PBGC Rescues Two Pensions Covering 25,000 People

The Pension Benefit Guaranty Corporation issued special financial assistance grants to two more multiemployer pension funds that had been on the brink of insolvency. More than $500 million was granted to protect the pensions of nearly 25,000 participants.

The first plan, which accounts for most of the total money, was the CWA/ITU Negotiated Pension Plan, which represents 24,288 participants in the printing industry. The Mount Laurel, New Jersey, based plan received $545.6 million, among the largest amounts granted by PBGC under the SFA program.

The CWA/ITU plan was expected to become insolvent in 2029. At that point, the PBGC would have taken over the plan and issued a 15% benefit cut.

According to the plan’s Form 5500, it had 1,537 active participants, 11,263 retired, 3,469 beneficiaries of deceased participants, and 6,756 entitled to future benefits, by the end of 2022. The plan was 41.5% funded.

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The second plan was Teamsters Local 102, based in Cherry Hill, New Jersey. The plan received $12.4 million to cover its 508 participants in the transportation industry. The pension was expected to become insolvent in 2030 when it would have had to issue a 15% benefit cut.

At the end of 2022, the pension had 47 active participants, 200 retired, 36 beneficiaries of deceased participants, and 225 entitled to future benefits. The pension was 28.87% funded.

The SFA provision of the American Rescue Plan Act allows for PBGC funding for severely underfunded multiemployer pension plans. Grants are calculated to ensure plan solvency through 2051.

Pension 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.” 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.

Tags: PBGC, SFA

“Climate cartel,” “ideological agenda,” “economic collusion,” and “anti-trust” were among the key phrases used by Republicans to describe the consideration of environmental, social and governance factors in investing at a hearing hosted by the House Judiciary Subcommittee on the Administrative State, Regulatory Reform, and Antitrust on Wednesday.

Representative Jim Jordan, R-Ohio, and the chairman of the judiciary committee, briefly stated his belief as to why ESG investing amounts to anti-trust activity. He argued that various institutional investors, proxy advisers, and non-profits have agreed to invest and exercise shareholder rights to reduce output of fossil fuels, to the detriment of consumers: “When you form a cartel to limit supply, it’s called restraint of trade,” Jordan said.

Representative Harriet Hageman, R-Wyoming, was more direct. She told the witnesses, who represented Ceres, a sustainable economy advocacy nonprofit, the California Public Employees’ Retirement System, and other organizations that “You are evil in what you are attempting to do and the violations of law you are engaged in,” and “your engagement is designed to fundamentally change business and industries to the detriment of consumers.”

Dan Bienvenue, the interim chief investment officer for CalPERS, explained to the subcommittee that he accounts for many risks in building CalPERS portfolio, “including climate-related risks.” He added that CalPERS does not boycott fossil fuels: “We remain invested because we believe owning these companies provides good value for our members.” When engaging with companies, Bienvenue said that they want to be sure that the companies they invest in are “positioned to be advantaged by the transition to a low-carbon economy.”

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Several Republicans on the subcommittee focused on membership in Climate Action 100+ as evidence of unlawful collusion among ESG informed institutional investors.

Representative Victoria Spartz, R-Indiana, asked Bienvenue why CalPERS joined Climate Action 100+. Bienvenue answered that “we view Climate Action 100+ as an opportunity for investors to get together and share ideas and figure out how to navigate, in our case a $500 billion portfolio, through a very uncertain future.” Emphasizing the multi-generational nature of California’s pensioners, he added: “we want every company to have a credible plan to navigate the climate transition, that way they can be profitable now and they can be profitable 20 years from now and 50 years from now.”

Democratic members of the subcommittee pointed out that Climate Action 100+ is not collusive because signatories are still independent fiduciaries. Representative Mary Gay Scanlon, D-Pennsylvania, noted that Climate Action 100+’s website says that “Signatories are independent fiduciaries responsible for their own investment and voting decisions and must always act completely independently.”

The American Securities Association said in an emailed statement of the hearing that: “The financial interests of America’s retail investors and retirement savers should always come before partisan politics and the profits of the ESG Industrial Complex. Examining whether any anticompetitive practices flow from this agenda is necessary to maintain the public’s trust and confidence in our financial markets.”

Tags: anti-ESG, ESG