The Pension Benefit Guaranty Corporation announced grants of Special Financial Assistance funds to five struggling multiemployer pension funds on Thursday.
The PACE Industry Union-Management Pension Fund will receive approximately $1.3 billion in assistance from the PBGC. The PACE fund is based in Nashville, Tennessee, and has 64,522 participants in the manufacturing industry. The plan was expected to become insolvent in 2034 and would have had to cut benefits by 20%.
PACE’s Form 5500 from 2021 showed that the fund had $1.7 billion in assets with 3,344 active participants and 28,378 participants receiving benefits. It also had 27,497 separated participants entitled to future benefits and 5,303 surviving beneficiaries of deceased participants.
The National Integrated Group Pension plan, based in Scranton, Pennsylvania, will receive $887.1 million in assistance. The plan has 48,254 participants in the manufacturing industry. Like PACE, the National Integrated Group was expected to become insolvent by 2034, at which time it would have to cut benefits by 15%.
The fund’s Form 5500 shows that in 2021 it had $840 million in assets with 2,515 active participants and 17,318 receiving benefits. The pension fund also had 22,120 participants entitled to future benefits, and 6,301 beneficiaries of deceased participants.
The PBGC also granted money to three much smaller funds on Thursday.
Roofers Local 42, a plan based in Cincinnati, Ohio, with 495 participants, will receive $33.6 million in assistance. In April 2021, the plan had cut benefits by 35% for about 400 participants.
IBEW Local 237, a plan based in Niagara Falls, New York, with 430 participants in the construction industry, will receive $32.2 million in assistance. In July 2020, the plan cut benefits for 330 participants by 25%.
Lastly, Bricklayers Local 7, a plan based in Akron, Ohio, with 397 participants, will receive $9.1 million in supplemental assistance on top of the $34.1 million it received in October 2022. In October 2020, the fund had cut benefits by 55% to 300 participants.
Plans that applied for assistance under the Interim Final Rule before the Final Rule was passed in July 2022 are permitted to reapply for the additional money that the formula used by the Final Rule would have granted them.
The SFA provision of the American Rescue Plan Act allows PBGC funding for severely underfunded multiemployer pension plans. Funds that receive assistance must monitor the interest resulting from the grant money separately from other sources of funding. The PBGC requires that at least two-thirds of the money it provides be invested in “high-quality fixed income investments.” The Final Rule on Special Financial Assistance, issued in July 2022, states that the other third can be invested in “return-seeking investments,” such as stocks and stock funds.