Central States Reaches Agreement to Repay $127M Overpayment

The Central States, Southeast and Southwest Areas Pension Plan reached a settlement with the Department of Justice on Monday and has repaid the federal government in full for a $126,555,536 overpayment the pension received from an assistance program. The fund was also required to pay 2.25% in annual interest on that amount starting from March 26.

The overpayment resulted from the inclusion of 3,479 deceased participants, out of about 360,000 total, in the Central States’ application for a Special Financial Assistance grant. In December 2022, Central States was granted $35.8 billion under the program, which was created as part of the American Rescue Plan Act to keep struggling multiemployer plans solvent through 2051.The Pension Benefit Guaranty Corporation, which administers the SFA program, did not start using the Social Security Administration’s death master file to conduct its death audits of SFA applications until November 2023, and the Central States plan, like all other pension funds, does not have access to it.

The PBGC said in an emailed statement that “With respect to other plans that received SFA before PBGC expanded the scope of its independent death audit, PBGC has full census data audits underway. PBGC is committed to facilitating the return of SFA amounts made to those plans based on inaccurate census data.”

The PBGC has not specifically identified any plans that received overpayments.

The DOJ wrote in the settlement agreement that “the Plan provided information in support of its contention that its application complied with, and PBGC paid SFA based on, all information requirements, including census data, that were in effect at the time of the application, and that it did not violate any statute, regulation, or instruction in connection with the Plan’s application for and receipt of SFA.”

Thomas Nyhan, the executive director for Central States, said in an emailed statement that “Central States will remain very healthy and at nearly full funding after returning the excess payment, which constitutes roughly 0.35% of the total SFA provided to Central States. An independent actuary has asserted that the funding ratio of Central States, inclusive of the total SFA, is 98.5%.”

Congressional Republicans, including Senator Bill Cassidy, R-Louisiana, and Representative Virginia Foxx, R-North Carolina, had subpoenaed the PBGC, PBGC Director Gordon Hartogensis and PBGC Inspector General Seema Nanda for documents related to the repayment. The subpoenas for Hartogensis and Nanda came after Hartogensis testified on March 20 to a subcommittee of the House Committee on Education and the Workforce that Central States was then negotiating with the DOJ to secure the repayment.