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Newsmakers

PBGC Approves $100.5 Million Bailout of New Jersey Pension Plan

Teamsters Local 408 is the 5th plan to be approved under the American Rescue Plan Act’s Special Financial Assistance program.
By Michael Katz

The Pension Benefit Guaranty Corporation (PBGC) has approved a $100.5 million bail out of the Local 408 International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America Pension Plan. It is the fifth plan approved by the PBGC under the Special Financial Assistance (SFA) program, which was enacted under the American Rescue Plan Act of 2021 (ARP).

The Union, New Jersey-based plan, which covers over 1,000 participants in the transportation industry, was certified to be in critical and declining status in the plan year that began in 2020 and became insolvent last September. The plan was required by law to reduce its participants’ benefits to the PBGC guarantee level, which was approximately 60% below the benefits payable under the terms of the pension.

However, the PBGC’s approval of the application will allow the pension plan to restore all benefit reductions that were triggered by its insolvency and make payments to retirees to cover prior benefit reductions.

“Without this Special Financial Assistance, these 1,058 transportation workers would not receive the retirement benefits they have earned through years of hard work,” U.S. Secretary of Labor Marty Walsh, who is also chair of the PBGC’s board of directors, said in a statement. “With funding from President Biden’s American Rescue Plan, these workers now have the assurance of the secure retirement they deserve.”

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The PBGC also said its Multiemployer Insurance Program will be repaid more than $520,000 to cover the amount of the plan’s outstanding loans for the financial assistance the agency has provided since last September.

Under the SFA program, the PBGC has established six priority groups that are ranked by various criteria, with preference given to the plans in the direst financial situation. The agency is currently accepting applications only from plans in the first two groups. The first group includes plans that are already insolvent or that are projected to become insolvent before March 11. And the second group includes plans that are expected to be insolvent within one year of the date they file their applications or that implemented MPRA benefit suspensions before March 11, 2021. The third group, which includes plans that are in critical and declining status with more than 350,000 participants, will be allowed to apply for financial assistance beginning in April.

Struggling pension plans are required under the SFA program to demonstrate eligibility and to calculate the amount of assistance per ARP and PBGC guidelines. Funds provided under the program may be used only to pay plan benefits and administrative expenses, and plans receiving aid are also subject to certain terms, conditions, and reporting requirements.

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Home > News > Newsmakers > El-Erian: Fed’s Powell Is Keeping Investors in the Dark
Newsmakers

El-Erian: Fed’s Powell Is Keeping Investors in the Dark

The chair of the central bank missed his chance to clarify its tightening plans, an economist laments.
By Larry Light



Federal Reserve Chairman Jerome Powell’s news briefing this week blew it, failing to provide a clear road map to the Federal Reserve’s plans for tightening monetary policy.

And that bugs Mohamed El-Erian, Allianz’s chief economic adviser. “The market wants greater clarity,” he said in a CNBC interview. For instance, he added, “People want to know how the balance sheet will contract.”

Powell left a lot of unanswered questions lingering on Wall Street. When asked about the pace of rate increases at his Wednesday appearance, the Fed chief would say only that the central bank’s policymaking panel needed to be “nimble.” He also said that body had “quite a bit of room” to raise interest rates and not harm the labor market.

The market took that to mean Powell is looking at more than three quarter-point hikes in the benchmark federal funds rate this year—what the committee, in its “dot plots” poll, predicted was the policy by which tightening would proceed. But after the Powell news confab, futures contract expected up to five increases this year, according to CME Group.

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Powell also provided no details on how the bank will diminish its $9 billion balance sheet, which has swelled thanks to the institution’s bond-buying program. The Fed is reducing its purchases and intends to finish the buying drive by March; while it has indicated a desire to reduce the enormous bond trove, no specifics have emerged.

The Fed could simply let its stash of bonds expire without rolling them over—

reinvesting the proceeds of matured bonds has been its practice. Or it could actively sell the paper. Selling its bonds likely would depress fixed-income prices and push up yields, which happens to be what the Fed wants.

“The Fed missed a golden opportunity to catch up with realities on the ground. Instead, it has fallen further behind,” El-Erian said. Investors are leery about what’s next, he explained. The S&P 500’s continued slide after Powell spoke seems to support that assessment.

“The market has recognized that the liquidity regime is changing, but [it’s] not clear on how it’s changing,” El-Erian said, referring to the rapid-fire volatility of stocks lately, driven by uncertainty about the Fed’s efforts to quell rampant inflation. “That’s what the market has got to adjust to—that inflation will no longer allow the Fed to be our best friend forever.”

Clearly, Powell has abandoned his previous stance that higher inflation—the December Consumer Price Index (CPI) showed a yearly rise of 7%—was no longer transitory. But El-Erian was displeased that the chair wouldn’t elucidate further.

“Inflation won’t go away rapidly,” the economist said. “In six months, we’ll still be talking about it.”

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