The New York State Teamsters Conference Pension & Retirement Fund has resubmitted its application to Treasury Department to enact benefits reductions under the Multiemployer Pension Reform Act (MPRA).
The fund said that since it withdrew its original application in early April, it held several meetings and calls with the Treasury Department seeking guidance for its application revision. It said that one of the most significant issues identified by the Treasury Department with the fund’s original application concerned its conservative investment return assumption.
“Based on discussions with Treasury, the resubmitted application contains investment return assumptions that are higher than in the original application,” said the fund in a letter to plan participants.
“Using these higher investment return assumptions, as well as factoring in the fund’s very positive investment return from 2016 (9.6%) and first quarter of 2017 (5.4%), the proposed benefit reduction percentages were able to be lowered.”
The proposed benefit reduction in the resubmitted application is 29% for non-active participants, and 18% for active participants. In its original application, the fund had proposed a 20% reduction in monthly benefits for all active participants, and a 31% reduction in monthly benefits for all retirees, beneficiaries, terminated vested participants, and all other non-active participants.
The 2% reduction in cuts were possible mainly because of the fund’s investment earnings in the interim, according to Tom Baum, the fund’s retiree representative. The resubmitted application will have an October 1, 2017, effective date for the benefit reductions, if accepted.
The original application assumed an investment return of 6.75% for the first 10 years, and 7.5% for the years after that. The new application was filed with a weighted average investment return calculated per year as follows:
The long-term rates for years 2027 through 2049 range from a high of 7.77% to a low of 7.66%.
According to MPRA mandates, there must be two classes that are fully protected from the proposed suspensions: those over the age of 80 as of Oct. 31, 2017, and
those who retired under a disability pension from the fund. It also mandates that partial age protection is provided for those between the age of 75 and 79 as of Oct. 31, 2017, and no participant can have benefits reduced below 110% of the amount that the Pension Benefit Guaranty Corporation (PBGC) would guarantee if the fund were to become insolvent.
The Treasury Department is expected to provide a 45-day period for comments, and to expedite its review of the application. If the application is approved, there will be a participant vote within 30 days after the approval.
By Michael Katz