UK Pension Funded Levels Fall in February

The funding level of the 5,588 pension plans in the Pension Protection Fund’s (PPF) PPF 7800 Index dropped to 95.6% at the end of February from 96.9% at end of January, according to the UK’s pension lifeboat for collapsed companies.

The lower funded level was a result of the aggregate deficit rising £21.1 billion to £72.1 billion during the month. Total assets were £1.568 trillion ($2.2 trillion), while total liabilities were £1.64 trillion. There were 3,608 plans in deficit, and 1,980 plans with a surplus.

Although the funded levels dropped from the end of January, they were up sharply from February 2017, when the index reported a deficit of £242 billion, and a funding level of 86.2%. Total plan assets were down 0.5% from the end of January, but were up 3.7% from the same time last year. Meanwhile, total plan liabilities rose 0.8% during February, but were down 6.5% from the end of February 2017.

Among the plans that were in deficit, the aggregate deficit at the end of February increased to £187.6 billion from £174.2 billion at the end of January, but was down 39% from the year-ago month when the group’s combined deficit totaled £307.4 billion. Meanwhile, the total surplus of plans that were in surplus fell to £115.5 billion from £123.2 billion at the end of January 2018, but was up 89% from the end of February 2017 when the total surplus was £65.3 billion.

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The number of plans in deficit at the end of February increased to 3,608, representing 64.6% of all plans in the index, from 3,493 at the end of January (62.5%), and compared to 4,380 plans in deficit at the end of February 2017 (75.6%). At the same time, the number of plans in surplus decreased to 1,980 at the end of February (35.4%) from 2,095 at the end of January (37.5%), but was up 40% from 1,414 (24.4%) plans in surplus at the same time last year.

According to the PPF, liabilities increased 0.8% during February, as conventional 15-year gilt yields rose by 1 basis point, while index-linked 5-15 year gilt yields fell by 10 basis points. Assets decreased by 0.5% during the month as a result of the impact of lower equity prices. Compared to the February of last year, 15-year gilt yields were up by 25 basis points, index-linked 5-15 year gilt yields were up by 43 basis points, and the FTSE All-Share Index was up 0.7%. Equity markets and gilt yields are the main drivers of funding levels.

The 7th Circuit Court of Appeals has remanded a ruling in favor of Indianapolis-based ManWeb Services, Inc., which is being sued by the Indiana Electrical Workers Pension Benefit Fund for not fulfilling the pension fund obligations of its predecessor.

The plaintiff is arguing that due to successor liability, ManWeb is responsible for the pension liabilities owed by The Freije Company, which withdrew from the pension fund and owes a liability of $661,978. Successor liability allows a creditor to seek recovery from the purchaser of assets for liabilities that were not assumed as part of an acquisition.

According to court documents, ManWeb paid $259,360 for the assets of Tiernan & Hoover,, which conducted business under the name The Freije Company, in August 2009. Freije signed a collective bargaining agreement with the International Brotherhood of Electrical Workers Local 481, however, ManWeb was non‐union.

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As a union employer, Freije contributed to the Fund, and under the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) was required to pay withdrawal liability of $661,978 when it ceased operations. But ManWeb did not make any contributions to the fund after its purchase of Freije.

Neither Freije nor ManWeb made withdrawal liability payments, and Freije never took advantage of its right to seek review of the assessment amount or to challenge the assessment in arbitration, said the Court of Appeals. The assessment therefore became due when the statutory deadline for contesting the liability passed. The fund then sued Freije and added ManWeb as a defendant based on successor liability.

The district court granted summary judgment for ManWeb in 2013, finding it lacked notice of Freije’s withdrawal liability. In the first appeal, the 7th Circuit Court remanded the case, finding that the company “had sufficient pre‐acquisition notice of [Freije’s] contingent withdrawal liability to satisfy the federal successor liability notice requirement.”

However, the district court granted summary judgment again in favor of ManWeb, concluding that the fund had not shown sufficient continuity of business operations to support successor liability. The Electrical Workers Pension Benefit Fund appealed again.

“ManWeb’s purchase of and use of Freije’s intangible assets—its name, goodwill, trademarks, supplier and customer data, trade secrets, telephone numbers, and website … weigh more heavily in favor of successor liability than the district court recognized,” said the Court of Appeals in its ruling.

The Court of Appeals vacated the district court’s decision, and remanded the case for further consideration.