The New York Teamsters Road Carriers Local 707 Pension Fund
has become insolvent, and is now on life support as the Pension Benefit
Guaranty Corporation (PBGC) has begun to provide financial assistance.
The PBGC will help pay the guaranteed portion of pension
benefits earned by the fund’s nearly 4,000 participants. The fund, which covers
retired and current truck drivers represented by the Teamsters Local Union 707,
has been unable to pay full benefits for the past year, and had reduced the
benefits to retirees to levels that were supportable by available plan assets,
according to the PBGC.
The average guaranteed benefit for current retirees of the
fund is $570 per month, which is less than half the average full promised benefit
of $1,313 per month. Some 42% of the fund’s retirees and beneficiaries have had
their benefits reduced by more than half of their promised benefits. Only 7% of
retirees and beneficiaries will receive their full plan-promised benefit
PBGC will initially provide the 707 Fund with $1.7 million
per month which, combined with employer contributions and other income, will
allow the pension fund to pay retirees’ benefits at the level guaranteed under
federal pension law. PBGC said the amount of future financial assistance it
will give the fund will vary based on changes in the fund’s income, and cash needs for guaranteed
benefit payments and administrative costs.
Despite the cash infusion from PBGC, the organization doesn’t
take over administration of insolvent multiemployer plans, and the 707 Fund
will continue to administer the plan.
The dire financial condition of the fund has been attributed
to several trends, such as a steady decline in participating employers and
aggregate employer contributions, increases in plan benefit levels that were not
adequately funded, and investment losses suffered in the 2008-2009 financial
In March of 2016,
the fund submitted an application with the US. Treasury Department
seeking approval to enact pension benefit reductions under the Multiemployer Pension
Reform Act of 2014 (MPRA). Multiemployer plans can submit an application
showing that proposed pension benefit reductions are necessary to keep a plan
from running out of money.
In its application, the fund had proposed to reduce all plan
participants’ pension benefits to 110% of the PBGC guarantee. It also detailed
its decades-long struggle to stay fully funded.
“Retention of contributing employers in the plan has been
very difficult since the deregulation of the trucking industry in 1980, and the
economic and financial crises since 2001,” said the fund in its application. “The
plan had been unable to attract any new contributing employers in decades.”
However, the Treasury rejected the fund’s application,
saying it “fails to satisfy the statutory criteria for approval of benefit
suspensions,” and that “the suspension of benefits is not reasonably estimated
to achieve the level that is necessary to avoid insolvency.”
By Michael Katz