On October 28, 2015 we reported that the Central States Southeast and Southwest Area Pension Fund, (“Central States”) one of the largest multi-employer pension plans in the country had filed an application with the Department of Treasury in which it sought to reduce core benefits under the Multiemployer Pension Reform Act of 2014 (“MPRA”) and had sent a notice of its application to its approximately 400,000 participants. Central States was also required to provide participants with an individualized estimate of reduced benefits.
On January 8, 2016, the Iron Workers Local 17 Pension Fund (the “Iron Workers Fund”) which operates from Cleveland, Ohio became the second multi-employer pension plan to file an application to the Treasury Department to reduce core benefits. In its application, the Iron Workers Fund’s trustees advised that the Fund’s actuary had certified that the Fund was in “critical and declining status” for the plan year beginning May 1, 2015. Moreover, without approval of the application, the Fund was projected to become insolvent within ten years in 2025.
The application stated that the Iron Workers Fund’s most recent Form 5500 for the plan year ending April 30, 2014 reflected assets of $85.7 million and liabilities of $223.2 million which means that the Fund had approximately 38 cents to pay for every single dollar of vested benefits.
This filing demonstrates that the underfunding plight impacts both large and smaller plans as the Iron Workers Fund had 2,021 participants of which 641 were active.
In regards to the Central States situation, because the MPRA requires that participants and beneficiaries have an opportunity to comment on the application, the deadline for submission of comments on the Central States application has now been extended until February 1, 2016. In addition, the Department of the Treasury have announced that public sessions would be conducted in regions that would be most impacted by any benefit reduction. Such sessions were scheduled in Greensboro, North Carolina on January 11, 2016 and in Peoria, Illinois on January 14, 2016. Members of the public were invited to attend the sessions.
Before core benefits can be reduced, the Department of the Treasury must review the application. It then has 225 days from date of receipt to reject the application. Otherwise, the application will be considered approved. If the Department of the Treasury were to approve the application, it would then have 30 days to administrator a vote for the participants and beneficiaries on the benefit reduction.
This second filing within less than four months should underscore the need for employers with collective bargaining agreements requiring contributions to multi-employer defined benefit pension funds to be vigilant and pro-active. They should conduct an annual “benefits due diligence.” It should take two forms; (1) a review of the pension fund’s annual Form 5500; and (2) an annual request to the pension fund seeking a written estimate of the employer’s withdrawal liability if it were to withdraw and an explanation of the methodology used in calculating the withdrawal liability.