The New York State Teamsters Conference Pension & Retirement Fund has withdrawn its application seeking approval from the Treasury Department to reduce its benefits under the Multiemployer Pension Reform Act (MPRA).
The fund’s board of trustees made its decision based on communications from the Treasury Department suggesting that its application would be denied, according to Tom Baum, the fund’s retiree representative. As the retiree representative, Baum is an advocate for the interests of retired and deferred vested participants, and beneficiaries of the fund.
Baum said the fund will submit a new application as soon as possible, and that the Treasury Department has indicated that it would expedite its review. He also said that the Treasury Department’s concerns about the original application centered on the plan’s short- and long-term investment return assumptions, and its mortality assumption.
The Treasury questioned why the short- and long-term investment return assumptions of 6.75% and 7.5% respectively differed from the higher rates suggested by a survey of investment managers. The Treasury requested a detailed explanation of how these percentages were determined. Because of this, investment return assumptions higher than 6.75% and 7.5% may be used in the new application, Baum said. He also said that if the fund uses a higher return assumption, it could help to prevent deeper benefits cuts. However, he added that the Treasury has not specifically said what assumptions it wants the fund to use.
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. Had the application been approved, the cuts would have gone into effect July 1. Baum said the fund expects that the cuts proposed in its new application will go into effect on October 1, if approved.
According to Baum, the fund had previously said that cuts in a new application would be greater than 31%, because its fiscal condition was expected to deteriorate significantly between the effective date of the first application, and the effective date of a later application.
“But there is some reason to hope that the cuts under the new application will not actually be deeper,” said Baum on his website. “The fund’s investment earnings during the last few months have been better than expected, which could help make deeper cuts unnecessary. It’s still possible, however, that the new proposed cuts will be deeper than 31%.”