September 2008 NewsLetter, "Does Green Mean Go? Trustee Decision-Making in the Post-PPA'06 Era"

Abstract

The Pension Protection Act of 2006 (PPA'06) requires trustees of multiemployer pension plans that are either in "endangered status" (referred to as the yellow zone) or "critical status" (known as the red zone), based on their actuary's annual review of the plan's financial condition, to take specific steps, including creating formal action plans, to improve their plan's financial status. PPA'06, however, does not require any particular action to be taken on behalf of multiemployer pension plans that are neither endangered nor critical (green-zone plans), which some might, therefore, interpret - mistakenly - to mean trustees of those plans can automatically proceed with unfettered confidence.

In fact, trustees of green-zone plans need to continue to pay attention to all of the funding indicators that were important prior to PPA'06, in addition to the new PPA'06 measurements, in order to monitor and manage their plans' financial condition effectively.

To provide a context for pension plan management in the post-PPA'06 era, this NewsLetter presents an overview of how measures of a multiemployer plan's financial condition have increased and changed over time. It also discusses the value to trustees of an explicit means of addressing how to integrate these various measurements into their decision-making - an exercise that is particularly important for trustees of green-zone plans - through a discussion of funding parameters.

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