Tax Facts

3739 / Under the Multiemployer Pension Reform Act of 2014, can a plan reduce a participant’s benefit levels?

In some cases, a plan may reduce the benefits of plan participants and beneficiaries. The Multiemployer Pension Reform Act of 20141 (MPRA) created a new type of plan status, known as “critical and declining status” that applies to plans that are projected to become insolvent within either (1) the current plan year, or within 14 subsequent plan years or (2) the current year, or within 19 subsequent plan years if (a) the ratio of inactive to active participants exceeds two to one or (b) the plan is less than 80 percent funded.2

If a plan is in critical and declining status, the plan may temporarily or permanently reduce any current or future payment obligations to plan participants or beneficiaries, whether or not those benefits are in pay status at the time of the reduction.3 Once benefits are suspended, the plan has no future liability for payment of benefits that were reduced while in critical and declining status.4

In order to reduce benefits, however, the plan actuary must certify that the plan is projected to avoid insolvency, assuming that the reductions remain in place either indefinitely or until the expiration date set by the plan’s own terms. The plan sponsor must also determine that the plan is projected to remain insolvent unless benefits are reduced, despite the fact that the plan has taken all reasonable measures to avoid insolvency.5


Planning Point: There has been increasing activity to reduce plan benefits under the 2014 law in recent years, so much of an increase that the U.S. Chamber of Commerce described the situation as a “crisis.”6 The multiemployer Central States Pension Fund applied to the PBGC to approve benefit reductions but was rejected on the basis the cuts would be insufficient to save the fund. However, the request of the Ironworks Union Local No. 17 Pension Fund was approved by the PBGC and by its members in 2017 to become the first to reduce retiree pension benefits under the law.7 More plans have now followed. 8

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