The Pension Benefit Guaranty Corporation (PBGC) said it will provide early financial assistance to the United Furniture Workers Pension (UFW) Fund A to avoid insolvency, and to pay benefits to participants.
The PBGC approved a partition application that will provide early financial assistance to the Nashville-based multiemployer pension plan, which covers nearly 10,000 participants. PBGC said that the benefits of 7,100 participants will not be reduced, while the remaining 2,800 participants will see future benefit reductions to 110% of the PBGC–guaranteed amount, with an average 12.7% cut in benefits.
The US Department of the Treasury approved a related application submitted by the plan for the required benefit reductions. It also certified the results of a participant vote on the plan’s benefit–reduction proposal. PBGC said its approval of the partition and early financial assistance is the first under the Multiemployer Pension Reform Act of 2014 (MPRA).
Under the MPRA, multiemployer pension plans threatened by insolvency are allowed to apply for benefit reductions, as well as early financial assistance from PBGC in an effort to extend their financial viability.
In its applications to the Treasury Department, and the PBGC, the UFW pension fund’s trustees said that the fund was in critical and declining status, and that its assets and expected income would be insufficient to pay promised benefits. It also warned that the fund would run out of money in 2021.
To keep the UFW Fund from becoming insolvent, some of the fund’s PBGC-guaranteed benefits will be transferred to a successor plan that will receive financial assistance from PBGC to pay those benefits. This will relieve some of the financial burden on the UFW Fund, and enable it to improve its financial condition, said the PBGC. It also said that plan participants whose benefits are moved to the new plan will be treated the same as participants whose benefits remain entirely in the original plan.
Both the original and successor plans will be administered by the UFW Fund. PBGC said it expects that participants who have benefits in both the successor plan and the original plan will receive a single combined payment from their plan administrator.