PBGC Grants $182.6M to Southwest Ohio Carpenters’ Pension

The Pension Benefit Guaranty Corporation provided $182.6 million to a struggling carpenters’ union pension fund based in Monroe, Ohio, on Tuesday under the Special Financial Assistance Program.

The Southwest Ohio Regional Council of Carpenters Pension Plan covers 5,399 participants. In April 2019, it had to cut benefits for 4,300 participants by 18% under the Multiemployer Pension Reform Act. The SFA grant will permit the pension fund to stay solvent until 2051 and restore previous benefit cuts.

According to the fund’s 2020 funding notice, the plan was 59% funded in 2020. In 2022, the fund certified its critical status with the Department of Labor.

The SFA provision of the American Rescue Plan Act allows for PBGC funding for severely underfunded multiemployer pension plans. Funds that receive assistance must monitor the interest resulting from the grant money as separate from other sources of funding. The PBGC requires that at least two-thirds of the money it provides be invested in “high-quality fixed income investments.”

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The Final Rule on Special Financial Assistance, issued in July 2022, states that the other third can be invested in “return-seeking investments,” such as stocks and stock funds.

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Higher federal spending is bringing many benefits to the U.S., according to J.P. Morgan Asset Management, ranging from boosting renewable energy to hastening health-care advances. And any resulting inflation is containable.

The firm’s in-depth study of changes following the pandemic, called “The post-COVID world comes into focus,” declared that bigger Washington largesse will prompt larger private spending on necessary societal needs.

Two significant pieces of legislation, signed by President Joe Biden, will produce a “multiplier effect” with the federal actions inspiring the private sector to shell out twice the Washington outlays, the report stated. Such an industrial policy, it contended, means that “markets alone will no longer determine winners and losers as the playing field is tilted to produce desired outcomes.”

In JPM’s view, the upsides of the stimulative policy will bring large expansions of solar and wind power, carbon capture programs, many more electric vehicles, necessary additions and improvements to “legacy infrastructure” (roads, bridges, tunnels, etc.) and accelerated medical breakthroughs.

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The report brushed aside concerns by deficit hawks that all the fresh federal spending will end up hindering economic expansion and potentially spark lofty and permanent inflation—and elevate interest rates, thus potentially crowding out investments in corporate and other private-sector debt such as mortgage-backed securities.

Congressional Republicans, in the recent federal debt ceiling fight, which came close to provoking a federal default, have taken a dim view of Biden’s increased spending. They warn that a dire future awaits as a result. Objections to the administration’s approach range beyond the GOP, with the nonpartisan Committee for a Responsible Federal Budget sounding warnings.

But JPM argued that extra government spending and the private efforts that this should encourage—which it called “crowding in”—will produce no economic harm. While conceding that past government spending surges have spurred inflation, the effect was not long lasting, the firm averred.

The study commented: “We see limited real-world evidence that deficits and prevailing interest rates are highly correlated … the crowd-in argument better describes the experience of the last two decades.”