The US Treasury Department has approved benefits reductions for The Western States Office and Professional Employees Pension Fund, and the Ironworkers Local 16 Pension Fund.
The Treasury Department has so far approved seven pension fund applications for a reduction in benefits and rejected five under the Multiemployer Pension Reform Act of 2014 (MPRA), with 10 applications currently under review.
For the Western States Office and Professional Employees Pension Fund of Portland, Oregon, the third time was the charm, as it had previously withdrawn two applications for benefits reductions. The plan’s accepted benefit suspension proposal reduces all participants’ benefits earned by 30%, subject to the limitations on benefit suspensions. The suspension does not treat categories or groups of participants and beneficiaries under the plan differently from one another, except when required by law.
The plan was determined to be in critical and declining status for the plan year beginning Jan. 1, 2018, and was projected to become insolvent during the 2036 plan year without the reductions.
With the reductions, the fund estimates that its funded percentage will rise to 96.54% by the end of 2057, from 63.20% as of the plan year beginning April 1, 2018. Its estimated assets as of April 1 were $330.2 million, against $522.4 million in liabilities.
The recovery plan “will stabilize the pension plan’s finances and allow it to continue to pay benefits to all participants in the future,” said the fund in a notice to participants. “However, a shared sacrifice is required, as most plan participants will see benefit reductions.”
And the second time was the charm for the Ironworkers Local 16 Pension Fund of Towson, Maryland, whose first application for a reduction in benefits was rejected by the Treasury Department in 2016 for failing to satisfy the statutory criteria for approval.
The fund was certified to be in critical and declining status for the plan year beginning Jan. 1, 2017, and had a funding percentage of 64.2% at the time. The plan’s actuary has determined that if the benefits are not reduced as proposed, the fund will become insolvent in 2032.
The fund’s recovery plan calls for participants’ benefits to be reduced by a fixed percentage, which averages out to a 20% reduction per participant, with older participants receiving a lower reduction, and younger participants receiving a higher reduction on average. The reduction is calculated by multiplying the number of months between age 80 and the participants’ age as of Oct. 1 by a 0.125% reduction rate for retirees and terminated vested participants, and 0.0625% for beneficiaries. Participants 80 years or older as of Oct. 31 will not have their benefits reduced.