After Receiving Extra $127M, Central States Working on Repayment Plan

Pension Benefit Guaranty Corporation Director Gordon Hartogensis testified at a House of Representatives subcommittee hearing this week that the Department of Justice is negotiating with the Central States pension fund for the return of a $127 million overpayment.

The $127 million was improperly granted to the pension fund by the PBGC for the benefit of plan participants that were deceased.

The hearing, “Examining the Policies and Priorities of the Pension Benefit Guaranty Corporation,” was led by Representative Bob Good, R-Virginia, who chastised Hartogensis for the way the PBGC is operating. Good also suggested that the PBGC consider reducing the premiums paid by single-employer pension funds to the PBGC because the PBGC currently has a surplus in the fund that backstops single-employer plans.

“The single-employer pension surplus is $44.6 billion,” Good said, according to a copy of his planned remarks. “I think it is time to come to the table with policymakers and legislators to reward these plans for their good stewardship, by lowering premiums.”

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The PBGC reported a surplus of $44.6 billion for fiscal 2023, but that surplus is relatively recent and can be volatile: the PBGC reported a $20 billion deficit in 2016.

The hearing came after Good and Representative Virginia Foxx, R-North Carolina, learned earlier this year of the PBGC’s overpayment to Central States.

In December 2022, the PBGC provided $35.8 billion to the Central States, Southeast and Southwest Areas Pension Plan. The Special Financial Assistance Program of the American Rescue Plan Act allows for PBGC funding for severely underfunded multiemployer pension plans.

Before November 2023, the PBGC did not use the Social Security Administration’s death master file when auditing plan applications for deceased participants, and pension plans do not have access to the file. According to Hartogensis, speaking Wednesday at a hearing before the House Committee on Education and the Workforce’s subcommittee on health, employment, labor and pensions, the inspector general for the PBGC first recommended using the DMF in March 2023.

Hartogensis emphasized that neither the PBGC nor the Central States plan have made any payments to the estates of deceased participants, and “there is no evidence that any of the applicant plans intentionally misled PBGC.”

He added that “we’re implementing a repayment mechanism for any SFA amounts that were paid based on inaccurate census data,” and that Central States is currently negotiating the terms of repayment with the Civil Division of the Department of Justice.

In defending the program itself, Hartogensis said the SFA program “provided stability for employers that use union labor.” The risk of plan insolvency creates withdrawal liability for the employers, Hartogensis explained, and this looming liability makes it harder for those employers to apply for loans. “There is a lot of collateral damage that was avoided” by passing the SFA program, Hartogensis said.

A Department of Labor statement from last week said that pension funds receiving overpayments must repay the money, and it clarified that doing so does not violate the funds’ fiduciary obligations under the Employee Retirement Income Security Act.

Central States declined to comment.

Tags: Central States, PBGC, PBGC premiums

Xponance Alts Solutions LLC, the alternatives subsidiary of woman-led and employee-owned investment firm Xponance Inc., has acquired a minority stake in private investment firm the Copia Group LLC. Financial terms of the deal were not disclosed.

According to Xponance Alts Solutions, it will make a general partnership minority investment in Copia and a limited partner commitment in its first private credit offering. Xponance Alts’ strategy is to partner with diverse and/or women-owned alternative managers within the private equity, private credit, infrastructure and real estate sectors.

Copia, founded in 2022 by Shundrawn Thomas and Anthony Hoye, invests in established lower middle market companies with scalable, sustainable business models. The company’s strategy is to provide deal structures tailored to portfolio companies while limiting equity dilution, with the aim of increasing wealth creation for underserved entrepreneurs and their communities.

“Xponance’s proven track record of excellence in investment management and successful alliances with diverse managers is well established in the marketplace,” said Thomas, also Copia Group’s managing partner, in a statement. “Our alignment of mission and values with XAlts creates a distinct partnership that firmly positions the Copia Group to deliver our triple bottom line of income, inclusion, and impact.”

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The investment in Copia is Xponance Alts’ first emerging manager investment and sixth general partnership investment since it was launched in 2021.

“The Copia Group’s focus on delivering competitive investment returns while creating significant social impact is highly aligned with Xponance’s mission to transform access into alpha,” said Xponance Founder and CEO Tina Byles Williams in a statement. “XAlts is making this investment in a firm and team that share our core values as we partner to enhance their growth.”

Xponance Alts’ parent company, formerly known as FIS Group, had $16.6 billion in assets under management as of the end of 2023.