SFA Update and Detail

No new filings but the Teamsters Local 641 Pension Plan application was posted, coming in at a record 920 pages, so here is a listing of those 20 plans in the pipeline with what they requested, what they reported as their unfunded liabilities using RPA rates (about 3%), the percentage of that unfunded liability that the requested bailout would cover, and the SFA interest rate used to calculate earnings.

Then let’s look at how Local 641 arrived at their requested amount.

Template 4 of the application is where the requested amount is calculated. The PBGC provides that template and here is what I get from making up my own sheet from Local 641 data.

I wind up with $1,101 at the end of the period but that is due to rounding in the earnings column. The way it works is you:

  1. Take the amount of assets in the plan as of the beginning of the period: $1,039,460;
  2. Add on the bailout money you want: $475,557,214 (the plug-in number);
  3. Estimate what contributions and withdrawal liability payments the plan will get and what the benefit payouts and expenses will be through 2051;
  4. Estimate earnings using the SFA rate (5.38% here) with full weight to assets as of the beginning of the year and half-weight to deposits and payouts; and
  5. Come up with a value of close to $0 assets in 2051.

A lot of estimating and, even if all those estimates pan out in the aggregate, the idea is have the plan broke at the end.

5 responses to this post.

  1. Posted by Ray Shorter on November 4, 2021 at 1:13 pm

    What could possibly be the holdup for approvals? Group 2 is fast approaching. In the meantime, why in the world won’t funds restore benefits now, alleviating the suffering of thousands of elderly people?

    Reply

    • Posted by geoxrge on November 4, 2021 at 2:59 pm

      “What could possibly be the holdup for approvals? ”

      Official ARP SFA website: https://www.pbgc.gov/arp-sfa

      “PBGC has 120 days to review an application. If capacity to process applications exceeds expectations, then the dates to accept applications may be accelerated.” Apparently applications are not being accelerated.

      How will PBGC respond to plan applications?

      PBGC has 120 days to conduct its review of a plan’s application. If PBGC approves the application, PBGC will notify the plan and pay the special financial assistance amount to the plan as soon as practicable, usually within 60 days.

      If PBGC denies an application, PBGC will notify the plan in writing of the reasons for the denial. Plans are permitted to revise an application by submitting only the information needed to address the reasons for the denial.

      https://www.pbgc.gov/arp-faqs

      I am still unclear as to where the the money is supposed to come from, does the PBGC request the money from the treasury which is required to sell debt to finance it?

      A quibble with the FAQ is it does not specify the start date for the 120 day review period. Nor does it state what happens if the review is not completed or even started in 120 days.

      Reply

  2. Posted by Ray Shorter on November 4, 2021 at 2:17 pm

    What’s the practical solution to avoid being broke in 30 years?

    Reply

    • Another bailout along the way.

      Reply

      • Posted by Ray Shorter on November 4, 2021 at 6:00 pm

        Most retirees won’t be around in 30 years, maybe not even 10, the entire rescue plan was a blessing given HR 397, Heroes Act 1 and 2 sitting for years. Maybe this Friday will be the beginning of some approvals. 707 is only about 4 weeks away for deadline.

        Reply

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