The Teamsters Local 807 Labor-Management Pension Fund of Long Island City, New York, has reapplied for a reduction in pension benefits with the US Treasury Department after having to withdraw its first application a year ago when the federal government shutdown complicated matters.
The trustees of the fund submitted the first application for relief under the Multiemployer Pension Reform Act of 2014 (MPRA) in June 2018 with a proposed pension preservation plan. However, the trustees said, while they were providing additional information to support the application, the federal government shutdown in late 2018 and early 2019 closed the Treasury Department, and the procedures for providing supplemental information to the Treasury and Pension Benefit Guaranty Corporation (PBGC) staff were halted.
Because of the snafu, the Treasury Department advised the trustees to withdraw the application with the understanding that it would otherwise be denied.
The trustees submitted a new application on Dec. 30, 2019, with a new pension preservation plan, which the trustees said takes into account the issues raised by the Treasury Department in the first application, though the trustees did not specify what those issues were.
“We believe that the new preservation plan is fair and reasonable and that the Treasury Department has good reason to approve it,” the trustees said in a letter to the pension’s participants.
Under the pension preservation plan, the monthly pension benefit payments of any pensioner who is in pay status as of Nov. 1, 2020, would be reduced by up to 49% as of that date, and the monthly pension benefit payments of any participant or beneficiary who enters into pay status after Nov. 1, 2020, would be reduced by up to 49% for benefits earned through Oct. 31, 2020. Additional benefits earned after Nov. 1, 2020, would not be reduced.
The monthly pension benefit payments of any individual would not be reduced below 110% of the monthly pension benefit, which is guaranteed by the PBGC. And for retirees who are 75 or older as of Nov. 1, the payment reduction may not exceed the “applicable percentage” of the portion of the monthly pension benefit payments that would be reduced. The “applicable percentage” is a percentage of the number of months occurring in the period that begins with the month after Nov. 1, and that ends with the month during which the retiree reaches the age of 80.
The effective date of the proposed suspension plan is Nov. 1, and the trustees estimate that the average benefit suspension will be 21%. There would be no reduction for any participant who is receiving a disability pension, or who is in pay status as of Nov. 1, 2020, and has reached age 80 by Nov. 1, 2020.
The trustees warned that if they don’t act now, the fund will run out of money in 10 years or less, and they would be forced to rely on benefits from the PBGC, which itself is expected to run out of money by 2025. They attributed the financial difficulties to a combination of external factors, such as stock market crashes, misguided government regulations, employers who have left the plan or have gone out of business, and an “unsustainable ratio” of 5.42 retirees to every one active participant.
“Reducing pensions for current retirees and beneficiaries is not something we want to do. But it’s the only way that we can prevent the pension fund from going broke,” the trustees told its participants. “If the pension preservation plan works as we expect it to, the result will be a pension fund you can count on for many years to come.”