Prospective adjustment of bargained pension benefits

P/OPINION 75-138


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                          May 29, 1975


Dear           :

This is in reply to your letter dated March 6, 1975,
requesting advice as to whether the Employee Retirement
Income Security Act of 1974 (Act) permits negotiations
with the union to reduce benefits of a defined benefit
and defined contribution pension plan under which the
benefits are based upon actuarial advice as to the
amount that can be supported by the rate of contributions,
stated in cents per hour worked, and the collective
bargaining agreement provides that, in the event the
rate of contributions for any reason fails to support the
benefits, negotiation may be undertaken to adjust either
benefits or contributions, or both, up or down.

I am advised by the Labor-Management Services Administration
of this Department that the new Act does not require the
establishment of private pension plans nor does it mandate
the level of benefits to be provided under such plans.
Thus, there is no specific bar in the Act that would prevent
the adjustment of plan benefits or contributions up or down.
However, the Act contains mandatory minimum vesting and
funding provisions which must be adhered to when making
such adjustments. The minimum vesting and funding require-
ments become effective for plan years beginning after
December 31, 1975 in the case of a plan in existence on
January 1, 1974.

It must be pointed out that although benefits can be
reduced, the reduction may not be made retroactively,
but only prospectively, with respect to benefits that
are already vested at the time the benefits are adjusted.
Also, if contributions are reduced after the minimum
funding requirements become effective, the contributions
may not be below the level required to meet the minimum
funding standard.