The Pension Benefit Guaranty Corporation (PBGC) has approved a facilitated merger of two New York pension funds to help them stave off insolvency. It is the first time the PBGC has used its authority under the Multiemployer Pension Reform Act of 2014 (MPRA) to help two plans merge.
The PBGC said it will provide financial assistance to help the merger of Poughkeepsie, New York-based Laborers International Union of North America 1000 Pension Fund with the Laborers Local 235 Pension Fund of Elmsford, New York. Beginning this month the PBGC will provide three annual installments of $8.9 million to bolster the merged plan. PGBC is the lifeboat for struggling pension funds.
“PBGC’s mission is to protect the retirement security of workers and retirees in defined benefit plans and helping plans merge is one way we can do that,” PBGC Director Gordon Hartogensis said in a statement. “Through this facilitated merger, we are preventing a failing plan from going broke and preserving benefits in a financially responsible way.”
The Local 235 Plan, which covers more than 1,100 participants, is a so-called “green zone” plan, which means it has a funding ratio greater than 80%. Yellow zone plans have a funding ratio between 65% and 79%, and red zone plans are less than 65% funded. The PBGC said the merger will protect the more than 400 participants of the Local 1000 Plan, which was projected to become insolvent in 2026, without affecting participants and beneficiaries of the Local 235 Plan.
Under MPRA, PBGC has the authority to facilitate plan mergers under certain conditions, including when one or more of the plans involved is projected to become insolvent within 20 years. Plans may apply to PBGC for financial assistance to facilitate a merger if the assistance does not impair the agency’s ability to meet its existing financial assistance obligations to other multiemployer plans. The PBGC itself is in financial trouble and has said that it expects its insurance program for multiemployer pension plans to run out of money within five years.
The PBGC said, however, that it will not be hurt financially by facilitating the merger of the two New York plans. It said that the merger reduces its expected long-term loss with respect to the Local 1000 Plan. Providing financial assistance to the merged plan will not impair the agency’s ability to meet its existing financial assistance obligations to other multiemployer plans.
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Tags: Gordon Hartogensis, Laborers International Union of North America, Laborers Local 235 Pension Fund, MPRA, Multiemployer Pension Reform Act of 2014, PBGC, Pension Benefit Guaranty Corporation