PBGC Multiemployer Program 2013 NCCMP Annual Meeting Hollywood, FL September 30 - October 2, 2013

1. PBGC Multiemployer Program2013 NCCMP Annual MeetingHollywood, FLSeptember 30 - October 2, 2013 Bruce Perlin – Acting Assistant Chief Counsel The opinions of Mr. Perlin are his alone and do not represent the views of the PBGC

2. Presentation Overview • Multiemployer Program Introduction and Overview • Update on Program Financials & Key Statistics • Multiemployer Reports to Congress • GAO Report to Congress • Programmatic Update • Legal Issues • Reducing Regulatory Burden

3. PBGC Multiemployer Program Overview • Manages PBGC’s program for providing financial assistance to insolvent ME plans • Reviews and classifies risk of ME plans for PBGC’s financial statements • Evaluates and analyzes financial condition of ME plans • Evaluates plans with greatest risk to PBGC • Monitors plan changes and transactions • Provides advice to multiemployer plan administrators and other stakeholders • Reviews and recommends action on PBGC’s ME regulatory functions

4. Program Financials - 2012 Net Position September 30, 2011 ($2.8 billion) 2012 Snapshot: Premium Income $92 million Investment Income $91 million Assets $1.8 billion Liabilities ($7.0 billion) Net Position September 30, 2012 ($5.2 billion)

5. Key Statistics: PBGC Multiemployer Program Net Financial Position (in $Billions)

6. Key Statistics: Multiemployer Plans- Participant Status 2010: 39% active; 61% inactive

7. Key Statistics: Financial Assistance to Insolvent ME Plans • Sources: http://www.pbgc.gov/open/index.html; http://www.pbgc.gov/res/data-books.html • A number of plans received financial assistance in more than one year. • 2012 figures rounded.

8. Key Statistics:Plans and Participants by Zone Status

9. Multiemployer Reports to Congress:PPA Report • Effects of PPA funding and disclosure provisions • As of 1/1/09 aggregate funding level of 49%* • In 2009 underfunding was $346 billion • Provides useful statistical and other information about plans and the need for a collaborative process going forward * Based on the cost to purchase annuities, not the plans’ funding rate.

10. Multiemployer Reports to Congress:5-year and Exposure Reports • Five-Year Report: adequacy of current premium levels to support current guarantee levels • Timing is uncertain, but projection is that current premiums plus investment income will be insufficient to meet annual guaranteed benefit payments • Approximately 35% probability that the multiemployer program assets are exhausted by 2022 and 90% probability of exhaustion by 2032 • FY 2012 Exposure Report • Projections of PBGC’s potential exposure

11. GAO Report to Congress • In March 2013, the Government Accountability Office (GAO) issued a report to Congress titled, “Private Pensions: Timely Action Needed to Address Impending Multiemployer Plan Insolvencies” • Distressed plans have taken significant steps to address funding; however, problems in some plans remain • PBGC’s financial assistance continues to increase; expects number of insolvencies to double by 2017 • Discussion of the PBGC insurance fund

12. Programmatic Update: Terminated Plan Review • Mission: To identify plans with unusually large administrative expenses, and to work to reduce those costs to forestall insolvency • Work jointly with DOL and IRS • Ensure Plans understand post-termination duties • Goal: To help participants receive their benefits at the plan level for as long as possible

13. Programmatic Update:Insolvent Plan Management • Number of insolvent plans expected to potentially double over the next 5-6 years • PBGC embarking on new project to consolidate administration of insolvent plans • Geared towards small insolvent plans • Idea is that a single administrator and/or trustee could administer a handful of plans • Reduces the plans’ administrative burden and allows us to conserve resources

14. Programmatic Update:Insolvent Plan Management

15. Programmatic Update:Insolvent Plan Management

16. Legal Issues:Sun Capital Sun Capital Partners v. New England Teamsters Pension Fund, 2013 WL 3814984 ( 1st Cir., July 24, 2013), reh’g denied, Aug. 23, 2013 • NE Teamsters sued the Sun Funds (private equity) for withdrawal liability as members of a withdrawing employer’s controlled group. • To be liable for withdrawal liability, the controlled group member must be a trade or business.  The district court held that the Sun Funds were NOT trades or businesses, rejecting a PBGC Appeals Board opinion on a similar case.  • NE Teamsters appealed and PBGC filed an amicus brief arguing that the Sun Funds’ effective control of the portfolio company for profit would likely make them trades or businesses under PBGC’s interpretation of its controlled group regulation.

17. Legal Issues:Sun Capital • First Circuit ruled that one of the Sun Capital Funds was a trade or business because it operated, managed, and was advantaged by its relationship with Scott Brass • Court took an “investment plus” approach • Case sent back to the district court for more fact finding on the other Sun Capital Fund and the common control issue with Scott Brass • Rehearing and rehearing en banc were recently denied

18. Reducing Regulatory Burden • In response to Executive Order 13563 on Improving Regulation and Regulatory Review, PBGC issued its plan to review its regulations to ease administrative burden, simplify filings, and provide relief for small businesses and plans  • Specifically pertaining to Multiemployer Program: • Annual valuation requirement for terminated but not insolvent multiemployer plans • Notices of insolvency and of insolvency benefit level • Filing requirements for mergers of multiemployer plans

19. PBGC Multiemployer Program Thank you