The Pension Benefit Guaranty Corporation has agreed to provide more than $680 million to bail out three insolvent multiemployer pension plans that cover over 5,500 participants.
The Teamsters Local 641 Pension Plan of Union, New Jersey, which covers 3,610 participants in the transportation industry, will receive $503.9 million including interest under the Special Financial Assistance Program established by the American Rescue Plan.
The plan became insolvent in March of 2021, at which time the fund began receiving financial assistance from the PBGC. It was required by law to reduce its participants’ benefits to the PBGC guarantee levels, which was approximately 55% below the benefits payable under the terms of the pension.
The federal funds will restore all benefit reductions caused by the plan’s insolvency, and will allow the plan to make payments to retirees to cover prior benefit reductions. The approval also means the PBGC’s Multiemployer Insurance Program will be repaid $13 million, which is the amount of financial assistance the agency has provided since March of 2021 to cover the plan’s outstanding loans, plus interest.
The PBGC also approved an SFA application from the San Francisco Lithographers Pension Plan, which covers 1,572 participants in the printing industry, and agreed to provide the plan with $133 million.
The plan, which became insolvent in June 2021, had to cut benefits for its participants to approximately 20% below the benefits payable under the terms of the plan. However, the plan will now be able to make payments to retirees to cover prior benefit reductions. As a result, the Multiemployer Insurance Program will be repaid the $5.4 million in financial assistance it has provided the plan since it ran out of money last year.
And the Laborers’ Local 186 Pension Plan of Massena, New York, which covers 379 participants in the construction industry, is set to receive $46.6 million from the PBGC under the SFA.
The plan has been insolvent since July 2021, at which time it had to cut its participants’ benefits to approximately 35% below what they would have received from their plan had it not run out of money. The plan has received nearly $1 million in financial assistance from the PBGC since it became insolvent, which will be repaid to the agency’s Multiemployer Insurance Program.
According to the PBGC, the SFA program is expected to provide funding to more than 250 severely underfunded multiemployer pension plans covering over 3 million workers, retirees, and their beneficiaries. Under the program, plans are required to demonstrate eligibility and calculate the amount of assistance needed pursuant to ARP and PBGC’s regulations.
Plans may use SFA funds only to pay plan benefits and administrative expenses, and they are not obligated to repay the PBGC. Plans receiving funds are also subject to certain terms, conditions and reporting requirements, including an annual statement documenting compliance with the terms and conditions. PBGC is also authorized to conduct periodic audits of multiemployer plans that receive financial aid under the program.
The most recent phase of the program began April 1, at which time multiemployer plans that fall under Priority Group 3 became eligible to apply for SFA funding. The group includes plans with more than 350,000 participants that are in critical and declining status.
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Tags: American Rescue Plan, Multiemployer Insurance Program, PBGC, Pension Benefit Guaranty Corporation, SFA, Special Financial Assistance, Teamsters Local 641 Pension Plan