President signs multiple bills affecting pensions at year-end 2014

In December 2014 President Obama signed legislation affecting multiemployer plans, a measure extending for one year a set of tax incentives (including pension provisions) and a bill intended to aid certain employees of American Airlines.

Multiemployer plans

On December 16 President Obama signed into law the Consolidated and Further Continuing Appropriations Act, 2015 (P.L. 113-235), which includes a package of changes to multiemployer plan funding rules designed to help shore up the troubled multiemployer plan system. The bulk of the Act provides fiscal year 2015 full-year appropriations through September 30, 2015, for all departments except the Department of Homeland Security, for which appropriations are provided instead through February 27, 2015.

Multiemployer plan changes. Under the Act, trustees of severely underfunded multiemployer plans may reduce the vested benefits of certain participants or retirees. However, the Act limits the extent to which benefits of disabled retirees, or those ages 75 or older, may be reduced. In addition, the insurance premiums multiemployer plans are required to pay to the PBGC increase from $12 to $26 per participant per year.

Other pension changes. While the pension provisions of the Act primarily impact multiemployer plans, some provisions are targeted at single-employer plans as well. This includes a provision limiting the applicability of the substantial cessation of operations rule under ERISA Sec. 4062.
Although President Obama has signed the measure, Treasury Secretary Jack Lew noted that “this package is far from perfect, and we oppose certain provisions.” Regarding the pension amendments, Lew said the legislation “fails to provide a viable solution to address the challenges facing multiemployer pension plans and puts a heavy burden on retirees.”

Tax extenders package

President Obama on December 19 signed into law the Tax Increase Prevention Act of 2014 (P.L. 113-295), which temporarily extends over 50 expired tax incentives for individuals, businesses and energy through 2014, including some pension and employee benefit provisions. The law also contains technical corrections to recent tax acts.

The Act extends through 2014 the ability of individuals at least 70 ½ years of age to exclude from gross income qualified charitable distributions from individual retirement accounts.
The Act also contains special extenders relating to multiemployer plans. One provision would extend through 2015 the ability of multiemployer pension plans to take an additional five years to amortize funding shortfalls. A second provision would extend through 2015 the special rules for three categories of severely underfunded multiemployer plans.

Rollover of airline bankruptcy payments

On December 18, President Obama signed legislation (P.L. 113-243) to give certain airline employees the option to contribute bankruptcy settlements to retirement accounts without incurring a penalty. This provision was made available to employees of airlines following their bankruptcies but expired before American Airlines sought bankruptcy protection in 2011.

“The bankruptcy caused those employed by American Airlines to suffer the loss of their earned pensions, and this legislation will give them the opportunity to rebuild their future without penalty from the federal government,” said Senator James Inhofe (R-Okla), who sponsored the bill in the Senate, along with Sen. Sherrod Brown (D-Ohio). The Worker, Retiree, and Employer Recovery Act of 2008 (P.L. 110-458) allowed employees of air service providers, who filed bankruptcy prior to 2007, to roll up to 90 percent of airline bankruptcy settlements into an individual retirement account without paying tax penalties through April 15, 2013.

American Airlines did not declare bankruptcy until November 29, 2011, and had not yet emerged from bankruptcy by April 15, 2013.

Source: P.L. 113-235; P.113-295.

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