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?