O n September 9, 2016, Representative John Kline, chairman of the House Committee on Education and the Workforce in the 114 th Congress, issued a discussion draft of a bill that would autho rize a new multiemployer pension plan called a composite plan . A composite plan would contain features of two types of existing pension plans: (1) defined benefit (DB), in which participants receive regular monthly benefit payments in retirement (which some refer to as a "traditional" pension), and (2) defined contribution (DC) plans (of which the 401(k) plan is the most common), in which participants have individual accounts that are the basis of income in retirement. Since composite plans would be neither DB nor DC plans, authorizing legislation is necessary to implement the proposal. Multiemployer pension plans are sponsored by employers in the same industry and maintained as part of a collective bargaining agreement. Congress approved changes to multiemployer DB pension funding rules in the Multiemployer Pension Reform Act of 2014 (MPRA, enacted as Division O in the Consolidated and Further Continuing Appropriations Act, 2015; P.L. 113-235 ). Overview of the Discussion Draft

As a result of the challenges facing multiemployer DB pension plans, stakeholders have sought alternative pension plan designs that could alleviate some of the concerns but retain some of the beneficial features. Composite plans would not feature withdrawal liability. Requirements for a Composite Plan

A composite plan would be an employer-sponsored multiemployer pension plan that would be neither a DB plan (in which the benefit is fixed and cannot be reduced except under MPRA) nor a DC plan (in which participants have ownership of funds in an account). This would relieve employers in the plan from the obligation to increase contributions in response to investment losses. The adjustable benefit plan differs from the composite plan proposal in several aspects: the plan would be responsible if there were insufficient assets from which to pay the floor benefits (as might occur if there were large investment losses); benefits would be insured by PBGC; the plan would continue to pay PBGC premiums; and employers would still be subject to withdrawal liability. Employers would likely find the absence of withdrawal liability an attractive feature of composite plans. The composite plan proposal would provide monthly income in retirement for the life of the participant (and spouse, if married). Pension Benefit Guaranty Corporation Insurance

Participants' benefits in composite plans would not be insured by PBGC. If the plan were to become insolvent and unable to pay benefits, PBGC would not provide financial assistance and participants would not receive their benefits. A composite plan might have to address these, or similar, changes to the value of plan liabilities with the realignment program, which could include proposed contribution increases and potentially mandatory benefit reductions. Because composite plans would not be covered by PBGC insurance, the plans would not pay premiums to PBGC.
Multiemployer pension plans are sponsored by more than one employer in the same industry and are maintained as part of a collective bargaining agreement. The challenges facing one type of multiemployer plans—defined benefit (DB) plans, in which participants receive regular monthly benefit payments in retirement—have led stakeholders to seek alternative pension plan designs that could alleviate some of the concerns but retain some of the beneficial features.
On September 9, 2016, Representative John Kline, chairman of the House Committee on Education and the Workforce in the 114th Congress, issued a discussion draft of a bill that would authorize a new multiemployer pension plan called a composite plan. A composite plan would be neither a DB pension nor a defined contribution (DC) pension (such as 401(k) plans, in which participants have individual accounts that are the basis of income in retirement). Since composite plans would be neither DB nor DC plans, authorizing legislation would be necessary to implement the proposal.
The composite plan proposal is the third element of a proposal by representatives of an organization of multiemployer pension and health plans to reform multiemployer DB pension plans. The first two elements were adopted as the Multiemployer Pension Reform Act of 2014 (MPRA, enacted as Division O in the Consolidated and Further Continuing Appropriations Act, 2015; P.L. 113-235). These elements consist of (1) proposals to strengthen the current multiemployer system and (2) measures to assist plans in very poor financial condition.
The main features of a composite plan include the following:
Employer contributions would generally be a stable amount and would not need to increase in response to investment losses. Participants would receive monthly benefits for the lifetime of the participant (and spouse, if married). Participants' benefits could decrease if the plan's assets experienced investment losses. Composite plans would not be covered by Pension Benefit Guaranty Corporation (PBGC) insurance and would not receive financial assistance from PBGC if a composite plan were to become insolvent and unable to pay participants' benefits. Composite plans would not feature withdrawal liability, which is an exit fee employers in underfunded multiemployer DB plans must pay to leave the plan.
For employers, composite plans would offer several advantages over DB plans. For example, employers would not have to pay withdrawal liability when leaving the plan and the plan would not have to pay PBGC insurance premiums. In addition, the likelihood of stable contributions likely would be an attractive feature.
Retired participants in composite plans would receive monthly benefit payments. However, the benefit amounts could increase or decrease, depending on the investment experience of the plan. The composite plan proposal contains a procedure to address situations in which plan assets fall below 120% of plan liabilities, such as could occur if there were investment losses. This realignment program includes proposed, though not mandatory, contribution increases and mandatory benefit reductions.