The trustees of the Sheet Metal Workers Pension Fund of Troy, Michigan, have reapplied for approval from the US Department of Treasury of a proposed suspension of benefits. The fund’s actuaries have estimated that as of May 1, 2019, the pension is only 40.6% funded, and is projected to become insolvent in the plan year beginning May 1, 2033.
According to the fund’s benefit reduction plan, non-active participants who retired before Aug. 1, 2009, and all terminated vested participants, would have their benefits cut by 35%, while non-active participants who retired on or after Aug. 1, 2009, would see their benefits reduced by 30%. As for active participants, the proposed reduction is 25% for employees that were hired before May 1, 2006, and for those hired on or after May 1, 2006, there would be no reduction.
The pension defines active participants as those who have worked at least 435 hours during the plan year ended April 30, 2017, or April 30, 2018, and who have not retired as of April 30, 2018. Non-active participants include terminated vested participants, retired participants, disabled participants, beneficiaries of participants, and alternate payees.
The pension withdrew its original application for a reduction of benefits in October 2018. At the time, the pension’s board of trustees proposed a reduction in monthly benefits such that the revised monthly amount is based on a level accrual rate of $48, multiplied by the years of service earned through April 30, 2019. Participants whose level accrual rate was already less than the $48 level accrual rate would not have had their benefits reduced. A participant’s level accrual rate is determined by dividing their benefit amount by their years of service. The reduction would have taken effect May 1, 2019.
The plan said the proposed benefit suspension would take effect as of May 1, 2020, and would continue indefinitely.
To date, the US Department of Treasury has approved proposed benefit reductions for 14 pension plans, one of which is still subject to a vote by its participants, while five applications have been denied. The number of approvals has risen sharply under Treasury Secretary Steve Mnuchin. Since he was sworn in, the Treasury Department has approved benefits reductions for 14 pension funds, while only denying one application.
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Tags: Benefit Reduction, Department of Treasury, Michigan, Pension, Sheet Metal Workers Pension Fund