The Pension Benefit Guaranty Corp. on Monday provided Special Financial Assistance totaling more than $600 million to three multiemployer plans. The plans are the Western States Office and Professional Employees Pension Plan, the United Furniture Workers Pension Fund A and the Building Material Drivers Local 436 Pension Plan.
The Western States plan, based in Portland, Oregon, has 7,230 participants in the service industry. In October 2018, it cut benefits by 25% to approximately 6,000 participants under the Multiemployer Pension Reform Act of 2014. The PBGC provided $294.7 million in assistance to cover lost benefits and to keep the plan funded through 2051.
As is often the case with plans in need of PBGC assistance, the Western States plan had a very high ratio of retirees to active participants. According to its Form 5500 filing for 2021, the plan had 472 active participants and 3,925 retirees collecting benefits.
The United Furniture Workers plan is based in Nashville, Tennessee, and has 8,434 employees in the manufacturing industry. In September 2017, the plan cut benefits to about 2,800 participants by 13%. The PBGC granted $214.6 million in assistance.
Lastly, the Drivers Local 436 plan, a Teamsters affiliate, received $95.2 million in assistance. The plan is based in Cleveland, Ohio, and has 1,461 participants. It was projected to become insolvent in 2026, when a 35% benefit cut would have been necessary.
According to its Form 5500 filing, as of January 1, 2021, the Drivers Local 436 plan had about $106 million in liabilities and $37 million in total assets.
The SFA provision of the American Rescue Plan Act allows for PBGC funding for severely underfunded multiemployer pension plans. Funds that receive assistance must monitor the interest resulting from the grant money as separate 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.