That was how P&I headlined their report of what Special Master (yes, that is his real title) Kenneth R. Feinberg of the Department of the Treasury informed the Central States trustees in a just-released letter.
As Special Master, appointed by the Secretary, I am writing to notify you of Treasury’s decision to deny the Application because the suspension fails to satisfy the stah1tory criteria for approval of benefit suspensions.
As described further below, Treasury finds that the Plan’s proposed benefit suspensions are not reasonably estimated to allow the Plan to avoid insolvency.
Treasury has concluded that two of the assumptions used for the actuarial projections in the Application are not reasonable.
Investment Return Assumptions Are Not Reasonable The Application uses a 7.5% annual investment rate of return assumption for the deterministic projections and uses corresponding annual investment rate of return assumptions by asset class as inputs for the stochastic projections. These assumptions are not reasonable because they:
- are not appropriate for the purpose of the measurement (cash flow projections relating to proposed benefit suspensions under Kline-Miller), taking into account the Plan‘s negative cash flows and other factors;
- do not adequately take into account relevant current economic data (that is, appropriate investment forecast data); and
- have a significant bias in that they are significantly optimistic.
Entry Age Assumption Is Not Reasonable. The entry age assumption is not reasonable because it:
- is not appropriate for the purpose of the measurement (cash flow projections relating to proposed benefit suspensions under Kline-Miller), taking into account the Plan‘s negative cash flows and other factors; and
- does not take into account relevant historical and current demographic data (that is, data available regarding entry age).
Application of Special Limitation on Suspension of Benefits Specifically, Treasury has concluded that it is not reasonable to justify larger benefit suspensions for one group of UPS participants based on the fact that those participants are not covered by a make-whole agreement (and therefore are less protected from benefit cuts) than for another group of UPS articipants who are covered by a make-whole agreement (and thus are more protected from benefit cuts). Applying a factor in a manner that justifies larger cuts for participants who are otherwise less protected (and therefore stand to receive smaller benefits) is not a reasonable application of the factor.
Treasury has found that the notices provided to participants in connection with the Application fail to meet this standard because they are, in important respects, not written in a manner so as to be understood by the average plan participant. This is because:
- the notices extensively use technical language without adequate explanation;
- critical terms used in the notices are not defined in the notices but only by cross-reference to other documents (e.g., the Plan document and the rehabilitation plan document); and
- the cross-referenced definitions in those other documents are not understandable to the average plan participant.
The Application fails to meet the requirements of Kline-Miller for the reasons described above. This notification letter will be made public in order to inform plan participants of the outcome of Treasury’s review.