Four struggling pension funds have recently applied to the US Treasury department seeking a reduction of benefits under the Multiemployer Pension Reform Act of 2014. They include the Toledo Roofers Local No 134 Pension Plan, the Mid-Jersey Trucking Industry and Local 701 Pension Fund, the Local 807 Labor Management Pension Fund; and the Southwest Ohio Regional Council of Carpenters.
The board of trustees of the Toledo Roofers Local No 134 Pension Plan
The plan applied for a reduction of benefits on June 25, saying it is projected to become insolvent at the beginning of 2030.
Under its proposed benefit suspension, it would eliminate any early retirement subsidy on the benefits of participants, or their beneficiaries, who retired prior to the plan’s normal retirement age of 65. If the benefit is greater than 175% of the amount guaranteed by the Pension Benefit Guaranty Corp. (PBGC) after the application of this step, the benefit would be reduced to 175% of the amount guaranteed by the PBGC. No reduction would apply to benefits based on disability under the pension plan’s terms.
An individual’s age would affect the amount of the reduction that may apply to the monthly benefit. For example, no reduction applies to the benefits of an individual who is age 80 or older as of the end of the month of the benefit reduction’s effective date. And the closer the individual is to age 80 as of that date, the smaller the reduction to the individual’s benefits.
The Mid-Jersey Trucking Industry and Local 701 Pension Fund was certified by its actuary to be in critical and declining status beginning June 1, 2017, and is projected to become insolvent at the beginning of the 2029 plan year.
According to the rehabilitation plan the pension submitted in its application, the following adjustable benefits would be eliminated for all participants with an annuity starting date of May 15, 2018, or later, and did not earn at least 120 hours of service during each of the three years with the month immediately preceding the participant’s annuity starting date:
- Disability benefit not yet in pay status.
- 60-month certain guarantee.
- Subsidized joint and survivor annuity for married participants.
- Commencement of new retirement benefits prior to age 55.
- Pre-retirement death, accidental death, and dismemberment benefits except as required by law for surviving spouses.
- The subsidized portion of the early retirement benefit and service pension for all years of service.
- Post-retirement death benefits for participants and beneficiaries.
- Lump-sum payment option for benefits earned prior to April 1, 2012.
The Local 807 Labor Management Pension Fund of Long Island City, New York, was certified in critical status by its actuary as of Sept. 1, 2010, and said it is projected to become insolvent during the plan year ending Aug. 31, 2026. It has submitted a rehabilitation plan that it says will delay the projected insolvency date until the plan year ending Aug. 31, 2033.
The fund’s proposed benefit suspension would apply to all pensioners and future pensioners, with an effective date of May 1, 2019. On average, the suspension would reduce the benefits of each participant by 14.6%, but the actual reduction would range from 0% to 39.5% depending on each participant’s age and date of termination from active service.
The following benefits would be reduced or eliminated under the terms of the rehabilitation plan:
- The amount of the early retirement pension would be reduced to be the actuarial equivalent of the benefit payable at age 65.
- The service pension and disability pension would be eliminated.
- The 60-month guarantee of pension payments would be eliminated. If a single-life annuity was elected, no additional benefits would be payable after death, despite the length of time retired.
- The factors for determining the amount of the 50% or 75% husband and wife pension would be changed to be the actuarial equivalent of the single-life annuity.
- If a participant is unmarried and dies before retirement, no benefit would be payable to any beneficiary.
- The $1,000 pension death benefit would be eliminated.
The Southwest Ohio Regional Council of Carpenters submitted its second application for a reduction of benefits, after it withdrew its original application in October 2017.
The fund’s rehabilitation plan would apply to all participants, beneficiaries, and alternate payees without regard to different categories or groups of individuals. It also does not distinguish between individuals based on years of service, benefit credit or accrual rate, employer, or the amount of benefits received through the effective date of the reduction of benefits, which is March 31, 2019.
The plan includes a one-time recalculation based on the premise that all accrued benefits and monthly benefits in pay status would be subject to the same early retirement reduction factors. And then all accrued benefits and monthly benefits in pay status would be subject to an additional flat 8% reduction.
In its first application, the pension had proposed eliminating all subsidies for all participants and beneficiaries for any monthly payments on or after Jan. 1, 2018, and then applying a uniform 17% reduction.