The Internal Revenue Service (IRS) recently announced that it is requesting comments on the possible expansion of its favorable determination letter program for individually designed plans. Specifically, the IRS is interested in public input on circumstances it should consider in its decision to accept applications for favorable determination involving amended plans, or types of plan amendments, during calendar year 2019. Currently, the IRS only accepts applications for rulings on initial plan qualification or qualification on termination.


Effective January 1, 2017, the IRS eliminated the staggered approach to accepting applications for favorable determination where such applications were accepted in a calendar year for plans in that year’s filing cycle. A plan’s filing cycle was based on the last digit of its sponsor’s employer identification number, and the cycles were identified as Cycles A through E. This elimination effectively terminated the favorable determination letter program for ongoing plans, though the program continued for plans where initial qualification or qualification on termination was sought.

In recent years, we have seen an unsettling trend with courts disregarding the terms of parties’ corporate asset purchase agreements and holding purchasers liable for their target’s multiemployer pension contribution and withdrawal liability under the theory of successor liability. A recent decision by the US Court of Appeals for the Seventh Circuit, Indiana Electrical Workers Pension Benefit Fund v. ManWeb Services, Inc. (ManWeb II), building on the court’s 2015 decision in Tsareff v. ManWeb Services, Inc. (ManWeb I), suggests that the reach of successor liability for multiemployer pension contributions and withdrawal liability may still be expanding.

The potential financial impact of severely underfunded multiemployer pension plans continues to be the focus of contributing employers, boards of trustees, and the participants and beneficiaries of such plans. The Bipartisan Budget Act of 2018 (Budget Act), passed into law on February 9, 2018, includes provisions intended to address these concerns. Of particular significance, the Budget Act creates a special select committee composed of 16 members—equally divided between the House and Senate and equally divided between political parties—to review proposals to improve the funding status of struggling multiemployer pension plans. The select committee is expected to review four legislative proposals that are currently available, and may review additional proposals. The select committee has until November 30, 2018, to report its recommendations and proposed legislative solutions, and Congress then has until the December adjournment date (at this time not determined) to vote on the recommendations. As 2018 continues, we will be monitoring and reporting on the actions of the select committee, including its recommendations at the end of November and any congressional action on those recommendations.

On July 20, the Nashville-based United Furniture Workers Pension Fund A (the Fund) became the second multiemployer pension plan to receive the US Department of the Treasury’s approval to suspend benefits under the Multiemployer Pension Reform Act of 2014 (MPRA). This is the first application approved under the Trump administration.

The Fund, which withdrew and resubmitted its application on March 15, 2017, proposed reducing all 9,900 participants and beneficiaries’ benefits to the maximum extent allowed by MPRA (i.e., to 110% of the Pension Benefit Guaranty Corporation (PBGC) monthly guarantee). Simultaneously, the PBGC conditionally approved the Fund’s request to partition all of the guaranteed benefit liabilities of its terminated vested participants and 56% of its retirees, beneficiaries, and disabled participants to a separate plan paid for by the PBGC.

On January 20, participants in the Iron Workers Local 17 Pension Fund became the first group of participants to vote and to approve benefit reductions under the Multiemployer Pension Reform Act of 2014 (MPRA). Prior to the vote, the Fund was projected to become insolvent by 2024. As reported in an earlier post, on December 16, 2016, this Cleveland-based Fund made headlines when the US Department of the Treasury surprisingly approved the Fund’s MPRA rescue plan and authorized the next step—a participant vote on the benefit reductions.

Once the Treasury Department approves a plan’s application to reduce benefits under MPRA, it conducts a vote of that plan’s eligible participants and beneficiaries. The proposed reductions become effective unless a majority of all participants and beneficiaries vote to reject them. In other words, not casting a vote is the same as voting to approve the reductions.

On December 16, the Iron Workers Local 17 Pension Fund (the Iron Workers Fund) became the first multiemployer pension plan to receive approval from the US Department of the Treasury (the Treasury Department) to cut benefits for participants as part of a proposed rescue plan under the Multiemployer Pension Reform Act of 2014 (MPRA). MPRA permits trustees of a significantly underfunded pension plan to apply to the Secretary of the Treasury Department to reduce participants’ benefits if (1) the plan is headed for insolvency within 15 years from the time the rescue plan would be implemented and (2) the trustees have exhausted all other means to avoid insolvency.

Join us in December for these upcoming programs on a variety of employee benefits and executive compensation topics:

Visit our events page for more of our latest programs.

An anti-assignment provision can be an effective tool for ERISA-governed health plans to fend off lawsuits from out-of network providers. ERISA has nothing within its statutory text that prohibits participants from assigning their rights under a health plan to a third party. Medical providers routinely require patients to assign their rights under a plan to the provider at the point of service, and courts have held that such assignments confer participant status on the provider. This allows the provider to avail itself of the plan’s claims and appeals procedures and gives the provider derivative standing to file suit under ERISA Section 502(a) if the provider’s claim is ultimately denied on appeal. Such suits are most often brought by out-of-network providers that believe the plan is underpaying the provider’s bills or wrongfully denying coverage.

Congratulations to Randall (Randy) C. McGeorge on his election to the Morgan Lewis partnership in our employee benefits and executive compensation practice! Effective October 1, 2016, Randy, who is resident in Pittsburgh, will join 32 other newly elected partners from 14 offices and 10 practices. For information about all of the firm’s newly elected partners, please see Morgan Lewis Elects 33 New Partners.

Please join us on June 8 for the 17th installment of our Hot Topics in Employee Benefits: What We’re Seeing webinar series. This session will update you on important developments regarding employee benefits and executive compensation in the following key areas:

  • Proposed rules relating to incentive compensation of financial institutions
  • The US Department of Labor’s new fiduciary rule
  • Claims and appeals requirements for qualified plans in light of Halo v. Yale Health Plan
  • HIPAA Phase 2 audits
  • Recent developments relating to controlled group liability
  • Issuance of final regulations and other developments relating to the Multiemployer Pension Reform Act of 2014