Four pension funds have submitted applications to the US Treasury Department to suspend benefits, while a fifth has resubmitted its request after previously withdrawing it.
Alaska Ironworkers Pension Trust
The Alaska Ironworkers Pension Trust said its plan is expected to become insolvent by July 1, 2030, and proposes to reduce all benefits earned through June 30, 2016, by a flat 34.5% across the board for all participants and beneficiaries. The amount of benefit due to each individual would be multiplied by 0.655 to calculate the new amount due.
The proposal does not treat categories or groups of participants and beneficiaries different from one another, and will not reduce any benefit below 110% of the level guaranteed by the Pension Benefit Guarantee Corp. (PBGC).
In its application to the Treasury Department, the pension said it hasn’t been fully funded since 2002, and after the financial crisis of 2008, the funded ratio dropped to 58.2% in 2009. In August 2010, the plan’s actuary certified that the fund was in “critical status,” after which the trustees adopted a rehabilitation plan that increased employer contributions and reduced future benefit accruals.
Despite attempts to revive the plan, the pension only managed to increase its funding to 58.7% by 2015 because of a drop in active participants that coincided with a rise in retirees. The number of active participants fell to 153 in 2016 from 227 in 2006, while the number of retirees rose to 569 from 522 during that time.
“These simple demographic changes help explain why the large non-accrual contribution by active employees has not been enough to pull the plan out of its funding deficiency,” the fund said in its application.
International Association of Machinists Motor City Pension Fund
The International Association of Machinists Motor City Pension Fund was certified to be in critical and declining status for the plan year beginning July 1, 2015. The plan’s actuary projects that if no changes are made, the plan will become insolvent by June 30, 2028.
The monthly benefit payable to participants or beneficiaries in pay status as of January 1, 2018, would be reduced as of said date to 110% of the amount of payment the participant or beneficiary would receive from the PBGC if the plan became insolvent. The reduction would apply to benefits earned through Jan. 1, 2018, and would begin with the January 2018 payment.
Participants whose benefit whose less than or equal to 110% of the PBGC multiemployer guarantee benefit will not have a benefit reduction.
Southwest Ohio Regional Council of Carpenters Pension
Less than 50% funded, the Southwest Ohio Regional Council of Carpenters Pension was certified to be in critical condition as of Jan. 1 2015, and is projected to become insolvent by 2034.
The pension has proposed eliminating all subsidies for all participants and beneficiaries for any monthly payments on or after Jan. 1, 2018, and then applying a uniform 17% reduction. As a result, more than 90% of participants and beneficiaries would have a benefit suspension that is 20% or less.
Teamsters Local 805 Pension and Retirement Plan
The Local 805 Pension and Retirement Fund has been in “critical and declining” status as of April 1, 2015, and unless changes are made, the fund said it expects to become insolvent during 2022. The Teamsters proposed reducing all participants’ benefits by the maximum amount allowed under the Multiemployer Pension Reform Act of 2014 as of March 31, 2018.
On average, the proposed suspension would reduce the benefits of current and future retirees by 22%. However, the actual percentage reduction would vary from 0% to 82%, depending upon each participant’s age and other factors.
United Furniture Workers Pension Fund A – Resubmit
In February, the United Furniture Workers Pension withdrew its application for benefits suspension that it had filed in August 2016, and resubmitted it in March. The plan was deemed in critical and declining status as of March 2016, and is projected to become insolvent in 2021.
“There is no question that a rapid increase in US furniture imports has been the primary competitive factor facing the contributing employers, and by extension, the pension fund,” said the fund in its application.
The plan’s trustees have proposed reducing benefits to 110% of the PBGC guarantee, excluding disabled retirees, or those who will be older than 80 as of Sept. 30, 2017. The percentage reductions would range from 0% to 62%, and of the fund’s 9,896 participants, 7,078 would see no reduction. For the other 2,818, the average reduction would be 12.7%.
Tags: benefits, Pension, suspensions