The US Treasury Department has approved an application for benefits reductions from the Western Pennsylvania Teamsters & Employers Pension Fund.
In its application, the plan’s trustees proposed a 30% reduction in benefits accrued through Dec. 31, 2017, for all participants, which was subject to the individual limitations required by The Multiemployer Pension Reform Act of 2014 (MPRA), and the limitation proposed by the trustees affecting top-tier contribution rate participants.
As required by MPRA, there will be no reduction for individuals who are age 80 or older by Aug. 31, and there will be only partial reductions for individuals between ages 75 and 80 on Aug. 31.
Also per MPRA guidelines, individuals who are receiving disability benefits under the terms of the plan will not have any reduction applied to that portion of their disability benefit that was awarded under the disability benefit provisions of the plan. And for those who worked in covered service after Dec. 31, 2017, benefits accrued after that date will not be suspended.
The approval by the Treasury Department is not a final authorization to implement the benefit reductions, and no reduction can take effect until a vote of the participants and beneficiaries of the fund with respect to the proposed reduction.
The MPRA requires the Treasury Department, in consultation with the Department of Labor, and the Pension Benefit Guaranty Corp. (PBGC) to administer the vote. Unless a majority of eligible voters reject the proposed cuts, the reductions in benefits will take effect Aug. 1.
The pension’s board of trustees said the benefits reduction proposal is the only realistic way to prevent the plan from running out of money by 2029.
“If the proposed reduction is implemented, you will receive a larger benefit than you would if the plan becomes insolvent,” the board told its members, adding that it “has done everything in its power to avoid these benefit reductions, including reducing active participants’ benefits and future accruals in 2006, 2008, and 2011.”
Early retirement and joint survivor subsidies were eliminated or limited to the portion earned prior to August 2008, and contributing employers have been required to substantially increase contributions to the plan.
“However, the reduction of future benefit accruals, mandatory employer contribution increases, and several good years of investment returns have not been enough to reverse the trend toward insolvency,” said the board.
If a majority of eligible voters reject the proposed reduction, MPRA requires that the Treasury Department, in consultation with PBGC, determine whether allowing the plan to go insolvent would impose more than $1 billion of liability on the PBGC. If it would, the Treasury Department would be able to allow the proposed reductions, or some modified form of the proposed reductions, to be implemented at a later date.
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Tags: PBGC, Pension, US Treasury Department, Western Pennsylvania Teamsters & Employers Pension Fund