The Michigan Regional Council of Carpenters and Millwrights union has applied for a reduction of benefits with the US Treasury Department in a move to help prevent the Detroit Carpenters’ Pension Trust Fund from becoming insolvent.
The Treasury Department has approved the last 13 benefits reduction applications, and hasn’t denied such a request since May 2017 when it rejected the application submitted by the Automotive Industries Pension Fund. Since the Kline-Miller Multiemployer Pension Reform Act of 2014 was enacted the Treasury department has approved 14 benefits reduction applications, rejected five, and four are currently under review, including the Detroit Carpenters’ Pension.
“We worked hard to keep the cuts equitable and fair,” said the plan on its recovery program website. The plan added that if the application is not approved and the plan becomes insolvent, “participants will have to rely on the shaky Pension Benefit Guaranty Corporation (PBGC) for an even lesser benefit.”
In 2018, the plan’s actuary certified that the pension was in critical and declining status for the plan year beginning May 1, 2018. As of that date the plan’s funded percentage was 34.5%, and the actuary projected that without any action the plan would become insolvent during the plan year ending April 30, 2036. [Source 2]
The benefits reduction application was submitted on Sept. 23, and the Treasury Department has 30 days from that date to post the application on its website, and 225 days to complete its review. If the application is granted, approved, and adopted the proposed suspension will take effect on July 1, 2020.
“This has been perhaps the most difficult decision the board has ever had to make,” said the plan. “Reducing pensions for current retirees and beneficiaries is not something we ever thought we’d have to do. If the pension recovery program works as we expect it to, the result will be a pension plan you can count on for generations to come.”