Second Union Plan Roadblocked

Pensions may be cut to ‘virtually nothing’ for 407,000 people in the Central States Pension Fund but that could be ten years away.

Last week another multiemployer (union) plan was put in a similar position except that it:

  • is 4,500 participants involved, and
  • could be ten months away.

The Road Carriers Local 707 Pension Fund, per their 5500 filing for the plan year ended 8/31/14 reported paying out $47,049,132 to retirees with contributions of $6,089.047.  The latest 5500 filing (which was for the short-plan-year 9/1/14 – 1/31/15) reported $21,910,307 paid out and $2,490,662 contributed.  According to  their application to the Department of the Treasury for benefit suspensions under MPRA , as reviewed in a prior blog, the plan had $24,485,44 in assets as of 1/31/16.

On June 24, 2016 the Department of the Treasury sent the plan trustees a letter that explained:

The Application includes cash flow projections intended to demonstrate that this statuory solvency requirement is satisfied. Those cash flow projections include financial assistance from PBGC based on the assumption that the Plan’s partition application, with which the suspension application is coordinated, would be approved.

On June 10, 2016, PBGC denied the application for partition. The failure to obtain a partition order is outcome determinative for the suspension application because Section 3.02 of the Application states that the Plan actuary’s certification that the Plan is projected to avoid insolvency as a result of the proposed suspensions “assumes the issuance of a partition order from the PBGC…” beginning July 1, 2016. Further the Plan stated in the Application that it will be insolvent by April, 2017 if the suspensions are implemented without the partition. Absent the assumed partition, the cash flow projections in the Application (updated to eliminate the assumed financial assistance from PBGC) demonstrate that the proposed suspension (without the partition) does not meet the statutory solvency requirement described above.

Based on the foregoing, Treasury has determined that the suspension of benefits is not reasonably estimated to achieve the level that is necessary to avoid insolvency and that the Application therefore fails to satisfy the requirements of Kline-Miller set forth in Code secion 432(e)(9)(D)(iv).

This will be the template for what happens to hundreds of other multiemployer plans facing bankruptcy and the options appear limited.

What do you think?

 

10 responses to this post.

  1. Posted by S Moderation Douglas on July 3, 2016 at 8:21 pm

    Public pensions are screwed up to different extents for various reasons, but the federal government has virtually no control over them, so they are free to make their own mistakes. I thought ERISA was supposed to watchdog the private pensions so this kind of thing wouldn’t happen. Did ERISA fall down on the job, or were the regulations too lax to begin with?

    Reply

  2. Posted by George on July 3, 2016 at 9:41 pm

    Road Carriers Local 707 is in NY so Sen Schumer will save them.

    Alcoa got $70 million for 600 jobs. So why not bailout 4500 road carriers.?

    The company said it will keep its smelter in Massena open and guarantee 600 jobs for three and a half years. In exchange, New York State will give the aluminum giant almost $70 million in cheap power and cash for capital and operating expenses.

    http://www.northcountrypublicradio.org/news/story/30202/20151124/alcoa-announces-3-5-year-grace-period-for-massena-plant

    Reply

  3. Posted by dentss dunnigan on July 6, 2016 at 10:02 am

    Bill Gross…”Worry for now about the return “of” your money, not the return “on” it.” ….Anything digital will likely be stolen.

    Reply

  4. Posted by Eric on July 6, 2016 at 9:29 pm

    dentss:
    Bill Gross did not mention anything about stealing anything digital. He mentioned debt levels, credit creation and velocity of money. He used a monopoly board as a tool.
    Eric

    Reply

  5. Posted by Eric on July 7, 2016 at 4:40 pm

    dentss:
    No. You are correct. However, people reading your post may have believed that he did.
    Eric

    Reply

  6. Posted by Anonymous on July 8, 2016 at 12:54 pm

    Let’s merge all the toll roads, already maxed out in debt (especially NJTA) and rename them the PORA (Pension Obligation Road Authority) increase tolls at will and drive if you support the cause or I guess claim to have no other choice?

    Reply

  7. Posted by S Moderation Douglas on July 9, 2016 at 10:02 pm

    Entirely off topic because I couldn’t a viable segue.

    This little jewel was linked on the pension tsunami website:

    “Apathetic Workers in State and Local Government Are Costing Taxpayers Billions”

    http://bit.ly/29Dnl9d

    Who can’t see the “but” here?

    Reply

  8. […] 4. Reduced participant payout – (See here and here) […]

    Reply

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