Category: Multiemployer pensions

Second SFA Decision

Mary Pat Campbell

Link:https://burypensions.wordpress.com/2021/12/23/breaking-news-second-sfa-decision/

Excerpt:

The PBGC Special Financial Assistance program for troubled multiemployer plans has ruled on the third plan to apply for bailout money.

According to a PBGC press release:

The Pension Benefit Guaranty Corporation (PBGC) announced today that it has approved the plan application for the Idaho Signatory Employers-Laborers Pension Plan (Idaho Signatory) in Portland, Ore. The plan covers 682 participants in the construction industry and will receive $13.9 million in special financial assistance, including interest to the expected date of payment to the plan.

Author(s): John Bury

Publication Date: 23 Dec 2021

Publication Site: Burypensions

Joe Biden’s multiemployer pension plan rescue is turning into a political disaster

Mary Pat Campbell

Link: https://www.ft.com/content/2af3b859-3791-4c2e-bbdc-93d23dc4c6a3

Excerpt:

Union-friendly members of Congress and senators, in particular Sherrod Brown of Ohio, pushed the team of President Joe Biden to incorporate a relief plan for federally guaranteed pension plans that would provide (forgivable) 30-year federal loan along with other support.

The cost of the bailout was estimated by the Congressional Budget Office to be about $86bn, of which $82bn would be spent in 2022. If everything worked out, that would have been a good talking point for Democratic candidates during the midterm elections next year, especially in the hotly contested rust-belt states.

But rather than specify the actuarial details of how the rescue would work, the congressional sponsors and the administration left this job to the experts at the Pension Benefit Guaranty Corporation, a US government agency. They may regret that decision.

…..

Even before then, the unions and employers who act as trustees for the multiemployer funds are probably facing legal troubles if they accept bailout money. As the committee went on to point out: “Trustees of such [troubled] plans who decide to take SFA face the risk of litigation from active employees, while those trustees who elect not to seek SFA risk being sued by retirees.”

Author(s): John Dizard

Publication Date: 20 Dec 2021

Publication Site: Financial Times

SFA Update – Revisions

Mary Pat Campbell

Link: https://burypensions.wordpress.com/2022/01/14/sfa-update-revisions/

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Excerpt:

The PBGC Special Financial Assistance program for troubled multiemployer plans is updating again this weekend. No new applicants but the PBGC summary worksheets did have two plans withdrawing and reapplying which made me wonder if these revisions were looking for more or less money.

Author(s): John Bury

Publication Date: 14 Jan 2022

Publication Site: Burypensions

SFA Bailout Timeline

Mary Pat Campbell

Link: https://burypensions.wordpress.com/2021/11/12/sfa-bailout-timeline/

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Excerpt:

For those wondering when payments under the PBGC Special Financial Assistance program will be coming, the International Foundation of Employee Benefit Plans blog has some guidance.

…..

The Pension Benefit Guaranty Corporation (PBGC) and Treasury officials have delivered a new briefing on the special financial assistance (SFA) program for financially troubled multiemployer plans under the American Rescue Plan Act of 2021 (ARPA). During the briefing on July 22, 2021, PBGC officials walked through the e-filing process, application instructions, assumption changes and what to expect after submitting the application. A recording and slides of the briefing are available here.

….

During the 120-day window, plans must notify PBGC about any facts or data submitted in the application that are no longer accurate. By day 120, PBGC will make a determination to approve or deny the SFA application.

Author(s): John Bury

Publication Date: 12 Nov 2021

Publication Site: burypensions

SFA Application: Through the Forest and Into the Weeds

Mary Pat Campbell

Link:https://burypensions.wordpress.com/2021/10/25/sfa-application-through-the-forest-and-into-the-weeds/

Excerpt:

The Road Carriers Local 707 Pension Fund , which was the first plan to seek bailout money under the PBGC Special Financial Assistance (SFA) program for troubled multiemployer plans, has their 425-page application uploaded on the SFA website.

…..

412-425) SFA calculations which is a fairly simple spreadsheet calculating the present value of the liabilities of all current participants (pages 419-420) and coming up with one amount ($706,400,534) to cover all their liabilities through 2051. New entrants presumably will be covered by new negotiated contributions and, after 30 years though if any of the current participants survive until 2051 they will presumably need another bailout.

The problem PBGC has with this filing appears to be that an interest rate of 5.32% was used for valuing liabilities which happens to be 2% plus the first HATFA Segment Rate when it is the third PPA Segment Rate to which the 2% should have been added. Per the IRS website (scroll down a little to Funding Table 3), that rate would likely have been the April, 2021 rate of 3.52% which would have made 5.52% the rate to be used for valuing liabilities (thus lowering the liability value as the higher the interest rate the lower the value). The tricky part is that the PPA third Segment Rate has been going down and is now 3.34% as of October, 2021.

Author(s): John Bury

Publication Date: 25 Oct 2021

Publication Site: burypensions

SFA New Filing; First In a Month

Mary Pat Campbell

Link:https://burypensions.wordpress.com/2021/10/23/sfa-new-filing-first-in-a-month/

Graphic:

Excerpt:

Plan Name: Local Union No. 466 Painters, Decorators and Paperhangers Pension Plan
EIN/PN: 14-6085295/001
Total participants @ 4/30/20: 45 including:
Retirees: 30
Separated but entitled to benefits: 8
Still working: 7

Asset Value (Market) @ 5/1/19: $523,604
Value of liabilities using RPA rate (3.09%) @ 5/1/19: $5,108,203 including:
Retirees: $4,213,315
Separated but entitled to benefits: $820,490
Still working: $74,398

Funded ratio: 10.25%

Author(s): John Bury

Publication Date: 23 Oct 2021

Publication Site: burypensions

5500 – Central States – 2020

Mary Pat Campbell

Link:https://burypensions.wordpress.com/2021/10/15/5500-central-states-2020/

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Excerpt:

We had some 5500 history in an earlier blog through 2016. This is where the plan was last year based on their 5500 filing for 2020:

Plan Name: Central States, Southeast & Southwest Areas Pension Plan

EIN/PN: 36-6044243/001

Total participants @ 12/31/20: 364,908 including:

Retirees: 191,550

Separated but entitled to benefits: 121,667

Still working: 51,691

….

Funded ratio: 21.91%

Author(s): John Bury

Publication Date: 15 Oct 2021

Publication Site: Burypensions

ARP: “Actuarial Equivalent of a Guillotine”

Mary Pat Campbell
ARP: “Actuarial Equivalent of a Guillotine”

Excerpt:

Right now on the American Rescue Plan (ARP) website:

Status of Applications [.xls] – Coming Soon

Until those spreadsheets start popping up we have no clue as to why, by whom, and how these bailout applications are being made but, before seeing any numbers, one thing bothers me.

A footnote on that ARP website reads:

**MPRA plans can restore benefits under 26 CFR 1.432(e)(9)-1(e)(3) at any time, including before applying for SFA.

So why aren’t plan participants like Carol Podesta-Smallen in the MarketWatch story not having their monthly pension amounts restored to pre-MPRA levels and getting large checks to make up for past reductions? It would reduce asset values in those plans but isn’t that a good thing when applying for bailout money?

Author(s): John Bury

Publication Date: 31 August 2021

Publication Site: burypensions

‘I’ll be robbed twice in one lifetime’: Retirees fearing financial disaster wait for pension rescue

Mary Pat Campbell

Link: https://www.marketwatch.com/story/ill-be-robbed-twice-in-one-lifetime-retirees-fearing-financial-disaster-wait-for-pension-rescue-11630018883

Graphic:

Excerpt:

A law passed in Congress earlier this year promised to reverse some of that damage by offering taxpayer-funded financial assistance to certain troubled pension plans like Podesta-Smallen’s, allowing them to restore benefits to retirees who suffered cuts. But the implementation of the rescue plan has been met with a barrage of criticism from plan trustees, participants and members of Congress who say it’s too tight-fisted with the financial assistance and could leave some plans in a worse financial position than they are in now.

….

When the American Rescue Plan was signed into law in March, many of these struggling plans and retirees with sharply reduced benefits thought their troubles were over. The law is expected to provide about $94 billion to eligible multiemployer plans through a financial assistance program designed to stabilize the plans for decades to come and reinstate previously reduced benefits.  

The sense of relief was short-lived, plan trustees and participants say. The Pension Benefit Guaranty Corp., the federal agency charged with protecting the retirement incomes of participants in private-sector defined-benefit pension plans, in early July released regulations detailing the formula for calculating the financial assistance for troubled plans.

In interviews and more than 100 comment letters to the PBGC, plan trustees, consultants, participants and lawmakers say that the rule’s stringent approach to calculating financial assistance means that many plans receiving the assistance won’t make it through the next 30 years as Congress intended, and some won’t even get enough money to cover the benefits they must restore as a condition of getting the cash.

Author(s): Eleanor Laise

Publication Date: 30 August 2021

Publication Site: Marketwatch

PBGC Issues Interim Final Rule on Multiemployer Bailout Plan

Mary Pat Campbell

Link: https://www.ai-cio.com/news/pbgc-issues-interim-final-rule-on-multiemployer-bailout-plan/

Excerpt:

There are four types of multiemployer plans that are eligible to apply for SFA under the PBGC’s regulation:

A plan in critical and declining status as defined by the Employee Retirement Income Security Act (ERISA) in any plan year beginning in 2020, 2021, or 2022.

A plan that had enacted a suspension of benefits approved under ERISA as of March 11, 2021.

A plan certified to be in critical status as defined by ERISA that has a modified funded percentage of less than 40%, and a ratio of active to inactive participants of less than 2:3, in any plan year beginning in 2020, 2021, or 2022.

A plan that became insolvent for purposes of section 418E of the Internal Revenue Code (IRC) after Dec. 16, 2014, when the Multiemployer Pension Reform Act (MPRA) became law, has remained insolvent, and has not terminated under ERISA as of March 11, 2021.

PBGC has prioritized seven groups of plans that qualify for the aid, ranked by the most impacted plans and participants first. The highest priority is given to applications of plans that are projected to become insolvent under ERISA by March 11, 2022, so that they will not have to reduce participant benefits, and to plans that are already insolvent, to help them reinstate benefits, provide makeup payments to participants and beneficiaries, and restore previously suspended benefits.

Author(s): Christine Giordano

Publication Date: 14 July 2021

Publication Site: ai-CIO

ASB Approves Third Exposure Draft of ASOP No. 4

Mary Pat Campbell

Link: http://www.actuarialstandardsboard.org/email/2021/ActuarialStandardsBoard-aug-9-2021.html

Excerpt:

The Actuarial Standards Board of the American Academy of Actuaries recently approved a third exposure draft of a proposed revision of Actuarial Standard of Practice (ASOP) No. 4, Measuring Pension Obligations and Determining Pension Plan Costs or Contributions. The standard provides guidance to actuaries when performing actuarial services with respect to measuring obligations under a defined benefit pension plan and determining periodic costs or actuarially determined contributions for such plans. The standard addresses broader measurement issues, including cost allocation procedures and contribution allocation procedures. The standard also provides guidance for coordinating and integrating all of the elements of an actuarial valuation of a pension plan.

The comment deadline for the third exposure draft is Oct. 15, 2021. Information on how to submit comments can be found in the exposure draft.

Link to draft: http://www.actuarialstandardsboard.org/asops/measuring-pension-obligations-and-determining-pension-plan-costs-or-contributions-third-exposure-draft/

Publication Date: 9 August 2021

Publication Site: Actuarial Standards Board

PBGC Multiemployer Pension Bailout – The Weeds

Mary Pat Campbell
PBGC Multiemployer Pension Bailout – The Weeds

Graphic:

Excerpt:

The Pension Benefit Guaranty Corporation (PBGC) on July 9, 2021 announced an interim final rule implementing a new Special Financial Assistance (SFA) Program for financially troubled multiemployer defined benefit pension plans.

What struck me:

…..

It is expected that over 100 plans that would have otherwise become insolvent during the next 15 years will instead forestall insolvency as a direct result of receiving SFA. Section 9704 of ARP amends section 4005 of ERISA to establish an eighth fund for SFA from which PBGC will provide SFA to multiemployer plans under the program created by the addition of section 4262 of ERISA. The eighth fund will be credited with amounts from time to time as the Secretary of the Treasury, in conjunction with the Director of PBGC, determines appropriate, from the general fund of the Treasury Department. Transfers from the general fund to the eighth fund cannot occur after September 30, 2030. (page 6)

Unlike the financial assistance provided under section 4261 of ERISA, which is in the form of a loan and provided in periodic payments, a plan receiving SFA under section 4262 has no obligation to repay SFA, and PBGC must pay SFA in the form of a single, lump sum payment. (page 7)

Author(s): John Bury

Publication Date: 10 July 2021

Publication Site: burypensions