CONNstruction - Winter 2011 - (Page 11)

newsandviews of the obligation to contribute, or unintentional, through workplace attrition if an employer experiences a sizable enough decline in its contribution obligation to trigger a partial withdrawal. A complete withdrawal A complete withdrawal is something that completely terminates the obligation to contribute to a plan. For the construction industry, this typically happens when an employer bargains out of this obligation to contribute or if his employees decertify the union. There is an exception for the construction and retail industries that allows employers to liquidate assets and avoid withdrawal liability as long as the employer does no covered work for a period of five years in the union’s jurisdiction. FASB Backs Off, Requiring More Rigorous Withdrawal Liability Disclosures By Jack Leahy CCIA Director of Labor Relations In September 2010 the Financial Accounting Standards Board issued initial proposals that would have required employers participating in multiemployer pension plans to disclose estimates of their withdrawal liability on financial statements. Recently, FASB approved a revised accounting standard that employers should find less onerous. Before discussing the new rule, let’s review some basics. Partial withdrawals There are two types of partial withdrawals: a 70 percent decline or a “partial cessation” of the employer’s contribution obligation. A 70 percent contribution decline occurs if during the immediate plan year and two previous years, the employer’s number of contributing hours does not exceed 30 percent of the hours contributed in the highest of the three years. A partial cessation occurs when an employer reduces its operations but continues to work in the jurisdiction of the CBA of the type for which contributions were previously required. New FASB rule The revised FASB rules required the following disclosures: • The amount of employer contributions made to each significant plan and to all plans in the aggregate. • An indication of which plans, if any, are subject to a funding improvement plan. • The expiration dates of CBA’s and any minimum funding arrangement. • The most recent certified funded status of the plan, as determined by the plan’s so-called “zone status,” which the Pension Protection ACT of 2006 identified, i.e. Red Zone: less than 65 percent funded, Yellow Zone: between 65 and 80 percent funded or Green Zone: more than 80 percent funded. These new disclosures become effective for public entitites December 15, 2011, and for private firms a year later. What is withdrawal liability? Withdrawal liability was created by the Multiemployer Pension Plans Amendments Act of 1980. It applies only to multiemployer pension plans – i.e. those plans to which more than one employer contributes and which are maintained pursuant to one or more collective bargaining agreements. It applies only to pension plans, not to group health or other welfare plans. Basically, withdrawal liability is a withdrawing employer’s pro rata share of a multiemployer plan’s unfunded benefits. Unfunded benefits are the difference in the present value of the fund’s total vested benefit obligations and the market value of the plan’s assets at the end of each plan year. Each year, the actuary for the plan, as part of the annual actuarial valuation of the plan, determines whether the plan has unfunded benefits and if so, the amount. If a fund has unfunded benefits, the Fund will assess withdrawal liability for employers that withdraw the following plan year. The bottom line Withdrawal liability can impose a serious financial burden on employers who don’t expect it or unwittingly trigger a withdrawal. It is good practice for an employer to request a calculation of the firm’s withdrawal liability from the plan’s administrator each year. Employers have a statutory right to this information, although funds can charge for the calculation. When does a withdrawal occur? Withdrawals occur whenever an employer experiences a complete or partial elimination of the obligation to contribute to a multiemployer plan. Withdrawals can be intentional, for example when an employer negotiates out CONNstruction / Winter 2011 / 11

Table of Contents for the Digital Edition of CONNstruction - Winter 2011

Is Water Affordable?
Water Infrastructure Projects Will Help Return the Construction Industry to Prosperity
FASB Backs Off, Requiring More Rigorous Withdrawal Liability Disclosures
The Potential of Public-Private Partnerships in Water and Wastewater Projects
Working Together
Pour It On
The Name Says It All
Momentum Achieved on MDC Clean Water Project
2011 AGC of CT Industry Recognition Awards & Dinner
CCPC Annual Picnic
YCF September Meeting
The Diggers Mixers Fixers Annual Golf Outing
CEUCA Fall Luncheon

CONNstruction - Winter 2011