Multiemployer 432

Question 1

For multiemployer plans, what is the funded percentage?

Answer 1

• AVA/AAL
• AAL uses unit credit funding method and valuation assumptions

Question 2

When is a multiemployer plan in endangered status (ignoring the endangered but safe rule)?

Answer 2

The plan is not in critical status and the plan has EITHER

1. Funded Percentage < 80%
2. Accumulated funding deficiency for plan year or next 6 plan years (allowing for amortization extensions)

Question 3

For multiemployer plans, when would a plan be endagered, but safe?

Answer 3

A plan is endangered but safe if the plan is currently in endangered status, but:

1. Not in critical/endangered status in prior year
2. Projected not to be in endagered status at the end of the 10th year following current plan year.

Question 4

When is a multiemployer plan in seriously endangered status (ignoring the endangered but safe rule)?

Answer 4

If the plan is not in critical status and the plan has BOTH

1. Funded Percentage < 80%
2. Plan has accumulated funding deficiency for plan year or next 6 plan years (allowing for amortization extensions)

Question 5

When can a plan ELECT to be in critical status?

Answer 5

• Plan not in critical status, but projected to be in critical status in any of the next 5 years
• Elect within 30 days of actuarial certification

Question 6

After ELECTING to be in critical status, what are the special rules for emerging from critical status?

Answer 6

No special rules - must emerge the same as if they entered critical status.

Question 7

When is a multiemployer plan in critical and declining status?

Answer 7

If a plan is in critical status and protected to become insolvent within:

• next 15 plan years
• next 20 plan years if and only if
  
  • Funded Percentage < 80% OR
  • Inactive Participants/Active Participants > 2

Question 8

For multiemployer plans, when must the plan actuary certify the plan status (i.e. endangered, critical…) and whether the plan is making the status to funding improvement?

Answer 8

By 90th day of plan year.

Question 9

If the plan is certified endangered or critical, who must be notified and when?

If you elect to be in critical status do you need to provide this certification?

Answer 9

Within 30 days after certification, must provide notice of status to

• Participants
• Bargaining Parties
• PBGC
• DOL

If you elect critical status, must still provide notice and provide notice to Secretary of Treasury.

Question 10

If the plan is “endangered/safe” who must be notified and when?

Answer 10

Within 30 days of the certificaation, must provide notice that the plan is not endangered to the:

• PBGC
• bargaining parties

Question 11

If the plan is not in critical status, but is projected to be in critical status in any of the next X years, you must provide a notice to Y within Z days after certification. What are X, Y, and Z

Answer 11

X = 5

Y = PBGC

Z = 30 days

Question 12

How many days after the start of the plan year must you adpot the funding improvement plan for an endangered plan? a critical status plan?

Answer 12

Both 330 days

Question 13

For a multiemployer plan, what is the required increase in the funding percentage by the end of funding improvement period for endangered plans.

Answer 13

final FP = “initial” FP + 33%(100% - FP)

Question 14

For a multiemployer plan, what is the required increase in the funding percentage by the end of funding improvement period for seriously endangered plans.

Answer 14

final FP = “initial” FP + 20%(100% - FP)

Question 15

What is the requirement for funding deficiency during the funding improvement plan period for multiemployer plans?

Answer 15

Must avoid accumulated funding deficiency for the last plan year of the funding improvement period.

Question 16

How long is the funding improvement period for

1. Endangered
2. Seriously Endangered
3. Critical Status Plan

Answer 16

10 years for endangered plans

15 years for seriously endangered plans

10 years for critical plan

Question 17

When must the funding improvement plan start?

Answer 17

Begins on 1st day of the 1st plan year after the of earlier of

• 2nd anniversery of adoption date for funding improvement plan
• Expiration of collective bargaining agreements in effect on due date for actuarial certification of endangered status for initial determination year. CBA must cover at least 75% of active participants at that due date.

Question 18

Once the funding improvement plan is adopted (effective), what is the restriction on amendments?

(Note that’s 2 questions)

Answer 18

Cannot adopt amendment which increase benefits

• Exception 1: plan amendment needed for plan to remain qualified
• Exception 2: (Once improvement plan if effective) funding improvement plan is in place and the increase in benefits is paid by additional contributions

Question 19

Once the funding improvement plan is adopted, what is the restriction on CBA?

Answer 19

The plan sponsor is not allowed to enter into a collective bargaining agreement that

• reduces the rate of contributions, or
• suspends contributions, or
• excludes younger or newly hired employees from participation

Question 20

Critical Status Rehabilitation Plan Definition

Answer 20

Actions or range of options formulated to enable plan to no longer be in critical status at the end of the rehabilitation period

If plan can not reasonably be expected to emerge from critical status by the end of the rehabilitation period, the rehabilitation plan must define measures to emerge from critical status at a later time, or to forestall insolvency

Question 21

For a plan in critical status, what are the restrictions on FOP?

Answer 21

• Cannot pay in excess of the SLA + Social Security supplement
  
  • Mandatory Cashout is ok
• No Annuity Purchase

Question 22

How do you emerge from critical status if you don’t have amortization extentensions?

Answer 22

• No longer satisfy critical status definition
• Plan not projected to be insolvent in next 30 years
• Plan is not projected to have accumulated funding deficiency for that year, or any of the 9 next plan years
  
  • Including amortization extensions
  • Ignoring the shortfall funding method

Question 23

How does critical status emergence and reentry change if you have automatic amortization extentensions?

Answer 23

Plan exits critical status if:

• Plan not projected to be insolvent in next 30 years
• Plan is not projected to have accumulated funding deficiency for that year, or any of the 9 next plan years
  
  • Including amortization extensions
  • Ignoring the shortfall funding method

Plan will reenter if they fail to meet either of the above in a subsequent year.

Question 24

Multiemployer Critical Status Criteria 1

Answer 24

The funded percentage < 65% AND

The sum of the MVA and PV of expected contributions for the current year and the next six years <

than the present value of the expected future non-forfeitable benefits projected to be payable in the current year and the next six years.

Question 25

Multiemployer Critical Status Criteria 2

Answer 25

• The plan has a funding deficiency for the current year, or is projected to have a deficiency for any of the next 3 years
• 4 years if the funded percentage is 65% or less
• Ignore Extension of amortization periods

Question 26

Multiemployer Critical Status Criteria 3

Answer 26

Each of the following 3 conditions is satisfied in the current year:

1. The NC + val interest on the UAL > the PV of the expected employer and employee contributions
2. The PV of the non-forfeitable benefits of the inactive participants exceeds the present value of the non-forfeitable benefits of the active participants.
3. The plan has a funding deficiency for the current year, or is projected to have a deficiency for any of the next 4 years. Ignoring extension of amortization periods.

Question 27

Multiemployer Critical Status Criteria 4

Answer 27

The sum of MVA and PV of expected future employer
contributions for the current year and each of the next four years is less than the present value of benefits expected to be paid during the current year and each of the next four years.

Question 28

When can a multiemployer plan suspend participant’s benefits?

Answer 28

• Plan in critical and declining status
• Actuary certifies in writting that all other reasonable steps have been taken and without suspension plan will be insolvent, but with suspension it will be solvent
• IRS must approve and must be ratified by a majority of participants
• Notice must be given to participants

Question 29

What are the restrictions on the suspension of benefits?

Answer 29

• No suspensions for disabled persons
• No suspensions if over 80
• Phased suspensions between 75 and 80
• Must be equal across participants
• Cannot reduce below 110% of PBGC guaranteed benefit

Question 30

T/F if a multiemployer plan finds they contributed money (or withdrawal liability) based on a mistake of fact they can get the money back with no penalties if it’s within 6 months of discovering the error.

Answer 30

True - would be reduced by any asset losses, but not increased with any asset gains