the proposed suspensions on each participant and beneficiary?

• If the suspension is combined with other reductions as described in request number 3.b, how will the notice of proposed suspension interact with the notices required for those other reductions?

• What issues arise in coordinating benefit protections that are measured as of the date of suspension (such as the restriction on suspensions that apply to a participant or beneficiary who has attained age 75 as of the effective date of the suspension) with the timing of the application, notice, and voting process?

We observe that ERISA already provides well-structured claims review procedures and multiemployer plan sponsors have significant experience in providing notices and opportunities for responses by participants who seek review of plan decisions. In this regard, we believe multiemployer plan sponsors will be in the best position to determine reasonable methods for the manner and content of communications concerning benefit suspensions.

6. With respect to item 5, please provide any examples of notices of proposed suspension that commenters would like to be considered in the development of a model notice.

As mentioned above, we maintain that the multiemployer plan sponsor is in the best position to provide the method and form of notices. If, however, Treasury proceeds with developing model notices, we urge that the agencies emphasize that such models are only an option and not required to be used by plan sponsors.

7. What issues arise in connection with the section 432(e)(9)(G)(ii) requirement to solicit comments on an application for suspension of benefits?

• Should the comments received from contributing employers, employee organizations, participants and beneficiaries, and other interested parties be made available to the public?

• How long should the comment period last?

Concerning the duration of the comment period itself, we suggest that the comment period be relatively short and not overly delay an already long time period for approval by the Secretary of the Treasury (in consultation with the PBGC and the Secretary of Labor).

8. With respect to the section 432(e)(9)(H) participant vote, what issues arise in connection with:

• Preparing the ballot, including developing a statement in opposition to the suspension compiled from comments and obtaining approval of the ballot within the statutory time constraints for conducting a vote; and

• Conducting the vote and obtaining certification of the results of the vote?

9. What other practical issues do commenters anticipate will arise in the course of implementing these provisions?

The Chamber anticipates the most significant practical issues to arise in a multiemployer plan's contemplation and implementation of benefit suspensions will be in the balancing of interests between the disparate groups of participants, and between the other disparate interests competing for consideration, including employer interests (in contribution requirements and benefit accrual value for their employees) and the long-term vs. short-term approaches in a plan's return to financial stability. In light of the approach by Congress to create a framework for consideration and execution of such suspensions, but otherwise leave the plan sponsors latitude to work within the framework, we believe the most appropriate approach in addressing these practical issues is to allow the respective multiemployer plans broad discretion in their decision-making.

² Code section 432(9)(c)(2)(VII) through (X).

³ Code section 432(e)(9)(G)(v) (emphasis added),

⁴ ERISA section 4221(a)(3)(A).

⁵ 508 U.S. 602 (1993).

⁶Id. at p. 623.

⁷Id.

⁸Id. at p. 626,

⁹ Code section 432(e)(9)(B)(v).